Dan Dobry
Dan Dobry

Protecting our wealth against aggressive tax policies aiming at middle class, mass affluent and HNW

Most Governments are witnessing WW2 scale deficits and eventually, the bill for this will end up at our front door. The estate tax, capital gains taxes, wealth tax, and the cancellation of exemptions in addition to other alternatives are all on the table and being discussed.

How should families prepare themselves for this raid on their assets and the future of their children?  

A strong and prosperous middle class is crucial for any successful economy and society. The middle class sustains consumption, drives the investment in education, health and housing and it plays a key role in supporting social protection systems through its tax contributions. Societies with a strong middle class have lower crime rates, they enjoy higher levels of trust and life satisfaction, as well as greater political stability and good governance. 

However, we reveal that the top 10% in the income distribution in the western world holds almost half of the total wealth, while the bottom 40% accounts for only 3%. The brunt of the taxes falls on small businesses and the mass affluent and on top of that they are not the beneficiaries of government policies. 

Since the financial crisis, the implicit tax rate on labor has increased gradually but steadily. During the same period, taxes on capital have risen steeply in Germany and France. 

Over the past 30 years, mass affluent households have experienced dismal income growth or even stagnation. This has fueled perceptions that the current socio-economic system is unfair and that the mass affluent class has not benefited from economic growth in proportion to its contribution. In addition to this, they will brunt most of the cost of the “Corona Crisis”  

Furthermore, the cost of living has become increasingly expensive for the middle class, as the cost of core services and goods such as housing have risen faster than income. Traditional mass affluent opportunities for social mobility have also withered as labor market prospects become increasingly uncertain: 1 in 6 workers are in jobs that are at high risk of automation. Uncertain of their own prospects, the middle class are also concerned about those of their children; the current generation is one of the most educated, and yet has lower chances of achieving the same standard of living as its parents.

How will the Governments pay for this? 


The first level of defense for governments worldwide is borrowing. Bonds issued by governments for 20 – 100 years de facto are transferring the bulk of the cost of COVID-19 to future generations. 

Cutting Spending 

Governments all over the world are promising cuts in public spending. 

Spending in some areas, such as schools and health systems, is being protected – and it would be difficult to reduce health spending after a pandemic.

Pensions, another big-spending item, are also in general protected.  

Public salaries are rising very fast as they bounce back after the pandemic, which could make it a very expensive pledge to honor.

Freezing salaries and cutting foreign aid may serve this goal but it will be marginal. 


But governments cannot keep borrowing forever, so they must also cut spending or increase income from taxes or both.

Before the UK Government was elected in 2019, the government promised not to raise the rates of the three biggest taxes – income tax, National Insurance, and value-added tax (VAT).

However, the chancellor announced measures that will increase most people’s tax bills in 2022.

Nation-states are likely to respond by increasing efforts to coordinate tax policy, and/or make tax grabs across borders (e.g., FATCA, CRS).

This will greatly accelerate the trend towards higher tax rates on labor, except for those who are highly mobile. As more workers become more mobile, it will become harder to tax the capital that is associated with them (e.g., pension and retail investment funds). 

The challenge for advisers will be to understand the impact of national and international tax rules, in a way that helps them to serve an increasingly mobile client base. Advisers must either become global tax experts or build partnerships with them. 

The easiest way to pay for COVID-19 

The easiest way for Governments to cover the immediate surplus cost of COVID-19 is to impose a wealth tax 

Introducing a one-off wealth tax of 5 percent on net assets above 500,000 USD for example would raise more than 260bn if 8 M taxpayers were eligible.  

50 tax experts from think-tanks, the OECD, industry practitioners, lawyers, and policymakers, said.: “a one-off wealth tax would work, raise significant revenue, and be fairer and more efficient than any other alternative,”. 

So once again the mass affluent middle class and small business owners will have to pay the price for us all. 

So how should families prepare themselves for this raid on their assets and the future of their children?  

In any scenario preparing for the inevitable would be wise. 

Working with a professional and preparing strategies for gifting assets to future generations, preparing trusts, and offshore accounts are all, strategies that in the best scenario could save families that worked all their lives accumulating assets for future generations from transferring these assets to governments and in the worst scenario could mitigate the damage. 

About the Author
Dan Dobry was the founder of the Union of Financial Planners in Israel (UFPI), served as the first Chairman and President of UFPI. Dan was the Global Council Representative for Israel for the Global Community (FPSB) from 2012 - 2018 and from January 2019 is a member of the Committee for Standards and Qualifications for the European Union (SQC).
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