An ode to economics and the tax system

Freda Blogs - I'm not sure what "code" you are referring to, but no-one's bashing the rich here. We're just suggesting that they pay their fair share given that they take so much more.

I accept that some people are entirely responsible for their own wealth, but in general there is very little social mobility in the UK, which means that if you are born poor you are likely to stay poor and if you are born rich you are likely to stay rich.

Even in the case of the very few people who got rich by being intelligent, why should they be entitled to more just because they are more intelligent? Surely they are no more deserving of material comforts than any other human being. In any case, economic inequality has documented negative effects on society (http://www.equalitytrust.org.uk/research )

The motivation argument doesn't really work either. Did the MDs of the 70s work less hard than the Chief Execs of today because they weren't paid as much? No. The inventors of the fire, the wheel, HTML, Linux and Facebook didn't do it for the patent fees or the advertising revenue. Isaac Newton, Louis Pasteur and Stephen Hawking didn't patent their discoveries; and I am sure no-one thinks a merchant banker has contributed more to society than them.

There is absolutely no reason to believe that we need people to be rich. As I said before, if they all left, there would be plenty of other people to do their jobs.

Tom Trainer: 'Code' = 'Ode'. Typo, sorry.

On what evidence do you claim that there is no social mobility? It is my perception that there has never been a better time for the 'less privileged’ to become wealthy – look at some of the internet millionaires or the many so-called ‘celebrities’, some without talent. Indeed, some of our fellow Buy to Let portfolio landlords are very wealthy. All these people come from a wide range of backgrounds and education.

I do agree that if the all the wealthy people left there would be plenty of other people to do their jobs – but do you think they would do those jobs for less money than the incumbents? Would they aspire to and settle for less wealth than their predecessors? Would the country be better off? In my view, no is the answer to all those questions. Anon’s post articulates well the dangers of ‘average’ and the absence of motivation.

You go on to talk about intelligence - where does that come into the argument? Nowhere in the ‘Ode’ does it say, as you appear to suggest, that the rich are entitled to more just because they are more intelligent, and you also assert (twice) that “they (the rich) take so much more”. Meaning? Evidence?

The point being made in the ‘Ode’ is about relative contributions towards the total tax ‘take’, and it is clearly demonstrated that the wealthy do pay at least “their fair share”, to use your terminology.

I would add that I don’t have any personal axe to grind as I am not wealthy.

