How would you tax the super-rich?

Nick Clegg has reignited the debate over whether the wealthiest in the UK should pay an extra emergency tax while the country battles the deficit.

He's argued that the richest people can best afford to contribute to reducing the deficit, rather than penalising the poor with further cuts.

"If we want to remain cohesive and prosperous as a society, people of very considerable personal wealth have got to make a bit of an extra contribution," Clegg told the Guardian.

This would be a time-limited tax while the country deals with "a longer economic war rather than a short economic battle", he explained.

Some commentators have argued that the Lib Dem leader is actually waging 'economic war' on the wealthy. But what are the options for taxing the rich more and exactly how much money could they raise?

• Osborne: don't drive away the rich

Mansion tax
"Nick Clegg's comments are actually about the Lib Dem's mansion tax, he's trying to reignite the debate," says Richard Murphy, tax expert and director of Tax Research LLP.

That idea certainly remains one of the party's policies. The Liberal Democrats fought for a mansion tax on the most valuable homes to be included in the last Budget. They wanted an annual levy against the value of homes worth more than £2 million.

It's hard to work out how much a mansion tax might raise. Tim Knox is the director of the Centre for Policy Studies and a staunch critic of the idea. He's argued that a mansion tax set at 1% of the value over £2 million would raise 'just' £1 billion a year - around 0.2% of total tax revenues.

That's not that much when it comes to deficit reduction. So how else could we squeeze more from the wealthiest few?

A wealth tax
"One simple way would be quite simply a wealth tax," suggests Murphy. "Some countries have tried it, for example, 1% of all wealth/holdings over a certain amount is subject to tax each year. The difficulty at the moment is that the very wealthy are so good at hiding their assets.

"Personal wealth in the UK is in the trillions, so it's not hard to imagine that a wealth tax would make a pretty big hole in the deficit."

And Clegg is not the first person to suggest such a thing. Murphy cites Greg Philo, professor of communications and social change at the University of Glasgow.

He has long called for a one-off levy of 20% on the wealthiest 10% of the population, as a way to clear the national debt and an alternative to the cuts.

Total personal wealth in the UK stands at £9,000 billion, of which the richest 10% own £4,000 billion, according to the Glasgow Media Group, of which Philo is research director. The professor has argued that a 20% tax, graduated so the very richest pay the most, would raise £800 billion.

The Glasgow Media Group highlights a YouGov poll from 2010 that suggests that almost three-quarters of the population would support this one-off tax.

Richard Murphy thinks another option would be for the country simply to improve its existing tax system so that the rich find it harder to avoid paying.

"We need to go back to the tax system we've got and make it work," he insists.

Tackle tax havens
The most obvious solution would be to tackle the money held by the wealthy in tax havens, suggests Murphy.

"We should look at how we can open up these havens to make sure the money hidden there is subject to tax again. There's an enormous amount: it's estimated that $21 billion (£13 trillion) is hidden in tax havens by world's wealthiest people. That's one way to tax the rich more."

So how much might the UK see from a clampdown on tax havens? Well, again it's hard to work out the total - after all, the money is hidden.

However, back in 2009, Murphy was asked by the BBC to give an estimate as to the amount lost through tax haven activity.

After extensive research, he estimated that £18.5 billion a year is lost to the UK exchequer as a result of tax havens - and that was three years ago.

While he admits that not all of that could be recovered in tax, Murphy argues even retrieving part of it would make for a fairer system.

End avoidance through companies and loopholes
One common way to reduce tax liability is to shelter income in limited companies. Murphy argues that this could be restricted by taxing the profits of such companies as the personal income of the owners.

He also suggests that there's plenty of tax relief that only exists to give the wealthy a break, according to Murphy. "We need to limit the allowances for relief, limit the mechanisms by which the wealthy can avoid paying tax."

Such mechanisms might include loopholes like venture capital trusts and higher-rate charity reliefs.

Taxed by envy?
Bernard Jenkin, a senior Conservative backbencher, believes Clegg's suggestion doesn't come from economic consideration, but simple jealousy.

He told BBC Radio 4's Today programme: "If the politics of envy made a country rich, we would be a very rich country."

So is this just the poor lashing out at the rich? Is Clegg pandering to unpleasant emotion rather than economic sense?

Murphy suggests that the deputy prime minister may be guilty of "gesture politics", but adds that there's nothing unfair about taxing the rich more.

"At the moment, the rich in the country have the lowest rate of tax apart from those on £10,000. It's not fair and we should correct that inequality. Secondly, who can actually afford to pay the cost of getting us out of recession? The wealthy.

"Finally, you have to remember that the wealthy don't get wealthy by themselves, society lets them do so. It's nothing to do with envy; it's about making a fair, equal and just society where everyone has an opportunity to get on."

Is Nick Clegg right to suggest a wealth tax? Would it be fair? Are we all in it together? Share your opinions with other readers in the comments below.

• Get in touch with MSN Money on Twitter, or
• Chat to us on Facebook