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Only Poor People Pay Taxes

In the week that more Government cuts hit the poorest in society, as George Osborne argues with his critics and Iain Duncan Smith says that he can live on £53 a week, I thought I would share this letter to The Guardian from Michael Meacher MP, which is still extremely powerful and pertinent:

The annual Sunday Times Rich List yields four very important conclusions for the governance of Britain (Report, Weekend, 28 April). It shows that the richest 1,000 persons, just 0.003% of the adult population, increased their wealth over the last three years by £155bn. That is enough for themselves alone to pay off the entire current UK budget deficit and still leave them with £30bn to spare.
Second, this mega-rich elite, containing many of the bankers and hedge fund and private equity operators who caused the financial crash in the first place, have not been made subject to any tax payback whatever commensurate to their gains. Some 77% of the budget deficit is being recouped by public expenditure cuts and benefit cuts, and only 23% is being repaid by tax increases. More than half of the tax increases is accounted for by the VAT rise which hits the poorest hardest. None of the tax increases is specifically aimed at the super-rich.
Third, despite the biggest slump for nearly a century, these 1,000 richest are now sitting on wealth greater even than at the height of the boom just before the crash. Their wealth now amounts to £414bn, equivalent to more than a third of Britain’s entire GDP. They include 77 billionaires and 23 others, each possessing more than £750m.
The increase in wealth of this richest 1,000 has been £315bn over the last 15 years. If they were charged capital gains tax on this at the current 28% rate, it would yield £88bn, enough to pay off 70% of the entire deficit. It seems however that Osborne takes the notorious view of the New York heiress, Leonora Helmsley: “Only the little people pay taxes.”

Related to that last point, here’s a graph that illustrates the extent of tax dodging and tax avoidance in the UK.

Update

Meanwhile, the Guardian reports on a massive leak of computer data that shows how much anonymous wealth is held in off-shore accounts
 

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Bankers Bonuses and the Rule of Law

I am sure I have made this point somewhere before on this blog, but a quick search through my archives doesn’t reveal it, so… 
All this business about bankers and CEO bonuses makes me uneasy. The pattern is now very familiar: it transpires that some despised ‘fat cat’ – a banker or the head of a quango, say – is due to be given a huge bonus on top of their already huge monthy remuneration. Outrage ensues. The aforementioned ‘fat cat’ is chased by the press and slandered by politicians and interest groups. The ‘Fat cat’ eventually issues a statement saying he will give back the money.
Continue reading “Bankers Bonuses and the Rule of Law”

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Strategic Ignorance in the US Primaries

The Republican Presidential Primary debates are frightening. From the audiences at these events, we’ve had the booing of a solider because he is gay, the cheering of the idea of someone dying because they didn’t have health insurance, and the enthusiasm for the executions of potentially innocent people. Meanwhile, the candidates seem entirely ignorant of foreign affairs or proper fiscal policy, and instead double down with their demonstrably untrue lies about President Obama.
This is clearly evidence of an extreme intellectual and moral decay – the sort of thing that, if unchecked by good people, could end up at some pretty unpleasant and illiberal end points: war, torture and extreme poverty. Let us hope that Obama prevails in the 2012 election.
In trying to comprehend why the Republican prospective nominees are so ignorant, it is easy to assume that it stems from an underlying stupidity. But this post from Chris Dillow introduces the concept of ‘strategic ignorance’:

Ignorance – normally a weakness – can increase one’s bargaining power. For example:
… The man who doesn’t appreciate the cost of a breakdown of negotiation – say who doesn’t know how much a strike will cost – will adopt a tougher negotiating stance, and so extract more concessions, than the man who doesn’t.

Applied to the presidential primaries, the idea here might be that many of the candidates are being willfully simplistic and ignorant in order to get votes.  In the wider US political system, they’re being ignorant in order to increase their barganing power in Congress.
This tactic is of course deeply cynical, disingenuous, and wrong.  However, I find it a strangely reassuring analysis, because it suggests that the Republican nominees aren’t actually as nutty as they appear.  If (or when) they achieve office, and faced with actual governing decisions, the cynical political player might at least pick the option which diffuses the chance of war or economic depression, when the genuinely ignorant leader might sleepwalk towards catastrophe.
My guess is that the nominess fall into two camps: The genuinely frightening (Congresswoman Michelle Bachmann, Herman Cain and Rick Santorum) and the cynical (Newt Gingrich, Gov. Rick Perry, Gov. John Huntsman, and Mitt Romney). Congressman Ron Paul feels like he should have a category of his own: A zealot, but self-aware in a way Bachmann and the others are not.

“[The Republican Party] consists half of people who think like Michele Bachmann and half of people who are afraid of losing a primary to people who think like Michele Bachmann and that leaves very little room to work things out,” – Barney Frank, the witty Speaker of the House we never had.

Via the Daily Dish.
In the UK we have plenty of terrible politicians, but very few who fall into the former group, of frightening zealots.  The negative virtues of cynicism and opportunism, which we deplore, also provoke compromise and middle-of-the-road choices, which we admire.  Ann Widdecombe (now no longer in Parliament) and Nadine Dorries MP might plausibly be added to the former category, but even they seem to be more self-aware than their American counter-parts.  Could this be because our constituencies are less gerrymandered and more diverse, preventing extremism that can exist when you have a whole continent of disparate values bundled together into a single political system?

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On Benefit Fraud

Now then.  Dave Osler has an interesting post about benefit fraud over at Liberal Conspiracy.  Apparently, only 1% of benefits paid by the state are wrongly claimed.  That still amounts to a billion pounds, but is obviously less than the billions spent on bank bailouts.
Crucially, it is also much less than the amount of benefits people are legally entitled to, but never actually claim (approximately £10.5 billion, points out woodscolt in the comments).  Double crucially, it is a fraction of the money lost to tax evasion (£30 billion).  Yet in our political discourse, it is benefit cheats who are blamed for the horrible amounts of money the government wastes.  Could this be because diddling benefits is a poor person’s game, while tax evasion is a middle- and upper-class pursuit?
During the election campaign, I recall more than one political debate I had with friends and passers-by, on this problem.  Like immigration, the issue is incredibly muddled.  People often equate benefit-fraud with the separate issue of the state giving people too much in benefits. A story about a woman who steals £60,000 from the state in a benefit fraud is equated with the story of a man who claims housing benefit of £2.1m a year to live in Kensington are seenn as somehow part of the same problem.  However, they are problems of a completely different order – The first is a case of someone breaking the law, who should be (indeed, was) caught and punished.  The second is someone acting perfectly legally and in their own interests, within the system operated by the Royal Borough of Kensington & Chelsea.  We solve the first case by investigating criminality.  We solve the second problem by forcing the borough into building more and better social housing (if indeed you consider humanely housing a group of refugees to be a ‘problem’).  Housing policy, and the level of benefits paid to those not in work, seems to me to be an ideological argument, where Labour and the Tories have very different views.  Meanwhile, everyone agrees that benefit fraud is wrong and must be stopped.  Public discussion on benefit fraud doesn’t always make this clear… and the Left loses the argument as a result.

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Fallout

As flights resume following the Eyjafjallajokull erruption, Europe is left counting the economic cost of a genuine, real-life, bona fide Act of God.  I was at the London Book Fair this week, with English PEN, and saw first hand the effect that cancelled travel plans can have on commerce, and indeed, the free flow of ideas.  Below is my Flickr photoset ‘Fallout’, showing the forlorn empty trade stands at the fair.