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Liquidity issues: solutions for the asset rich, cash poor

Loutzenhiser, Glen and Mann, Elizabeth (2021) Liquidity issues: solutions for the asset rich, cash poor. Fiscal Studies, 42 (3-4). pp. 651-675. ISSN 0143-5671

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Identification Number: 10.1111/1475-5890.12281

Abstract

Liquidity concerns are oft raised when considering wealth taxes, yet the issue has received scant attention in the extant literature. In this paper we provide the first comprehensive review of the liquidity problem. Our aims are to estimate the scale of the problem, to explore the extent to which archetypal examples are at risk of experiencing low liquidity, and to review the policy options to reduce the scale and impact of liquidity challenges. Using data from Round 6 of the Wealth and Assets Survey, we demonstrate that the scale of the problem depends largely on conceptual and design issues. We find that farmers and business owners are commonly over-represented in the low-liquidity group, but there is little evidence to support the typical narrative surrounding single pensioners. Finally, we conclude our review with a number of preferred solutions to address liquidity issues, including recognising that a net wealth tax can be paid out of income or by sale of assets, by withholding tax (e.g. by pension providers), by borrowing/financing, deferred payment arrangements and, possibly in limited circumstances, payment in specie.

Item Type: Article
Official URL: https://onlinelibrary.wiley.com/journal/14755890
Additional Information: © 2021 The Authors
Divisions: Social Policy
LSE
Date Deposited: 04 Jan 2022 15:33
Last Modified: 04 Jan 2022 15:39
URI: http://eprints.lse.ac.uk/id/eprint/113308

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