James took a lot of time to answer my post on Conservatives and my first comments. It's only just that I reply to his criticisms and I do apologise for the time-lag. Real life issues etc... I also hope that the dialogue will be interesting to others. Please jump in and provide your own thoughts...
James said:
[On] The duplicity of conservative politicians:
My answer: I wasn't arguing that liberal politicians were of a more upstanding nature than conservative ones (that might only be generally true in the case of Tea Party nutters being elected in the 2010 cycle in the USA). I am rather sure they aren't, on an individual basis. I was arguing that left-leaning politicians don't usually lie about taxes, which is one of the fundamental point of economics within the public discourse.
On this, I think you (conservatives) would possibly better served by trying to establish that left-wingers deliberately lie about, I don't know, the efficiency of government spending or the lack of consequences to lowering retirement age or some-such.
Republican tax proposals: As for the specifics of the Republican tax policies you mentioned, there's a strand of conservative opinion which favours "regressive" and flat-rate tax systems on ideological grounds (i.e. because we all use the same services, and should all pay towards their upkeep). I’d suggest that this isn’t a case of voters being misled, but rather of Republican politicians proposing policies which are in accordance with the values held by some of their core supporters. Everyone knows that this will lead to people on lower incomes paying more tax - this is, to a certain degree, the point of a flat rate or regressive tax system (i.e. that no one gets a free ride).
My answer: I really do doubt that most Americans voting Republican or approving of Paul Ryan truly understand that point. Most Republican states consume far more in federal USD than Democrat ones.
I have a certain degree of sympathy with this as a means of fixing some of the problems with the current US tax system – which allows large sections of the electorate to vote in favour of ever increasing hikes in government spending in the certain knowledge that they will never be expected to shoulder the tax burden.
My answer: Furthermore, that statement, while sometimes true (California pensions and, generally, California, with your stupidly organized direct voting system, I am looking at you) is far from always true...
"[T]here’s a modest correlation between the likelihood of not paying
income taxes and the likelihood of supporting Obama. But Romney vastly
overstates the link. Obama has substantial support among households
$100,000 and up, and virtually all of them pay income taxes.
(...) Obama is expected to win millions of votes from people who do pay federal income taxes, and Romney is expected to win millions of votes from people who do not pay federal income taxes.
(...) Obama is expected to win millions of votes from people who do pay federal income taxes, and Romney is expected to win millions of votes from people who do not pay federal income taxes.
Romney gets strong support from seniors. He led in the CBS-New York Times poll by a 53 percent to 38 percent margin, and a CNN and Opinion Research Corp. poll from around the same time had Romney leading among senior by a 53 percent to 45 percent margin.
Yet being a senior is one of the biggest reasons an American would pay no federal income taxes. Among those who saw tax breaks wipe out their income-tax liability, nearly half benefited from a tax break targeted at senior citizens".
Yet being a senior is one of the biggest reasons an American would pay no federal income taxes. Among those who saw tax breaks wipe out their income-tax liability, nearly half benefited from a tax break targeted at senior citizens".
All that to say that, no, it's not all the hard-working people voting Conservative and the spongers voting Left.
It's interesting to note that the Coalition government here in Britain has taken a very different line by raising the Personal Allowance (i.e. by increasing which the number of people who are exempt from paying income tax). Their intended purpose presumably being to show that tax cuts can also benefit the poor.
My answer: Well, at least, I agree with that decision by the Coalition government - even if I am sure I'd disagree with the rest of what they've done. Unless they planned on paying for those cuts by raising taxes on the top 0.1%? Unlikely, I think... :)
The notion that cutting welfare (and moving away from a “progressive” tax system) would be inimical to the advancement of socially conservative values is an interesting point, and I’m going to respond to it in slightly more detail.
Families: Back in the 1960s and 1970s, a common argument was that the expansion of the welfare state was contributing undermining the traditional family by making it financially advantageous for women to have their children outside of wedlock rather than getting married. Here in the UK, there was also a perception that single mothers were being fast-tracked for council housing, and that the best way for a woman to jump the queue and get her own home would be to have an illegitimate child (i.e. that social liberals, whether intentionally or otherwise, were using welfare as a tool to subvert conservative social institutions).
More recently, there have been a number of quite high-profile stories in the news about the small minority of welfare recipients who have been able to milk the system by having large numbers of children (again, generally outside of marriage), and who have therefore been able to secure housing in multi-million pound mansions at the taxpayer’s expense.
