Hunger $ Billionaires

[aka Calum Da Jazbo]

well the table shows that in the USA that growth in GDP was higher when taxes were higher and lower when they were lower .... it was the government what done it .... just like in China ... low tax wealth creation is a myth for the oligarchs and bankers ... the best source of real growth is a burgeoning bourgeoisie and skilled worker middle class thriving in a thoroughly mixed economy .... tax the rentiers and the financiers until the pips squeak matey ... and keep the libraries, playing fields and wards ...

[aeolium]

The New Statesman recently published a chart showing the changing fortunes of young people over the decades and showing what a grim prospect faces most of them currently, simply one among the many inequalities arising from the policies of the last 3 decades.

[Lateralthinking1]

well the table shows that in the USA that growth in GDP was higher when taxes were higher and lower when they were lower .... it was the government what done it .... just like in China ... low tax wealth creation is a myth for the oligarchs and bankers ... the best source of real growth is a burgeoning bourgeoisie and skilled worker middle class thriving in a thoroughly mixed economy .... tax the rentiers and the financiers until the pips squeak matey ... and keep the libraries, playing fields and wards ...

I find that table wholly convincing. Various nuances as set out in ahinton's post might well apply. But it is the supporters of big business who are encouraging a simplistic read-across and what they are saying is a myth.

Bear in mind that around the last year the top rate in the UK equated to more than 100%, the Beatles recorded a song about it. And there was no recession in that decade.

Turning back to that US table, growth declined in every decade other than the 1980s. The same is probably true of the UK.

But other than 1988 and 1989, taxes were quite high in the UK in the 1980s if not as high as they had been in the 1960s. Low taxes under Mrs Thatcher are therefore also a myth. Most people speak as if taxes are higher now when that is not so.

More significantly, given that downwards trend and the exceptional length of the current double dip - incidentally it appears from the chart that nearly every recession is double dip - who can prove that this is actually a recession?

I would think it more likely that it is the new norm. Perhaps we need some new terminology

[Lateralthinking1]

The New Statesman recently published a chart showing the changing fortunes of young people over the decades and showing what a grim prospect faces most of them currently, simply one among the many inequalities arising from the policies of the last 3 decades.

There is a lot of truth to this article. I wouldn't have the gall to be a Minister selling the university loan system knowing I had received a grant. Having age differentials for things like the minimum wage is also beyond the pale. Still, if some had their way, there would be no minimum wage for anyone. And voluntary working requirements already achieve that by the back door.

Decision makers of my age have considerable chutzpah. Whether though grandparents were actually the responsible ones, as the article suggests, is very dubious. In fact, it is a sleight of hand. Those of my grandparents generation were so. To some extent the same is true of those of my parents generation. But I am nearly 50. This article is presumably written for people well under 30. Dearest Grandma and Grandad, currently aged between 60 and 75, are among the biggest offenders. I am sure as people many of them are lovely. But they in the main started this mess and they will almost certainly as a trend be the wealthiest generation ever to live in Britain. They are not at all the same in terms of social responsibility as those born between 1900 and 1935 or earlier.

The well-off in the 40 to 60 age bracket are, if anything, even more self-centred and it is here that true divisions are occurring in the long term. Some of the current middle aged will be financially secure. A significant percentage will not be and they will suffer in old age at the hands of the next generations. Hence venom in future policy making, while understandable, will hit the people who were not the cause of the problems. So we need to be careful with this age distinction thing. It will divide the generations - and crucially reduce wealth in ordinary families - while obscuring that wealth difference is always the main issue. Yes, age as a trend is a factor but that factor is also a convenient smokescreen for those who don't want to discuss equitable solutions.

And there are other dubious facts in the article. I am not sure that a multiple of 3.5 times salary for a mortgage was ever available to one person until the industry became irresponsibly stupid. Furthermore, the comparison of increases in house prices with food items is ludicrous. Often houses costing £2,000 in 1960 were worth £100,000 in 1986. Did anyone during the mid-1980s look at the price of a pint of milk in 1960 and multiply it by fifty? I doubt it. So we could all do similar arithmetic and bemoan our fate.

