Bloody hell it’s been more than a year since my last blog post! I’ve actually started a few and then given up and just let them become way out of date… And in fact I’ve just ditched 3 unfinished, unpublished posts. So what’s prompted me to blog today? The Green Party’s announcement of a 60% income tax rate. I’m interested in the Greens and in the left generally, but I think a 60% income rate tax is wrong and counter-productive.
I appreciate that our public services are desperate for funding, but to me the tax that needs reform is corporation tax, specifically closing the off-shoring loopholes. Corporation tax is a profit tax not an income tax. What that means is a tax on what is made after all costs have been deducted, rather than on gross earnings. The thing with income tax is, I don’t care who you are, paying 60% income tax is staggeringly unfair and a huge disincentive to work. I think tax rates are about right, though a 50% supertax for those earning mega-money eg over £1,000,000 could be considered and VAT should definitely be cut to 15%.
The thing is, yes our economy is grossly unbalanced, but excessively punitive individual taxation is not the solution. I do think avoidance and evasion need to be tackled, the “tax gap” is a disgrace, it runs at anywhere between £35BILLION (HMRC’s number) and £120BILLION (Tax Justice Network’s estimate) per year. The cost of the top tax cut from 50% to 45% in 2010 is estimated to be £100MILLION per year, so as you can see it’s “nibbling at the edge” of the problem rather than solving it. Clamp down on the bigger problem and close the tax gap. Increase corporation tax to 28% or even 30% and CRUCIALLY make big companies pay all of their staff a living wage (what is a big company? Can’t tell you in financial terms, but examples would be Asda, Shell, BT etc).
How would this work? And why would it work? Look at some of these multinational corporations, the make billions of pounds of profit every year, but many of their workers are on below subsistence wages (ie the minimum wage), this means that they literally can’t afford to work, so the government makes up the shortfall by way of tax credits – ie Child Tax Credit or Working Tax Credit. But what *they* don’t tell you is that tax credits are essentially propping up poverty wages, they allow corporations to get away with paying poverty wages. They are a subsidy for (big) business. Apparently supermarket workers claim £11BILLION in benefits every year!
Look I’ve run my own business, I know how difficult it can be to pay decent wages for your staff, but I’m not talking about small companies here – I’m talking about multi-national corporations where the directors are being paid mega-bucks and the shareholders get a huge dividend every year.
Dividends are profit share, but often that profit is derived from “exploiting” the workers, this exploitation is masked by government intervention by way of tax credits. So is it real profit? Why not make all companies pay all of their workers a decent wage BEFORE they can be considered in profit? How would you do this? You could impose a punitive profit tax of say 75% on any listed company that doesn’t pay its workers a living wage. And if a company can’t afford all of its costs (including the aforementioned living wage for all of its employees) then it isn’t profitable at all, it’s merely exploitative – or worse, a lifestyle business. Tax Credits and other in work benefits are a huge drain on the public pocket, but without exploitative businesses the cost could be massively reduced. Plus the extra income would create more spending and boost the economy that way.
I have lots of other ideas that I think would benefit the public purse, I might publish them before the election. If I can be arsed.