Reducing welfare spending would certainly create hardship for some people who are living in families, but it’s a stretch to claim that it would be bad for families as an institution.
My answer: The housing aspect you mention is extremely UK specific. There, I actually agree with you, generally. The effect might be hard to measure but I think it's a bad idea to incentivise women, especially poorer ones, to have out of wedlock kids by favouring them when it comes to social housing. It may have made good sense when unmarried mothers were shunned and often more or less forced into poverty and/or prostitution. Since this is no longer the case, I think we ought to review the criteria for social housing attribution.
However, my point was more along the lines of "conservative economic policies create hardship, especially for the poorest segment of the population. Since a lack of financial stability is one of the primary cause for the lack of familial stability, conservative economic policies go against conservative social values".
"The survey finds that those who are less well-off are as likely as
others to want to marry, but they place a higher premium on economic
security as a condition for marriage. And this is a bar that many may
not meet."
Now, why women would have kids with men they don't think are good enough to be marriage material is a bit of a mystery (or a testimony to the strength of our genetic imperative to multiply) but the point remains: Poor people don't marry as often and divorce more than richer, more stable people. Thus creating more poor people isn't a good idea from the point of view of family values.
Social values: I also dispute the notion that these sorts of changes would be bad for social values. On the contrary, the proposals you mentioned sought to reshape the social contract in a way which would encourage the values which their proponents believed would be best for America (i.e. hard work, personal responsibility and respecting other peoples’ property rights).
My answer: Personal responsibility, hard work and a general respect for the law are only going to occur when people can see a path, a future for themselves and/or their kids and can see these efforts paying off.
These days, even the classic road to betterment (going to college) is turning into a trap.
How do you expect people to work hard, take responsibility and respect other people's properties when they got no realistic option of bettering themselves?
Naked Capitalism isn't exactly an unbiased source but take the time to look at the graph on what people did/do with their money during this crisis
"People are draining their retirement accounts, neglecting medical care, and relying on food stamps to get by".
Social cohesion: I’m not sure that this is a concern for most modern conservatives.(or at least, it isn't understood as something which would be challenged by wealth inequality). Historically, it was certainly something which One Nation Conservatives and High Tories bought into, but the mainstream of the modern conservative movement cleaves far closer to classical liberalism in the Thatcher or Reagan model. (And in some cases - such as the US Tea Party movement, goes beyond it in seeking to roll back the state).
So, honestly, I don’t think that the proposals you’ve mentioned were madness (or in any way inimical to social conservatism) – they were just designed to reshape society in accordance with values which are very different to your own.
My answer: And yet, every time they've been implemented, even partially (Thatcher, Reagan) things have gone badly. The US and UK lead the West in terms of teenage pregnancies (Okay, there might be something a bit specific in the UK with the skewed incentive of housing but the US? With its religious framework on top?), the US sees quite a bit of murder (fair enough, guns) and the UK sees quite a bit of assault (question: are they just substituting because the UK has no guns? i.e. both countries are violent but in one case it leads to homicides due to the abundance of guns while, in the other, it leads to 'just' a trip to the ER?). The UK leads the way with alcohol abuse by youngsters... I mean, look at the consequences of Thatcherism on the social fabric of Northern UK...
Bottom line: Either playing by the rules allows people to see themselves (or their kids) joining/staying in "the middle class" or people will not be playing by the rules for very long...
Poverty: I agree with a lot of what you’re saying – no one’s suggesting that everyone who leaves the unemployment queue is going to jump into a high-paid job. However, even if people aren’t capable of working at a graduate level, I would generally prefer to see them working at whatever level of job they can secure, rather than being permanently unemployed. (Even if this does mean that some people are cycling between low-paid jobs, as you suggest.) And the system needs to reward this.
My answer: Yes, I agree. And I think most left-leaning economists would to. Hence my point that we ought to be able to find something agreeable when it comes to economics between left-leaning and conservative voters. We do want the same thing overall and we all agree that incentives matter...