What I do feel strongly is that there is no direct link between house prices and the basic economic laws of supply and demand. Every economist disagrees but they do so ignoring all the evidence. I therefore doubt that a new consensus will ever happen.

[ahinton]

I find that table wholly convincing. Various nuances as set out in ahinton's post might well apply. But it is the supporters of big business who are encouraging a simplistic read-across and what they are saying is a myth.

Bear in mind that around the last year the top rate in the UK equated to more than 100%, the Beatles recorded a song about it. And there was no recession in that decade.

Turning back to that US table, growth declined in every decade other than the 1980s. The same is probably true of the UK.

But other than 1988 and 1989, taxes were quite high in the UK in the 1980s if not as high as they had been in the 1960s. Low taxes under Mrs Thatcher are therefore also a myth. Most people speak as if taxes are higher now when that is not so.

More significantly, given that downwards trend and the exceptional length of the current double dip - incidentally it appears from the chart that nearly every recession is double dip - who can prove that this is actually a recession?

I would think it more likely that it is the new norm. Perhaps we need some new terminology

Perhaps we do, but perhaps we could also do with some more careful scrutiny of the situation before we select and use it.

If in recent US history, GDP grew when taxes were high and fell when they were low, it doesn't necessarily follow that (a) the rates of taxes and GDP are inextricably and inevitably linked as such statistics might be presented to suggest and (b) the same outcome would necessarily apply everywhere just because it may have done so in US at certain times. To draw such conclusions without taking on board who is paying what rates of what types of tax on what funds (i.e. income or assets, earned or inherited) and in disregard of national debt at any time is to risk an overly simplistic approach to a subject as important and complex as this one, it seems to me. I have never tired of advocating the greatest possible simplicity in tax régimes because taxpayers fund the cost of running them and the costs or errors made within them which are inevitably more widespread the more complex the taxation system may be. Taxing incomes too much also means that whoever is being overtaxed will spend less for the simple reason that they have less disposable income to spend; this does nothing for economic growth and the higher the taxes imposed the greater the likelihood that those subjected to them will avoid them, evade them or move to less onerous tax régimes and, whilst we know that evasion is illegal, most avoidance is not but moving to another tax régime is certainly not illegal. In Britain's case, might it not be more sensible to consider streamlining the tax system to make its implementation as simple and economical as possible in order to be able to reduce taxes and try to encourage wealthy people to come to Britain and be taxed more favourably there then where they are now? Surely this, if implemented correctly (and we all know from bitter past experience what a bit "if" that would be!), might at best come to be something of a win-win situation in that Brits already in Britain could pay at little less in taxes with very little loss to HM Treasury (by virtue of tax collection and inspection cost savings) and the Treasury coffers could at the same time be swollen by new sources of tax revenue from relatively wealthy immigrants seeking to reduce their current tax burdens? This wouldn't quite constitute "Britain plc - tax haven" but could prove advantageous nevertheless.

[Serial_Apologist]

There is a lot of truth to this article. I wouldn't have the gall to be a Minister selling the university loan system knowing I had received a grant. Having age differentials for things like the minimum wage is also beyond the pale. Still, if some had their way, there would be no minimum wage for anyone. And voluntary working requirements achieve that by the back door anyway.

Decision makers of my age have considerable chutzpah. Whether grandparents were actually the highly responsible ones, as the article suggests, is very dubious. In fact, it is a sleight of hand. Those of my grandparents generation were, and to some extent the same is true of those of my parents generation. But I am nearly 50. This article is presumably written for people well under 30. Dearest Grandma and Grandad, currently aged between 60 and 75, are among the biggest offenders. I am sure as people many of them are lovely. But they in the main started this mess and they will almost certainly as a trend be the wealthiest generation ever to live in Britain. They are not at all the same in terms of social responsibility as those born between 1900 and 1935 or earlier.

The well-off in the 40 to 60 age bracket are, if anything, even more self-centred and it is here that true divisions are occurring in the long term. A significant percentage of the current middle aged will suffer at the hands of the next generations while the remainder will be financially secure. Venom in future policy making will hit the people who were not the cause of the problems. So we need to be careful with this age distinction thing. It will divide generations within families - and crucially wealth within ordinary families - while obscuring that wealth difference is always the main issue. Yes, age as a trend is a factor but that factor is also something of a convenient smokescreen who want any discussion to be had other than one that seriously readdresses the balance.

