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1%, Budget, income tax, inequality, super-rich

Tax isn’t just a moral issue. Inequality is inefficient and deflationary.

But what the hell do they do with it all?

I mean, the 100 families who supposedly own 20 per cent of the wealth of the United Kingdom, according to Oxfam. The one per cent who own 50 per cent of the world’s wealth. How can you spend all those billions?

How many big cars does anyone need? How many houses? Do they derive some sort of sexual pleasure from gold ingots in the loft?

Is there a Facebook for the filthy rich where they all swap tips from the Financial Times How to Spend It luxury magazine? How many big watches with silly dials can anyone wear ?

In the past, the very rich often became philanthropists. The Gettys, Kennedys and Carnegies who made their money, mostly through ruthless business practices, managed their reputations by endowing art galleries, political campaigns and educational initiatives.

At the turn of the 19th Century, nearly half of Scotland’s university students received support from the Carnegie Fund.

But today’s rich don’t even seem to do much of that, except for internet billionaires such as Bill Gates and Elon Musk, and even then philanthropists at present always seem to have an angle.

There is usually a business model buried in the giving, either through tax-efficient trusts or some kind of payback in kind through boosting the brands of their companies.

Of course, apologists for the super-rich tell us that, without them, the National Health Service would collapse and we wouldn’t have free education.

Why? Because these generous people contribute one third of the taxes that are used to pay for our public services. But this plutocratic killer fact is just another index of inequality.

The reason they contribute so much is because they extract such a huge a share of the nation’s wealth in the first place. Even with our low taxation (and the tax avoidance industry) they can’t help paying a lot in tax.

Think for a moment. All those people on zero hours contracts contribute very little tax because they earn next to nothing. Middle class earnings have been falling for many years, reducing their share of total tax.

In a wonderfully sour piece the business magazine Forbes dismissed all of this yesterday as “whining” by charities like Oxfam “trying to justify their existence”. Forbes points out that extreme global poverty has halved over the past 20 years. But its claim that this is down to the rich is a distortion of economic history.

It was concerted action by the UN ‘s Millennium Development Goals and the Make Poverty History campaigns that halved the number of souls living on less than $1.25 a day. After 2005, the developed nations agreed finally to wipe out some of the debts of developing world and to contribute 0.1 per cent of GDP to development.

Note, too, that it was ordinary basic-rate taxpayers who financed this, not the wealthy through a supertax. Anyway, global poverty isn’t history: three billion people still live on less than $2.50 a day while the top 80 billionaires share $1.9 trillion; yes, $1.900,000,000,000.

This isn’t just a moral issue, though moral issues don’t come much bigger. This concentration of wealth is a danger not only to social cohesion and global security; it is also damaging the long-term prospects of the rich themselves.

To return to my original point. The problem with wealthy people is that they don’t spend it. They can’t. It isn’t humanly possible. What wealthy people do is hoard their cash in property, paintings, commodities, gold and other forms of speculation, which is why we have real-estate bubbles.

Grossly unequal distribution of wealth deflates effective demand. Or, in layman’s language, because ordinary people haven’t money to buy stuff, the stuff doesn’t get made and the economy declines.

There’s no secret why the 1950s and 60s were boom times. After the Second World War, governments used the taxation system to redistribute wealth and created consumer capitalism. Working people could buy washing machines, fridges, TVs and cars. They never had it so good. Yet, top tax rates in the UK and US in the 1950s were over 80 per cent.

The rich can’t spend all their money. If they’d just spread a bit more of it around they’d be more secure because the economy would expand. Top people meeting this week in Davos know this but lack political will. The super-rich need to be saved from themselves.

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About iain2macwhirter

Writer and journalist.

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