One other point to note is that even the working poor you’ve mentioned are likely to be in receipt of government benefits (e.g. income support and housing support). For part-time workers, these are benefits which they could lose if they were able to find full-time work. Here’s a link to an article on the poverty trap argument I mentioned, which you might find interesting:
My answer: Thank you for the link. Yes, I don't disagree that the system needs to be designed fairly carefully so that, one, people are always better off working than sitting on their butt (caveat: ... unless they're taking a bit of time to find a job more in line with their past working experience and education) and, two, no one working to the best of his abilities within the existing marketplace should be 'poor' i.e. unable to feed, house and clothe himself/herself.
I don't think the people who designed the present-day system really had other ideas but it certainly can get all screwed up with too many pieces creating the wrong incentives. No disagreement there.
Anyhow, my lunch break’s at a close so I should probably stop writing.The ball’s in your court!
Actually, I’d like to respond to your point about taxes being too high on the 99.9% as well.
You might also find this report by the Centre for Policy Studies (CPS) interesting:
The main thrust of their argument is that most people in the UK receive more in state services (i.e. cash benefits and benefits in kind)than they pay in tax. And that the difference between the two figures has increased substantially over the last few decades.
Only the top 47% pay more in taxes than they get in return (although the discrepancy between the two figures increases sharply with income).
Now, admittedly, CPS is a conservative-leaning think-tank, and attributing spending between different income groups is a sufficiently nuanced topic that you could probably debate parts of their methodology. But it sounds as though the rest of us are already getting an exceedingly good deal out of the rich.
It’s also interesting to note that the top 1% of UK taxpayers paid 26.5% of all income tax in the last financial year, and that the top 0.01% paid 4.5% of all income tax.
This probably isn't proportionate to their wealth, but is certainly a lot more than they're receiving from the government in return for their contributions.
To be clear, I'm not arguing for more tax on middle-class taxpayers - but the evidence doesn't seem to support the notion that we're getting the short end of the stick.
Though, to be fair, I'll need a bit more time to go into the details of the CPS study. I would add that, in the US, the trick of concentrating on 'federal income tax' rather than 'all taxes' is used often to make taxes seem more progressive than they are. The Telegraph does the same - only in the body of the article is it clear that we are talking about income tax alone. What about VAT and payroll taxes? They tend to be highly regressive taxes and so, overall, in the USA at least, the system ends up being only 'mildly progressive'. That's just not good enough.
Over to you, my good sir! :)
In any case, though, thank you, James, for taking the time to read this blog and support it with your comments. I do appreciate!
Left wing politicians lie less? Oh come on. Did you even see Hollande's last manifesto. Anyone with primary level maths skills could tell it was horseshit from start to finish.
ReplyDeleteOf coruse, the problem is that most people won't actually read manifestos (as well Hollande knows, or he would never have produced such egregious claptrap).
Hey, I claim 'straw man'. I was specifically referring to the US situation. I would gladly concede that conservatives in France or the UK are not nearly as bad as their US counterparts.
DeleteThe worst that can be said about Cameron and co is that they believe in the 'confidence fairy', as Krugman calls it. But even if it is mostly a mirage, confidence CAN matter. Ask Greece, Spain, Italy or Ireland...
So, overall, even if some of the arguments parallel on both sides of the Atlantic, I have not seen anyone like Paul Ryan either in the UK, let alone France...
And, by the by, re-reading myself, didn't I caveat my point with "On this, I think you (conservatives) would possibly better served by trying to establish that left-wingers deliberately lie about, I don't know, the efficiency of government spending or the lack of consequences to lowering retirement age or some-such".
DeleteThere's an interesting discussion going on right now in the blogosphere on the Multiplier and its size i.e. it is questioning the efficiency of gvt spending...
http://www.bruegel.org/nc/blog/detail/article/938-blogs-review-empirical-and-theoretical-multiplier-uncertainty/#.USM_8_KdiZQ
http://blogs.ft.com/gavyndavies/2012/10/21/high-fiscal-multipliers-undermine-austerity-programmes/?
In that case you have refined your position from your earlier blog posts, in which you said that most conservative voters had been deceived by politicians into supporting right-wing policies.
ReplyDeleteI did mention before and do believe that a lot of right wing politicians (if not conservative economists) rely on deception and outright lies when it comes to convincing people to vote for measures against their own interests.
In this respect, I do believe that the vast majority of conservatives are being either gullible or, said less provactively, misled.