I’m not bashing the rich either. And I must apologise for my excessively long rants, which I must stop soon or I'll be getting divorced for neglect. I’m simply outraged at the injustice that some people have so much when others have so little, when there is enough to go around. Obviously people are not all equal in terms of skills, talents or attributes, and some will always be the innovators, entertainers and leaders, while the majority of us will just get on with our lives making our own small contributions. It's important that people are willing to maintain the sewers and collect the rubbish, that well qualified professionals look after our health care, competent people administer our financial institutions, teach our children, play football for our favourite team, entertain us on the TV etc. Think back to the 70s though and ask which one of the above would be missed first, and by everybody, if they suddenly disappeared. Is it the one who is valued and paid the least by any chance?
It seems to me that the salary attracted by most jobs is mainly dictated by the level of qualifications required, without much consideration for how important the job is to all of us, how physically demanding or emotionally stressful, how dangerous it is, whether it requires 24/7 cover, and many other factors. Pretty much any doctor, architect, footballer or rock star could learn to wield a shovel on a building site or collect refuse ( though this may be disputed by those who have seen them attempt it ;-), but very few labourers or refuse collectors could have learned to become doctors, architects, footballers or rock stars. If they could, why would they choose to break their backs, ruin their skin and hands, risk injury and even death on a daily basis, work with cold hard steel, concrete, mud and all manner of human detritus in freezing wet winters and sweltering summer heat for a wage that barely covers the day to day never mind any nice luxuries. There are a lot of unpleasant jobs that few would choose to do, but they still need to be done. Some will say that these days many prefer to claim benefits and leave this kind of work to migrant workers who will accept lower wages for hard graft. Nevertheless we all need builders and refuse collectors etc, and all jobs do require skills, talent, and motivation, and can be done well by someone who enjoys their work and feels rewarded, or done badly by someone who is only showing up because he has no other choice, and feels he is getting nowhere. People then propose that the benefit system must be too generous if people are better off on benefits than they are working. I say that the problem is that the minimum wage is too low. Why on earth should anyone in this day and age in a wealthy western country get out of their bed and give 40 hours a week of their life doing ANY job of work that someone else needs or wants them to do, and yet not take home enough pay to put a roof over their head, pay bills, eat, clothe themselves, drive a little old car, and manage a modest holiday once a year. For this, I reckon someone needs at least £10 an hour, and they’d still have to be very good budgeters. People will then say that small firms can’t afford this sort of wage, and I can fully understand that, but it doesn’t alter the fact that it’s immoral to expect someone to work 40 hours and not earn enough to live on. Therefore, the government should subsidise small firms to enable them to pay a living wage. That should cost less than paying unemployment benefit or universal credit, the small firm could then recruit the staff they need to grow their business, and the worker would gain in self esteem and have an incentive to go to work. If this means that those at the top of the food chain have to take a slightly larger hit, then that’s how it has to be. At the end of the day, they made their money by taking a little, or a lot, of profit from the efforts of everyone else below them in the food chain. If they make a hundred times more than the guy at the bottom, it’s not because they are a hundred times cleverer, or work a hundred times harder, they were just lucky enough to be born in the right environment, or a bit smarter or more ambitious than the average, or they happened to have a good idea, or had a lucky break, or are just plain ruthless. Of course too there are lazy scroungers living on benefits. We’ve all had a few of them as tenants, with their big TVs, foreign holidays, too lazy to be up for the boiler service man at 11.00 am, can’t manage down to the housing office to complete their claim forms, but can jump in a taxi with the kids for a day out on the other side of the city, don’t pay a single utility bill, give you a week’s notice and leave your flat like a tip. In my paid job as a health care professional though I see the other side of the welfare system, what it was really set up for and why it is so precious and necessary. The poor old souls who lived through the war, saw the introduction of the NHS, worked and paid taxes all their lives, and are too proud to claim the benefits they are entitled to, or face the humiliation of being turned down, as they almost invariably are at their first application. I think this is the unsophisticated means of trying to weed out the scroungers. Trouble is, the scroungers are better at filling in the forms and more willing to persevere than the genuine. There aren’t many left though who can remember when you had to pay sixpence to visit the GP, or buy your own school jotters and rub them out when they were full to save buying a new one. When they only wore shoes in the winter as they were too expensive to wear them out in the summer, when your employer could dictate when or even if you could marry without losing your job, when a sixteen year old girl could be yoked into a harness to help the gardener pull the big mower round acres of stately lawns. These were some of the experiences of my own grandparents, and it seems some would like these days to return. Do we ever learn anything from history, or is it all forgotten once those who were there are all gone?

Freda Blogs - I just googled "social mobility in UK" and loads came up including news of an OECD report that said we had the worst mobility in Western Europe http://www.dailymail.co.uk/news/article-2137585/Britain-worst-social-mobility-Western-world.html and this Wikiedia article http://en.wikipedia.org/wiki/Social_mobility

The problem with one's own perception is that it only takes into account what one sees, which can never be the full picture. You really need academic studies to draw such conclusions.

The rich clearly take more than the poor; otherwise how would they be rich?

Why do you think the remaining people would not do the jobs of those who had left for the same money? There are always people willing to do a job for less money. Do you think if a Chief Exec of a company left the country because they didn't want to pay tax, no-one else would want to do his or her job? People did these jobs for less in the past. Why would they not want to now?

All very interesting, and I'm pleased it hasn't degenerated (yet) into a slanging match!!

Most people seem to be coming out with a social conscience, to those who say but we have to have a reward system, yes of course I'm sure most people would agree, it's just a case of where you draw the line, is it fair that people earn 10 times the salary of other people for the same amount of work, or 20, or 200 times? I don't think anyone is promoting communism, just a bit more fairness. I live in France where I believe they have a system whereby the best paid person in a company cannot receive more than 20 times the worst paid person, so the insentive for the people at the top is to raise everybody's salary to raise their own. But, I hear you say, France loses many of it's top financial heads to London - true - but the country seems to function very well without them.

@Tom Trainer:
Oh dear - I think I'm going to agree to disagree with all your views. They all sound like communism to me (and we all know how that turned out).