And there are some dubious facts in the article. The comparison of increases in house prices with food items is ludicrous. Often houses costing £2,000 in 1960 were worth £100,000 in 1986. I am buying an identical house to that of my parents. Theirs cost them £6,000 in 1969. Mine cost me over £200,000 in 2005. So we could all do similar multiples and bemoan our fate.

Actually, I refuse to believe that there is any direct link between house prices and the basic economic laws of supply and demand. Every economist disagrees but they do so ignoring all the evidence. That though is a matter where a new consensus may never happen.

Those who out of religious or other persuasion chose not to go along when the ethos of "gimmegimmegimme" was king are arguably psychologically better-placed to face what's coming; but we can't overlook the fact that the form capitalism took in fact needed to enjoin the majority in its spending spree on stuff that wears or goes out of fashion quick - if only to lecture 'em all in hindsight how weak and in need of religion and/or strong leadership we all are - excepting the strong leadership, presumably. The Lat1's and Serial_Apologists of that world contributed nothing to national or international wellbeing, as measured by its yardsticks of success and aspiration, and in making claims for sustainability were either seen as oddballs, cultists or fanatics intent on imposing their hangups on the rest given half a chance. Funnily enough Jesus of Nazareth preached something similar in the bible, though you wouldn't think so by watching many a baptist preacher in the poverty-stricken Deep South balling at congregationalists the current message of Rich is Good.

[ahinton]

What I do feel strongly is that there is no direct link between house prices and the basic economic laws of supply and demand. Every economist disagrees but they do so ignoring all the evidence. And I doubt that a new consensus will ever happen.

That's very true and illustrates a fundamental problem. The trouble is that the supply and demand situation that has seen house prices escalate out of proportion to salary levels is very different to the one that affects those salary levels, by which I mean that a situation in which the average salary could increase broadly in line with the average house price increase would, I suspect, be at bet un-guaranteeable and at (a much more likely) worst unattainable. The problem here, however, is that, as you yourself imply, the vast gulf of difference between the two was almost as bad in 1960 when the average house price might well have been around £2,000; what was the average salary at that time?

[Lateralthinking1]

Perhaps we do, but perhaps we could also do with some more careful scrutiny of the situation before we select and use it.

If in recent US history, GDP grew when taxes were high and fell when they were low, it doesn't necessarily follow that (a) the rates of taxes and GDP are inextricably and inevitably linked as such statistics might be presented to suggest and (b) the same outcome would necessarily apply everywhere just because it may have done so in US at certain times. To draw such conclusions without taking on board who is paying what rates of what types of tax on what funds (i.e. income or assets, earned or inherited) and in disregard of national debt at any time is to risk an overly simplistic approach to a subject as important and complex as this one, it seems to me. I have never tired of advocating the greatest possible simplicity in tax régimes because taxpayers fund the cost of running them and the costs or errors made within them which are inevitably more widespread the more complex the taxation system may be. Taxing incomes too much also means that whoever is being overtaxed will spend less for the simple reason that they have less disposable income to spend; this does nothing for economic growth and the higher the taxes imposed the greater the likelihood that those subjected to them will avoid them, evade them or move to less onerous tax régimes and, whilst we know that evasion is illegal, most avoidance is not but moving to another tax régime is certainly not illegal. In Britain's case, might it not be more sensible to consider streamlining the tax system to make its implementation as simple and economical as possible in order to be able to reduce taxes and try to encourage wealthy people to come to Britain and be taxed more favourably there then where they are now? Surely this, if implemented correctly (and we all know from bitter past experience what a bit "if" that would be!), might at best come to be something of a win-win situation in that Brits already in Britain could pay at little less in taxes with very little loss to HM Treasury (by virtue of tax collection and inspection cost savings) and the Treasury coffers could at the same time be swollen by new sources of tax revenue from relatively wealthy immigrants seeking to reduce their current tax burdens? This wouldn't quite constitute "Britain plc - tax haven" but could prove advantageous nevertheless.