It’s difficult to read this as anything other than an insinuation that conservative politicians are more dishonest than their left-wing counterparts. And that people who hold conservative views do so because they have been duped into a sense of false consciousness by their insidious political puppet-masters. (Which, to be fair, is how a lot of liberals seem to characterise the Republican Party.)
To be honest, I’m glad that you’re willing to concede the point. Because I’d far rather continue the conversation from a position of mutual respect, in which we’re both willing to acknowledge that the other party has made an educated decision to embrace values which differ from our own.
Clearly power lies with the rich and powerful. One only has to glance at the composition of the House of Commons to see that it is made up of a overwhelming number of white, middle class men who were disproprotionately privately educated. This reflects the structured inequalities in the British state.
ReplyDeleteBecause of the structured inequalities in the British state, the powerful undoubtably play a role in deciding what is and what is not debated and in what context. Therefore, they undoubtably have a disproportionate effect on shaping outcomes and public opinion. Individuals opinions are shaped by the society in which they live.
Whilst there is an element of free will in individual opinions, they will also have been shaped by the context in they live.
in *which* they live
ReplyDeleteMy answer: I really do doubt that most Americans voting Republican or approving of Paul Ryan truly understand that point. Most Republican states consume far more in federal USD than Democrat ones.
ReplyDeleteYou’re right that many people are shockingly ill-informed about the candidates and policies they’re voting for, but this is true across the spectrum of political opinion. Rush Limbaugh broadcast a tape back in the 2008 election in which Democratic voters were asked why they were supporting Barrack Obama. Some of the results (such as the chap who claimed that he was voting for Obama because Obama was against abortion) were surprising.
However, my understanding is that most Republicans have a decent understanding of what fixed-rate or regressive tax policies would entail (or at least as robust an understanding as any other economic laymen.)
I was aware that Republican states receive more money from the federal government than Democratic ones. However, I don’t think that this is relevant to the arguments for and against progressive taxation.
My answer: Furthermore, that statement, while sometimes true (California pensions and, generally, California, with your stupidly organized direct voting system, I am looking at you) is far from always true...
ReplyDeleteAll that to say that, no, it's not all the hard-working people voting Conservative and the spongers voting Left.
First of all, I’ve never said that conservatives work any harder than liberals or socialists.
To address the specifics of the example you raised: Romney’s 47% comment was extremely ill-judged, not least because his 47% included groups (such as retired people) who make up some of his party’s staunchest supporters. (As you say, retired people are an obvious exception: as they’ve generally made up their minds as to which party they’re going to support far earlier in life. The other obvious distinction is that most retired people have paid for whatever perks they enjoy in old age through a lifetime of taxes.)
However, I think that Romney’s broader point was correct: people who receive government benefits without paying anything back in tax don’t have much reason to care about government efficiency or whether the tax burden is tolerable.
This can be a dangerous thing, as it risks creating a group of voters for whom the welfare state is an endless free lunch, and for whom taxes are something which only happen to other people. (This is perhaps the flip side of the coin to “no taxation without representation”: everyone should be expected to contribute to the public purse if they’re going to have a say in how the money collected is to be spent.)
These people certainly aren’t representative of the broader socialist movement. However, I suspect that such people generally vote overwhelmingly in favour of socialist parties as a means to the end of securing an ever-increasing stream of government entitlements. In this sense, they are a constituency which the left has manufactured for itself (at the taxpayer’s expense), who can be relied upon to lend the weight of their votes to its ideological agenda.
The analogy that sprang to my mind while I was writing this was of a group of friends going for a meal:
Bob: “We’re going for a pizza, do you want to join us?”
Joe: “Sorry, I can’t afford that.”
Bob: “Don’t worry, we’ll cover your share.”
Joe: “Okay then, I want to go to Papa John’s.”
Bob: “You know that’s an hour out of our way, right?”
Joe: “Oh, and I want an extra-large with a stuffed crust and extra toppings. And while you’re down there get me two six-packs of beer and a bottle of whiskey.”
You might feel that the comparison is unfair, but I’d say that’s more or less where this woman is now (i.e. milking the benefits system for everything she can get out of it): http://www.telegraph.co.uk/news/uknews/9880720/Unemployed-mother-of-11-is-keeping-horse.html.
Shifting to a flat-rate or regressive tax system could help to mitigate this problem, by ensuring that everyone feels some of the sting of taxes.
