What’s the truth about taxing the wealthy? Eleven things you should know.

UPDATE, 18 October 2016. This article has appeared on Al Jazeera: US elections: The rich can’t be trusted with money. The more they have, the more they screw up. I highly recommend it.

Introduction

One hideous neoliberal party forced to throw a crumb to the poor

Ed Balls, Shadow Chancellor, has said that the Labour Party would reintroduce a 50p-in-the-pound rate of tax for earnings above £150,000. This minor gesture to Britain's poorest has been met with howls of protest from the super-rich. How valid are their objections?

Ed Balls, Shadow Chancellor, has said that the Labour Party would reintroduce a 50p-in-the-pound rate of tax for earnings above £150,000. This minor gesture to Britain’s poorest has been met with howls of protest from the super-rich. How valid are their objections?

Ed Balls, a senior figure in one of our several hideously neoliberal (‘free-market’-championing) political parties (New Labour in this case), has dared to deviate a smidgen from the scripts written for him by his multinational masters and, unable any longer to withstand pressure from the majority of people in the UK (who are sick of being screwed by the super-rich), he has suggested that those who earn £150,000 a year or more should pay tax at a rate of 50 pence in the pound, which is (believe it or not) more than they currently pay. Those who earn this amount comprise about 1% of the UK population, I understand, and bear in mind that they would only pay this rate on their earnings above £150K!

‘The end of the world!’ cries the self-interested establishment.

The cries of horror from the neoliberal establishment were predictable, yet I still found myself feeling both sad and angry. Their apparently self-interested arguments (truly enlightened self-interest would not have them spout such nonsense, as I hope you will come to understand as you read on) have been demonstrated to be false, and yet they are endlessly and dutifully recycled by the mainstream media. (This was sadly predictable too, given the neoliberal stranglehold on the major sources of news for most of the public. See MediaLens.org for more on this.)

My conscience drives me once more, sighing, to tackle the myths of neoliberalism, this time specifically in regard to the issue of higher rates of tax for the wealthy. I hope it will be a useful reference and will even open the eyes of some who have been force-fed nothing but neoliberal propaganda all their lives.

Outraged

Simon Walker, Director General of the Institute of Directors, has whined that the poor little super-rich guys he represents, who supposedly 'create jobs', will be driven to leave the UK if they are asked to pay a little more tax.

Simon Walker, Director General of the Institute of Directors, has whined that the poor little super-rich guys he represents, who supposedly ‘create jobs’, will be driven to leave the UK if they are asked to pay a little more tax.

Let’s start with the supposedly outraged cries of Simon Walker, Director-General of the Institute of Directors, as an example.  In the Guardian, he was quoted as saying:

The 50p tax rate – actually 52p, because the last Labour government manipulated National Insurance contributions – greatly damaged Britain’s claim to being seen as a low-tax economy and actually drove down total tax receipts. It was, and remains, an envy-driven political gesture designed solely to drive a wedge between voters.

The Institute for Fiscal Studies warned when it was introduced that it could fail to boost total revenues. HMRC’s own analysis reported that the underlying yield ‘is much lower than originally forecast … and it is quite possible it could be negative’. As a tax it was self-defeating: it failed to raise enough money to pay for itself.

This argument was countered in the very same article:

But Labour said the most recent figures released by Her Majesty’s Revenue and Customs showed that top earners paid £9.5bn more in total income tax liabilities when the rate was set at 50p than previous analysis had shown.

Eleven facts the establishment are ignorant of… or choose to ignore?

Entrepreneur Nick Hanauer says that rich people don't create jobs and they should be taxed.

Entrepreneur Nick Hanauer says that rich people don’t create jobs and that they should be taxed.

Now let’s assemble a few more facts to demolish the neoliberal nonsense spouted by Walker and his plutocrat cronies. The following points are interrelated, as should become obvious.

1. The rich are NOT ‘job-creators’.

Walker bleated on Radio 4 about how the proposed higher rate of tax would drive ‘job-creators’ away from the UK. Well, the ‘job-creators’ lie has long been exposed. Although TED, presumably under pressure from its neoliberal sponsors, tried to suppress this myth-busting talk by Nick Hanauer, it was forced to release it when the story of the attempted suppression leaked:

The super-rich are not generally in business to ‘create jobs’. They are in it to make profit (and, indeed, it is the legal duty of public limited companies to do so). Accordingly, they usually attempt to minimise their payrolls, employing as few people as possible on as little pay as possible (ignoring the fact that this may not be in the best long-term interests of the company). When large companies take over smaller ones they will try to make efficiency savings, and this includes employing fewer people. When they outcompete smaller businesses (easy, because multinationals can avoid paying tax through the use of tax havens, transfer pricing, etc., and that’s why you should support your local bookshop rather than Amazon) they often employ fewer people than the businesses they replace. For example, for every two jobs Walmart (Asda’s parent company) creates, three are destroyed.