Thank you for your thoughtful comments which I appreciate. I am aware of your views on tax reform. I was on a slightly different line of argument, following up on the article/table posted by Calum. I will stick with that for now other than to ask one question.

If someone earns a million pounds, he is taxed at 15% or 20% under a new flat rate system, and he continues to have access to all previous lawful channels of tax avoidance, why would he not still use the latter? In doing so, he would save huge amounts of money. We keep being told that it is "human nature" to minimise tax payments. And it's even said by some that it is a moral duty!

On the main issue, I agree that "it doesn't necessarily follow that (a) the rates of taxes and GDP are inextricably and inevitably linked and (b) the same outcome would necessarily apply everywhere". Why then was the tax cut from 50% to 45% seen as crucial by big business for growth? The problem is that in all of its "cry wolf" posturing, it is becoming less and less credible.

[aka Calum Da Jazbo]

well argue as [yee you yiew etc] may .... what is not true is that it is NECESSARY to cut taxes to promote growth, but it is necessary to cut taxes to promote inequality .... and to keep the ganghsters in the food markets happy about hanging on to their ill gotten lucre

[Lateralthinking1]

That's very true and illustrates a fundamental problem. The trouble is that the supply and demand situation that has seen house prices escalate out of proportion to salary levels is very different to the one that affects those salary levels, by which I mean that a situation in which the average salary could increase broadly in line with the average house price increase would, I suspect, be at bet un-guaranteeable and at (a much more likely) worst unattainable. The problem here, however, is that, as you yourself imply, the vast gulf of difference between the two was almost as bad in 1960 when the average house price might well have been around £2,000; what was the average salary at that time?

According to one source, the average annual salary in 1960 was £948.93. Given its figure for 2009, I am not convinced.

Others say around £700. That seems about right to me.

[ahinton]

well argue as [yee you yiew etc] may .... what is not true is that it is NECESSARY to cut taxes to promote growth, but it is necessary to cut taxes to promote inequality .... and to keep the ganghsters in the food markets happy about hanging on to their ill gotten lucre

You can promote inequality - indeed, you don't even have to as it "promotes" itself quite well enough - whatever you do or don't about taxes!

I'm afraid that, within reason, inequality is not the issue for me that poverty is. What does equality mean to you in this particular context? Everyone having more or less the same total income from whatever sources and more or less the same value assets? That would quite obviously be impossible as well as undesirable. Presumably you don't mean it as literally as that but I'm curious to know what you do mean by it. If you have very wealthy people and fairly poor people and many in between and you also have different tax levels for different people according to their wealth but irrespective of their ability to pay (as in the case of asset rich cash poor people), you have inequality not only of incomes and assets values but also of taxation, which I imagine you would not especially choose to advocate - but if you declare what you mean by inequality your position on this will become clearer.

[ahinton]

Thank you for your thoughtful comments which I appreciate. I am aware of your views on tax reform. I was on a slightly different line of argument, following up on the article/table posted by Calum.

Fair comment.

I will stick with that for now other than to ask one question.

If someone earns a million pounds, he is taxed at 15% or 20% under a new flat rate system, and he continues to have access to all previous lawful channels of tax avoidance, why would he not still use the latter? In doing so, he would save huge amounts of money. We keep being told that it is "human nature" to minimise tax payments. And it's even said by some that it is a moral duty!

He (or she) might indeed still use them but, since there's no such thing as a free lunch, using legal tax avoidance measures doesn't come without the cost of professional (albeit often tax-deductible) fees and in a climate such as that which you posit the incentive to be bothered to do so becomes a great deal less than it is now.