For a hopefully interesting tangent, which might also help to answer your point about why some people on lower incomes support right-wing policies, you might like to check out “we are the 53%”:
http://the53.tumblr.com/
http://www.buzzfeed.com/jpmoore/we-are-the-53-16-examples-of-the-conservative
Seriously, click those links.
The common theme between many of those posts is people who are (or have been poor) but who don’t want government hand-outs and are determined to make their own way in life on their own merits. I think that this shows that there is still a strong current of individual self-reliance in the US (which doesn’t exist in the same way here in Britain). For what it’s worth, I suspect that most of those people are going to be very successful in achieving their ambitions.
My answer: The housing aspect you mention is extremely UK specific. There, I actually agree with you, generally. The effect might be hard to measure but I think it's a bad idea to incentivise women, especially poorer ones, to have out of wedlock kids by favouring them when it comes to social housing. It may have made good sense when unmarried mothers were shunned and often more or less forced into poverty and/or prostitution. Since this is no longer the case, I think we ought to review the criteria for social housing attribution.
ReplyDeleteAgreed.
I’d be genuinely interested to find out more about what people mean when they say that they view financial stability as a condition of marriage (and, unfortunately, this is a point which the article doesn’t explore).
Is this just a case of young people thinking “I’ll get married and have kids in about 10 years, once I’ve got my career sorted”?
I’d struggle to understand this sentiment being expressed by people who already had children outside of marriage, unless what they’re really saying is “I can’t afford to get married”. That is certainly something which is occasionally heard in the UK where people are able to claim benefits as single parents which they would not be able to claim if they married their partners. I don’t know whether the US benefits system works in the same way.
Did you follow any of the commentary which followed the publication of Charles Murray’s book Coming Apart: The State of White America ? Murray blames the welfare state for contributing to the collapse of poor American families.
The book isn’t available online, but there’s an article on it here: http://www.realclearpolitics.com/articles/2011/04/12/coming_apart_at_the_seams_109527.html
Here’s another article which talks about welfare causing similar problems in the African-American community: http://www.washingtonpost.com/wp-dyn/content/article/2011/02/04/AR2011020404934.html
My answer: Personal responsibility, hard work and a general respect for the law are only going to occur when people can see a path, a future for themselves and/or their kids and can see these efforts paying off.
ReplyDeleteThese days, even the classic road to betterment (going to college) is turning into a trap.
How do you expect people to work hard, take responsibility and respect other people's properties when they got no realistic option of bettering themselves?
I don’t agree with your premise that it’s no longer possible for people to better themselves through hard work. I graduated from university during the recession, and that hasn’t been my experience.
It’s true that going to university in the UK has become considerably more expensive in the last few years. But I wouldn’t call this a trap, because people don’t need to worry about repaying their student loans until after they graduate, and even then not until they’re earning a decent wage. Studying towards a degree is an investment in your future, and it’s only fair that the person who is going to benefit most from it should pay part of the cost.
Where students do tend to get in trouble is if they’ve been profligate in their use of credit cards and bank overdrafts (generally because they don’t know how to budget).
However, you’re right that we are likely to see continued social unrest over the coming years, because people have been led to expect things which might no longer be achievable.
I recently watched a television programme (“Free Speech”), in which a panel of politicians and entrepreneurs took questions from an audience of young people in south Wales (many of whom were unemployed).
One of the interesting things that struck me about it was the sense of entitlement which many of the audience displayed in their response to the panel’s answers. No, they weren’t willing to relocate to London to find work (as many people from Eastern Europe have done). And they had no interest in starting their own businesses (as one of the panellists had done when he’d been unemployed after leaving school in the 1980s).
In other words, they claimed that they wanted to work, but they weren’t willing to do anything productive to make that happen.
Now, a few years earlier that might not have been such a problem because jobs would have been more readily available locally. But my suspicion is that a great many of those people are going to be very disappointed when their strategy of sitting back and waiting for a job to fall into their laps continues to prove unsuccessful.
And you’re right that in some cases people will allow those feelings of disappointment to turn to frustration and resentment (if they haven’t already). Some of those people might then decide to go out and commit crimes or flirt with political extremism. I don’t think that’s going to achieve anything productive for them, but such is human nature.
Incidentally, have you read Robert Gordon’s article “Is US economic growth over?” (http://www.voxeu.org/article/us-economic-growth-over) Gordon admits that his premise is deliberately provocative, but it seems to have struck a chord with a substantial number of people. I’d be interested to hear your response to it.