Why, then, do so many believe that the super-rich create jobs? Well, apart from the barrage of propaganda we are subjected to in this regard, it is true that large companies (with the super-rich at the top of them) employ many people each. However, just because many people are employed by any one large company (with shareholders and super-rich people at the top, creaming off the profits), this does not mean that several smaller and less top-heavy companies, filling the same business niche, would not employ more people. The evidence suggests they would. In fact, as Nick Hanauer suggests, if you want to create more jobs you need to create more demand, and a good way of doing this is by redistributing money. He unequivocally advocates taxing the rich.

2. To stimulate the economy give money to the poor, NOT the rich.

Scottish Parliamwnr Debating Chamber

The shamefully ghastly things invested in by the pension funds of the Members of the Scottish Parliament are indicative of what the super-rich do with their excess money. They tend not to invest in anything that is any good for the majority of us. (And, by the way, unless you have looked into it, your pension fund may be just as bad!)

This is, of course, implicit in the above point. People living on the breadline will spend what extra income they are given, creating more demand for goods and services (and therefore potentially more employment). If you give more to the rich they will tend to hoard it, or invest it in ways that are far less beneficial, if not downright harmful. (I am not going to go into detail here in this regard, but you will get the idea by seeing where the pension funds of the members of the Scottish Parliament are invested.)

3. The market dictates that top dollar needs to be paid for top talent? Nonsense!

David Erdal

David Erdal, author of ‘Beyond the Corpration, Humanity Working’, on executive pay: ‘The kids have taken over the sweetie shops, the cops have commandeered the betting shops. […] The reason why the invisible hand is invisible is that it isn’t there.’

CEO pay is not related to performance, as explained by David Erdal in his book on employee-owned companies, Beyond the Corporation, Humanity Working. Here is an extract from my review of this book:

The demand for CEOs has remained constant, he says, while there are vastly more MBAs entering the workforce and therefore available to take these positions, yet their pay has rocketed. This is ‘no great mystery’ as the people who want the chief executives to have lower salaries don’t have any power and depend for their information on a company on what the chief executive provides – just as Tony Blair was able to persuade the British public of the ‘imminent danger’ posed by Saddam Hussein. Corporate governance is the responsibility of non-executive directors, but these are the CEOs of other companies with vested interests in high executive pay. Similarly, financial institutions are the major shareholders and ‘the managers of [these] are themselves very highly paid. They have a […] personal interest in seeing high pay for City and City-related jobs [and] identify with the wealthy and the educated – as do the legal and financial advisers who so often advise against employee buyouts – much more readily than they do with the pensioners whose interests they are supposed to serve.’ Erdal concludes, ‘The kids have taken over the sweetie shops, the cops have commandeered the betting shops. […] The reason why the invisible hand is invisible is that it isn’t there.’

Erdal’s arguments find support in Ha-Joon Chang’s 23 Things They Don’t Tell You About Capitalism (see Thing 14). Furthermore, recent research also demonstrates that there is no link between corporate pay and performance.

4. Inequality is bad for everyone.

The graph below lists some of the correlates of income inequality. Note the position of the UK, and click on the image for a treasure trove of striking data.  Need I point out that one way of correcting such inequality is redistributive taxation?

Graph modified from the Equality Trust website showing that health and social problems are worse in unequal countries. Click on the image to visit the site and learn more.

Graph modified from the Equality Trust website showing that health and social problems are worse in unequal countries. Click on the image to visit the site and learn more.

5. You create far more happiness by giving a pound to a poor person than you do by giving it to a rich one.

Richard Layard: 'If £1 is transferred to a poor person from someone ten times richer, the poor person gains 10 times as much happiness as the rich person loses. '

Richard Layard: ‘If £1 is transferred to a poor person from someone ten times richer, the poor person gains ten times as much happiness as the rich person loses. ‘

This argument was most famously made by Richard Layard:

Happiness research provides good evidence in favour of redistribution of income. […]  if £1 is transferred to a poor person from someone ten times richer, the poor person gains ten times as much happiness as the rich person loses. 

6. Beyond a certain point, more money scarcely improves happiness.

Emotional wellbeing does not appear to be improved when people earn more than $75,000.  Note that this figure is less than half the threshold at which the proposed 50p tax rate will kick in. How much money does anyone need to be happy?

7. The super-rich are bad for the environment.

It's hardly surprising that the super-rich are worse for the environment. Here's Roman Abrahamovitch's $350-million yacht.