On the main issue, I agree that "it doesn't necessarily follow that (a) the rates of taxes and GDP are inextricably and inevitably linked and (b) the same outcome would necessarily apply everywhere". Why then was the tax cut from 50% to 45% seen as crucial by big business for growth? The problem is that in all of its "cry wolf" posturing, it is becoming less and less credible.[/QUOTE]
This argument is the other way around to that which Calum was writing about and I do not in any case necessarily claim that it is wholly valid; it certainly does not apply in cases where the taxable income (for it's income tax that we're discussing at this point) is inherited, yet HMRC does not and cannot be expected to distinguish between incomes arising from employment or business and those which are inherited for the purpose of regarding - still less taxing - them differently. That said, I think that we're getting rather too hooked up on income tax rates in isolation when today's total tax take is a lot less income tax dependent than it was half a century ago.

[Lateralthinking1]

He (or she) might indeed still use them (tax avoidance schemes) but, since there's no such thing as a free lunch, using legal tax avoidance measures doesn't come without the cost of professional (albeit often tax-deductible) fees and in a climate such as that which you posit the incentive to be bothered to do so becomes a great deal less than it is now.

A great deal less? If you were to save £200,000 or more per annum? I doubt it. How much would you pay in a non tax scenario to save £200,000? I would be prepared to pay up to £195,000 if I had that kind of money. (On tax, I am an exception).

If it is true as you suggest that fewer would bother, accountants in that field would have less demand. Consequently they would have to reduce their costs. That in turn would bring back the same old customers.

Should Jersey etc update its legislation on smuggling?

[Lateralthinking1]

Those who out of religious or other persuasion chose not to go along when the ethos of "gimmegimmegimme" was king are arguably psychologically better-placed to face what's coming; but we can't overlook the fact that the form capitalism took in fact needed to enjoin the majority in its spending spree on stuff that wears or goes out of fashion quick - if only to lecture 'em all in hindsight how weak and in need of religion and/or strong leadership we all are - excepting the strong leadership, presumably. The Lat1's and Serial_Apologists of that world contributed nothing to national or international wellbeing, as measured by its yardsticks of success and aspiration, and in making claims for sustainability were either seen as oddballs, cultists or fanatics intent on imposing their hangups on the rest given half a chance. Funnily enough Jesus of Nazareth preached something similar in the bible, though you wouldn't think so by watching many a baptist preacher in the poverty-stricken Deep South balling at congregationalists the current message of Rich is Good.

Yes indeed - but isn't there a conundrum here? When Gordon Brown spoke about prudence, it was fairly easy to dismiss. Many might feel that he didn't exercise it and that it was never likely to be promoted. But it did hark back to an era not that long ago when prudence wasn't wholly mythical.

Many will recall how living within ones means was the only socially acceptable option. It went far beyond post-war rationing. The first credit card didn't appear for 20 odd years. Being in debt, other than with a mortgage, was pretty shameful for often it was an indicator of real poverty. Not even Steptoe seemed to be in that position.

So something changed. It did so surreptitiously and rapidly. More cars, television sets, refrigerators and washing machines had already been seen on the high streets for quite a long time. So when was it and why was it - and was it a part of the grand plan decades earlier? If so, is it possible to say how?

I'm not doubting it but the old guard wasn't Jesus. It didn't have to be because the bank manager, friendly and severe, turned down individuals' requests to enter a financial hell. And as far as I can tell, even Mrs Thatcher was speaking the language of prudence as late as 1979-1990, so what was going on?

[mangerton]

Many will recall how living within ones means was the only socially acceptable option. It went far beyond post-war rationing. The first credit card didn't appear for 20 odd years. Being in debt, other than with a mortgage, was pretty shameful for often it was an indicator of real poverty. Not even Steptoe seemed to be in that position.

So something changed. It did so surreptitiously and rapidly. More cars, television sets, refrigerators and washing machines had already been seen on the high streets for quite a long time. So when was it and why was it - and was it a part of the grand plan decades earlier? If so, is it possible to say how?

What about hire purchase, aka "the never-never"? That kicked in as far as I remember in the fifties. Christmas clubs? There were also the informal arrangements amongst groups of friends, called a "menage" - pronounced "menodge", in Glasgow.

Eg for a bicycle... Bikes cost (say) £15 - and they probably did, in those days. 15 people would pay a pound a week, for 15 weeks, and each week someone got a bicycle. They'd draw lots to see who got the bike each week.

This of course is the source of the expression, said of someone useless, "He couldnae run a menodge!"