Can you come back with ANY hard numbers or comments (with real evidence) to back up any of your statements?

- I'm happy with the tax rates in this country. The hard evidence is there that people who earn the most, pay the most. If I earn more money, then I pay more tax.
- My overriding view about tax is that if you earn £1 in income, you won't lose more than 49% of it in taxes (including NI). I see it as the only way to make sure people get a reward for working harder (or taking investment risk).
- Once you go over the magical 50% (or install caps), then it becomes a major barrier to investment.

I could give real personal examples, but I want to sort out lunch for my children... have a nice weekend...

Slightly off topic here but what do you all think of the word 'success'. It appears now to only mean someone who earns a huge amount of money. This of course can apply to the media/industrial/sports tycoon whose wife spends a fortune on plastic surgery and botox to ensure hubby doesn't trade her in for a younger model, whose children are drug or alcohol addicted and who spend their lives trying to get onto reality TV shows, bouncing from one unsatisfactory realationship to another. Whose former staff are flogging behind the scenes secrets about, "what really goes on"

Funnily enough I see success in the family where the parents are ambulance drivers and supermarket checkout staff whose children work hard, are polite and don't survive on handouts from mum and dad.

Shame the rest of society doesn't see it that way.

@Tom Trainer:
The report being reviewed in the newspaper article concludes that the biggest factor in social mobility is quality parenting and whether the home environment is educational and whether the parents have good mental health.

These attributes have nothing to do with wealth – less well-off parents can read to their children and encourage their educational and emotional well-being , just as the wealthy can (and seemingly do, according to the statistics in this report). Similarly, parents from all walks of life can inculcate drive, aspiration and ambition in their children –it’s not all about money.

I have no wish to enter into a political argument about the benefits of wealth, socialism etc, my point is simply to look at the experiment being quoted in the "Ode", and how the analogy with the tax system shows the wealthy paying significantly more in percentage and actual terms then the majority of us; your argument that ‘they take so much’ from the rest of us is not sustainable, particularly when the opposite is true – they are giving much more in financial terms.

I also agree with Gillian here that success should not necessarily be measured by wealth; I have dear friends who are a fireman and nurse, whose contribution towards is society is huge.

@SimonBB:
Agree wholeheartedly.

@Gillian Schifreen: yes it is very irritating how we are told these days that success means attaining lots of material wealth. This attitude impoverishes society.

@simonBB: No "oh dear" about it; I am sure there was never any doubt from the outset that we disagreed. The report in the article did not actually state that "the biggest factor in social mobility is quality parenting"; it was the MPs who concluded that, and MPs are not a respected source of fact or evidence.

I really don't know what to make of your comments about Communism. Do they relate to this thread? If so, how?

You repeat the statement that people who earn the most, but no-one has ever disputed this. What we are saying is that they need to pay more because they take more. If the top rate of tax was 1% higher than the bottom rate, then the rich would still pay the most but would that be fair?

I have tried to justify my comments with relevant references. Could you please let me know which of them you feel have not been properly justified and I will attempt to do so. I set out below the claims you make that do not appear to be justified.

You claim that tax rates over 50% are a barrier to investment, but don't say why. Why is it a barrier to investment to tax a millionaire merchant banker over 50% on his salary?

You also fail to explain why no-one would do the jobs of rich people who left the country and why you believe that buy-to-let landlords come from "a wide range of backgrounds and education." Can we have some support for these please.

If I was super rich I would choose for my domicile to be in a country in which I paid the lowest tax.

I would also base my companies in Countries in which I would pay the least tax.

Therefore, does it not stand to reason that if we want to increase tax revenues we need to lower tax in order to attract more super rich people and companies to our Country as opposed to increasing tax thus incentivising them to move or not even give us a second look?

I believe it was a British Ambassador who introduced this concept to Hong Kong?

I see some merits in the concept pointed out by Chris whereby the highest paid person is not allowed to earn more than 20 times the lowest paid person. That might well drive productivity in some cases. However, I can't see how it would apply to an owner of an SME who takes dividends or a footballer. Could you really see a top Premiership striker working for 20 times what the person on the turnstiles receives? All the best players would go elsewhere, even if the tax rate in the UK was the lowest in the world.