It’s hardly surprising that the super-rich are worse for the environment. Here’s Roman Abrahamovitch’s $350-million yacht.

The environmental footprint of the wealthy is much greater than that of the poor. A study by the Canadian Centre for Policy Alternatives found that the wealthiest 10 per cent of the population have about 2.5 times the negative impact on the environment of those in the bottom 10 per cent.  Note especially:

While the size of an individual’s ecological footprint increases as household income increases, the real jump is at that top 10% level. When it comes to environmental impact, it really is a case of the rich and the rest of us.

Making the rich richer is, on this basis. bad for all of us.

8. Wealth is corrupting.

This is truly shocking! Please watch.

…And I seem to remember Jesus had something to say about this too!

Not convinced? Here’s what one of the super-rich thinks, despite the evidence that inequality is correlated with lack of social mobility (i.e. that the ‘American Dream’ is a fiction):

Ha-Joon Chang argues that social security (paid for by taxation) encourages innovation and creativity. Furthermore business benefits from the infrastructure paid for by taxation. High taxation is not automatically bad for business!

Ha-Joon Chang argues that social security (paid for by taxation) encourages innovation and creativity. Furthermore business benefits from the infrastructure paid for by taxation. High taxation is NOT automatically bad for business!

9. Wealth-accumulation (and innovation) by the super-rich depends on things paid for by tax.

As argued by Ha-Joon Chang in 23 Things They Don’t Tell You About Capitalism, the success of businesses depends on many things paid for by taxation, not least of which is good social security, which encourages people to take risks in the knowledge that if they fail they have something to fall back on.  In other words, entrepreneurship (business innovation and creativity) thrives in countries with high taxation!

10. The poor give proportionately more to charity than do the rich.

Many studies have shown that the poor give a higher proportion of their income to good causes than do the rich. This despite the fact that they need a far higher proportion of their income for their own subsistence. Here’s just one of many articles on this fact. In other words, the rich fail to give voluntarily to society what they can well afford to give. They should be taxed!

11. To criticise the way the system is stacked in favour of the super-rich is NOT ‘the politics of envy’.

Bruce K. Alexander contends that 'hypercapitalism' is the major cause of psychosocial dislocation, and that this is the major driver of 'addiction'. Furthermore, he believes that those at the top of tree ar dangerously addicted to the pursuit of wealth and power, in this way worsening hypercapitalism....

Bruce K. Alexander contends that ‘hypercapitalism’ is the major cause of psychosocial dislocation, and that this is the major driver of ‘addiction’. Furthermore, he believes that those at the top of tree ar dangerously addicted to the pursuit of wealth and power, in this way worsening hypercapitalism….

I seem to recall in his radio interview (mentioned above) that Simon Walker also trotted out that well-worn neoliberal phrase about ‘the politics of envy’. If you have understood any of the above points then you will realise what nonsense this is.

I, for one, pity rather than envy the misguided misanthropes who believe that it is their birthright to accumulate as much money as they want in the face of the evidence that this is harmful to society and not even good for themselves.

Canadian psychologist and addictions expert, Bruce K. Alexander, believes that many of the super-rich are ‘psychosocially dislocated’, chasing ever more wealth accumulation, power, drugs, etc., in a futile attempt to fill the void in their souls, making the world a worse place in the process.

Envy these miserable, deluded parasites? Don’t make me laugh!

If you are not prepared to pay slightly more tax…

So, Mr Walker, Director-General of the Institute of Directors, if you and the people you represent (those who earn £150,000 per year or more) are not prepared to pay slightly more tax, then you are all welcome to leave the country. In fact, please go!

It is surely not good for society to court those who have so little understanding of economics (or so little honesty?) that they persist in making the fallacious arguments I have exposed above. It is surely not good for society to admire those who are motivated primarily by the accumulation of personal wealth far in excess of what they need for a decent standard of living and at the cost of society at large.

If you are too mean to pay a little more tax, or too stupid to see the flaws in your logic, then depart forthwith, to a neoliberal paradise tax haven of your choice (the one at the top of this graph?)

…Oh, and when you go, leave the door open so that we can let in Bulgarian and Romanian economic migrants, and asylum seekers from Syria. All the evidence suggests such people will make far more of a contribution to UK society than super-rich tax-dodgers ever have, despite the repugnant racist nonsense spewed out by the conscienceless (or wage-slave?) hacks of the scapegoating neoliberal media.

On the other hand…

On the other hand, Mr Walker, if you have an open mind and are willing to learn, then let me suggest, in addition to the books and websites referred to above, the following reading/viewing matter:

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About biowrite

I am a writer specialising in non-fiction, particularly in assisting people with their biographies.
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