My answer: And yet, every time they've been implemented, even partially (Thatcher, Reagan) things have gone badly. The US and UK lead the West in terms of teenage pregnancies (Okay, there might be something a bit specific in the UK with the skewed incentive of housing but the US? With its religious framework on top?), the US sees quite a bit of murder (fair enough, guns) and the UK sees quite a bit of assault (question: are they just substituting because the UK has no guns? i.e. both countries are violent but in one case it leads to homicides due to the abundance of guns while, in the other, it leads to 'just' a trip to the ER?). The UK leads the way with alcohol abuse by youngsters... I mean, look at the consequences of Thatcherism on the social fabric of Northern UK...
ReplyDeleteBottom line: Either playing by the rules allows people to see themselves (or their kids) joining/staying in "the middle class" or people will not be playing by the rules for very long...
Most of those things can’t (and shouldn’t) be blamed on the Thatcher and Reagan governments.
We’ve seen a process of cultural change, which began long before either of those governments took office, which has seen the West move away from socially conservative values and towards a more permissive society.
This trend certainly continued during the 1980s, but neither government was the root cause of it. It isn’t realistic to blame conservative governments for the continuation of these pre-existing trends while they were in power: cultural change is impossible to legislate against, and can therefore be extremely difficult for a government to address.
The example of the Thatcher government dismantling the British coal industry is a specific example in which a conservative government demolished what could in certain ways have been regarded as socially conservative community (although the miners themselves would probably have taken umbrage if you’d described them in that way.) However, I doubt that many of people who identify as social conservatives would see the Thatcher government’s decisions as having been in any way contrary to their values.
Where I do agree with you is that neither of these governments, once elected, had much interest in doing anything more than throwing the occasional bone to the socially conservative wings of their respective parties (we could perhaps draw a comparison with the Blair government’s relationship with socialists within the Labour Party).
The problem as I see it is not that right-wing politicians are duping their supporters into conservatism, but that they often have no interest in promoting the legislation which their conservative supporters want to see enacted once they have been elected.
Unfortunately, in a two party system, social conservatives seldom have any better options (with the exception of casting a protest vote for minor parties, such as UKIP, which means letting Labour win in the short-term in the interests of forcing the Conservative Party to re-engage with its core supporters.)
One other thought which struck me while writing this reply is that over the past few decades we’ve moved from living in a community-based society to an increasingly atomised one:
ReplyDeleteFor most of the post-war period people would have worked in the same offices and factories as their neighbours, drank in the same pubs and worshipped in the same churches. Many of them would also reasonably have expected to live within those communities for their entire lives. They were therefore part of an extended social network in their extended communities, which must have made the notion of “social responsibility” (whether in a social democratic or a one-nation conservative sense) a relatively easy sell to most people.
That simply doesn’t describe the society we’re living in today. Most of us don’t live in communities in any meaningful sense. We don’t know our neighbours (and don’t want to know them): the only time we’re really aware of their existence is when they do something which inconveniences us. What we do have are more mutable social networks through family, friends and colleagues.
In that sense, classical liberalism seems a better fit for modern Britain insofar as it has always taken an atomised view of society as its starting point (i.e. a society in which individuals formed loose connections with each other through friendships and business contracts, rather than being bound to each other through any deeper community ties.) This would, obviously, be less true in some parts of the US and of mainland Europe, which still cleave to an older social model.
It strikes me that socialists, like social conservatives, might find themselves increasingly swimming against the tide if the precepts of their ideology are fundamentally at odds with the way in which our society now operates. This would obviously be a long-term cultural trend, rather than something which would happen immediately.
My answer: http://theredbanker.blogspot.com/2012/05/taxes-here-comes-great-reaper-part-2.html
ReplyDeleteThough, to be fair, I'll need a bit more time to go into the details of the CPS study. I would add that, in the US, the trick of concentrating on 'federal income tax' rather than 'all taxes' is used often to make taxes seem more progressive than they are. The Telegraph does the same - only in the body of the article is it clear that we are talking about income tax alone. What about VAT and payroll taxes? They tend to be highly regressive taxes and so, overall, in the USA at least, the system ends up being only 'mildly progressive'. That's just not good enough.
