Friday, January 15, 2010

The Telegraph: woe betide the rich

A remarkable piece of ideology-soaked thinking in today's Torygraph.

When the top rate of income tax rises up to 50 per cent in April, a person earning £1m in Britain will have to pay £491,278 in tax.

An article by Damian Reece in today's Telegraph ('Tough times for the rich') compares the situation with the equivalent in Frankfurt (£486,808) and Paris (£461,128), London's two biggest financial competitors in Europe. "We really are going backwards", is the concluding remark.

It's interesting how Reece only draws comparisons with places such as Switzerland and Hong Kong, but not with Sweden, Norway, Finland and the Netherlands, where the top rate of income tax ranges between 52 and 55 per cent.

Or indeed Denmark, described by US business magazine Forbes as the country with "the best business climate in the world" as well as one with the lowest levels of income inequality. And, don't say too loud, the top rate of income tax in Denmark stands at 58 per cent.

However, the above doesn't fit the Telegraph's ideological propaganda.

Otherwise they would do good to mention what the Institute of Fiscal Studies reported a month ago: the fact that "earnings from employment [are] the main culprit in driving up inequality [in Britain]", and that unequal distribution started growing dramatically in the 1980s.

Or they would remind the reader of what The Economist - hardly a mouthpiece for socialism - remarked in a special report in 2007: that "income is distributed more unequally in Britain than in almost any big rich country except America" and that "fat pay packets have helped London house prices to triple over the past decade".

According to IDS (Income Data Service), in 1988, the average FTSE boss earned 17 times the average employee's pay. In 2008 the figure stood at 75.5 and, in 2009 - sod the "credit crunch" - 81 times the average pay of full-time workers.

With all of the above factors put together, it seems only reasonable for the government to take small steps towards redistribution. Quite simply, if top bosses don't act towards establishing more humane wage differentials, somebody else will have to.

It makes easy headlines to say that higher taxation "makes the threat of a gradual exodus from London real" - and we keep hearing it time and again - but god alone knows how many young talents would be ready to fill the shoes of the same egomaniac financial barons that brought the country's economy to its knees.

Also, like Robert Peston remarked last month, "taxing bankers rather than banks would not weaken the banks themselves, at a time when they need to accumulate capital".

Finally, it looks like it still hasn't dawned on many that an over-inflated financial sector carries enormous side effects which is precisely the reason why the UK was so badly affected by the crisis.

And by the way, while that thrives safe in the knowledge that bail-outs will come if the going gets tough, and manufacturing keeps going down the pan, how many mobile phone and fast food jobs are there to sustain the country?


Daniel Hoffmann-Gill said...

Good stuff, nice facts on Denmark too, there is always another side to the story.

Anonymous said...

Very few of those rich enough to pay 50% tax will pay it, that's why they are rich enough to pay to avoid it.

I can think of ways to avoid it, and a quick trawl of financial services (costs deductible at the top rate of taxation) and tax 'shelter' offerings reveal that the 'financial industry' is already ahead of the game.

Fortunately none of this matters very much.

As I see it, the standard of living of the majority is not determined by government policy and pretty speeches inaudible to 90% of the elctorate.

People’s lives are very much better than they were 150 years ago, but this is not the consequence of wise government or wise elctoral choices.

What has put more bread on the table is agro-technology, and holidays abroad for the masses, aero-technology. I don’t see the hand of government in any of this. Gordon can do little to damage the march of progress and neither can David

All states in the world, are more or less enjoying the same huge advances in living standards, regardless of regime and philosopy.

see for example