February 11, 2014

George Osborne, MP

George Osborne, MP

They”€™re also the sort of people who are really helping the economy and, although this didn”€™t exactly set them back, it wasn”€™t the sort of psychological boost that helped at a critical point in the economy. Argue all you like about the extent of the trickle-down effect, but my hunch is that they”€™re the ones causing it, not the international oligarch who only spends three weeks a year in Mayfair. There aren”€™t enough of the really high flyers to make much of a difference. Besides which, most of their spending is confined to a handful of postcodes in London during the party season. Unless you”€™re the doorman at Claridge’s, their trickle makes the average rainfall in the Sahara look Amazonian.

So why target the minor league for fat-cat taxes? Well, I”€™m afraid that’s due to a combination of good old-fashioned envy and a blind refusal to rise above gestural politics. I would argue that there is a good reason for a high upper tier on income tax. Successive studies have argued that it is wealth disparity in nations that causes unhappiness, not absolute levels of wealth. Over the last fifteen years or so there has been an exponential and global rise in that disparity, exacerbated by a recession that hardly affected the internationally wealthy, and it is a significant factor in an underlying and deepening malaise at the heart of our societies. But I agree this is not going to be fixed by micromanaging income-tax tiers. It’s quite possible that it isn”€™t fixable at all, unless you happen to regard barricades in the streets as a solution. Which I don”€™t. The top tier is, however, a symbol, and symbols are powerful and important.

But the politicians and the media alike must stop pretending that what might be called the domestically well-off are the same as the super-rich. They”€™re not. So in the UK, Labour are at fault for bringing in a largely symbolic tax at a level that will affect hardworking, productive achievers even in a small way. The Tories are at fault for getting rid of a symbol that, while achieving little or nothing in practical terms, acted as a placebo to the disgruntled majority who felt with some justification that they were suffering badly in a recession that wasn”€™t having much of an effect on the well-off.

The solution would have been to introduce the top tier at a higher level. As of 2011-12, there were roughly 450,000 UK taxpayers earning £100,000-£250,000 but only about 80,000 earning £250,000-£500,000. If the tier were set at £250,000, it would have been just as useful symbolically, but it would have been a matter of real, not even psychological, indifference to those it supposedly affected. Besides, if people didn”€™t flee the country before, then at that level I doubt you”€™d see a single person packing their cases. Oh, they”€™ll holler and yell and threaten all day and night, but they won”€™t really go. If they do, I”€™ll pay for their taxi to the airport and throw in a cuckoo clock to welcome them to Zurich.



Sign Up to Receive Our Latest Updates!