You are of course right that VAT and National Insurance Contributions are more regressive than income tax. (The Telegraph title is misleading in that regard, although in my experience that isn’t uncommon from online newspaper articles.)
However, I suspect that a disproportionate percentage of all tax revenue is still paid by the top few per cent of the population. This doesn’t necessarily mean that they pay a higher percentage of their income in tax, but does mean that they pay a disproportionate percentage of the total amount which HMRC actually receive from each income group in cash terms.
The CPS report is an interesting one because it compares what people in each income group are paying in taxes (in pounds sterling) with the value of the services which they are receiving from the state in return (in pounds sterling). And, to be honest, I think that’s the way we should be looking at it: the top few per cent are (for the most part) already more than pulling their weight.
Socialists often try to conjure up a sense of class warfare by insisting that the rich are screwing the rest of us over. However, the only conceivable sense in which this could be true is if from a perspective akin to Marx’s “from each according to his ability, to each according to his needs” (i.e. if you insisted on seeing individuals’ wealth as the something which belongs to society as a whole, rather than as their private property).
Now, to elaborate on that in response to the points from your earlier post:
1. I don’t agree with the idea that investors haven’t earned the income which they receive on their investments.
To take this back to its most basic level: creating a profitable company will require the input of both labour and capital (i.e. investors who are willing to risk their savings to finance the company). The one is insufficient without the other.
So, if someone invests their savings in a company (whether directly through buying shares themselves, or through a third party such as a bank which will then invest the money which they have deposited on their behalf) then they are earning whatever return they receive on that money.
And that’s as true of the billionaire with a fortune in stocks and shares as it is of the pensioner with a more modest savings account.
2. I agree with you that the government should do more to stamp out tax evasion, and to simplify the tax code to limit companies’ scope for tax avoidance.
ReplyDeleteYou’re also right that billionaires would be little better off than the rest of us if we were living in a state of total anarchy (i.e. Somalia). (Although it’s worth noting that even failed states such as Somalia have their own hierarchies which are based in part upon inherited wealth, and in part upon individual ability.)
However, this analogy simply doesn’t describe the world we’re living in: the choice for multi-national companies and extremely wealthy individuals is not “do we want to invest in a country with a stable government or in a Hobbesian state of nature”, but rather “will we gain most from investing in this country which has a stable government, or in that one which also has a stable government”. Imposing punitive rates of taxation would achieve little more than encourage investors to divest in one’s country (I’ll return to this point in greater detail later…)
It’s also worth noting that the overwhelming majority of government spending in a modern in a modern welfare state is on areas (such as welfare and healthcare) from which investors derive comparatively little benefit. To answer your point about Philip Gates: I suspect that most large retail consortiums would find paying for their own garbage collection far cheaper than paying tax on the entirety of his income at the rates currently demanded by the British government.
3. I think you’re misunderstanding the fundamental nature of conservatism: I believe in property rights, and this includes a willingness to extend the same rights to others (however wealthy they might be) that I wish to enjoy myself.
On a more practical level, the risk with introducing punitive rates of taxation is not so much that they’ll cut back on their hours but that they’ll either leave the country themselves or move their wealth overseas.
The other problem is that they can afford the best tax advisers, who will always be able to find ways for them to reduce their tax liability. Taxing the ultra-rich is dependent, to a certain degree, upon their goodwill and acquiescence to being taxed at the rate in question. We’ve seen that in Britain with the introduction of the 50% tax band, which has substantially reduced the number of people who declared incomes of more than £1,000,000 in the UK, as people have responded to the tax increase by finding more aggressive ways of limiting their tax liability.
4. The problem with this is that the sort of international co-operation which this plan requires simply doesn’t exist.
We’ve seen that in France over the last year, with countries across Europe competing to welcome wealthy French entrepreneurs to move to their countries instead. (Which ties back to my original point: the bottom line is that the rich contribute far more in tax revenues than they use in services.) You could call this a “race to the bottom”, but it could equally fairly be characterised as the French government having priced itself out of the market.
Protectionism of the sort which your post seems to envisage (i.e. requiring any company which wants to sell goods or services in one’s country to be registered to pay tax there) would risk creating a trade war with whichever foreign countries found their corporations locked out of your markets.
In any case, though, thank you, James, for taking the time to read this blog and support it with your comments. I do appreciate
ReplyDeleteThanks for taking the time to reply. It’s an interesting conversation.