As an upper rate taxpayer I agree with Dave and would prefer to be made to
pay more tax rather than encouraged to donate to charities etc. But of
course our pension funds are behind what bothers me a lot as well - the
super-rich business chiefs driven by maximising returns to shareholders.
This quote from Robert Reich's recent book is sobering, referring to the US
experience but the case here too I'm sure:
'In 1980, the typical chief executive of a large American company took home
about forty times the annual earnings of a typical worker; in 1990, the
ratio rose to about eighty-five times. Between 1990 and the end of the
century, total executive compensation rose from an average of $1.8 million
to an average of $12 million - an increase of more than 600 percent,
resulting in compensation packages that averaged 419 times the earnings of a
typical production worker.'
Reich argues this is what we get when we want more 'stuff' at cheaper and
cheaper prices, and better than before. The issue is of course incentives -
the reason why Blair won't make taxes more progressive than currently. I
think he's partly right - there's currently a problem of filling many senior
management posts in the public sector, and one reason has to be that the
extra post-tax income is hardly worth the extra hassle and pressure. On the
whole though the case for a more progressive income tax regime seems strong
to me, and public resistance seems to reflect a widespread lack of knowledge
about what people are paid (as Dave suggests; and a friend of mine who's an
accountant recently told me that a GP practice he'd seen the books for had
no GP receiving less than £95,000, which surprised me). In Norway and Sweden
I believe that you can look up your neighbour's income in the local
publicly-available tax records - surely one factor behind their (moderately)
more egalitarian distribution of income. But I'd also go for wealth, and
would certainly vote for a return of betterment tax, which would raise
billions from non-productive landowners.
-----Original Message-----
From: D.Byrne
To: [log in to unmask]
Sent: 07/06/2001 16:39
Subject: Re: Blair and the rich-poor gap
I very much agree with what John Veit-Wilson said in his post but would
want
to emphasize the significance of high incomes. High incomes cannot be
considered as some stratospheric irrelevance in relation to adequacy,
which
is one effect of working with median figures. I have just been writing a
polemic on tax and thinking rather hard about the 9% of UK income tax
payers
who pay higher rate tax. Things are complicated by the disastrous
disaggregation of household incomes for tax purposes but I don't think
we
will be far wrong if we think about the highest income households as
having
at least one income at this level. The effect of low taxation of incomes
like this is that such households have significant resources for private
services in education and health as well as the traditional area of
housing.
Given the enormous significance of differential educational performance
for
inter-generational transmission of advantage, such households can easily
purchase achievement by their children - I certainly see this at the
University of Durham in terms of the privately educated intake. What
this
all boils down to is that we must think about these issues not only in
terms
of adjacent reference groups but rather in terms of a social norm. In
the UK
now the top 10% of household incomes seem to be setting a normative
standard
of aspired to adequacy which is very much removed from any statistical
norm.
This was well illustrated by the recent debate about moving up the cut
off
level for national insurance contributions, which actually provoked a
leftish comment by Blair in his TV confrontation with a property
developer.
This is interpreted as a tax on middle incomes when it applies only to
the
top quintile of incomes - a strange definition of middle but now middle
income has to be read in the same way as middle class. There are no
uppers!
David Byrne
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