By Jack Peat, Editor of The London Economic
Wealth in a capitalist economy knows no bounds. Nor does inequality, which is why when you hear the top one per cent of earners will pay almost third of all income tax you think, well so they should.
It’s one of those things you assume to be an axiomatic component of a fair society. Your contributions in tax should be proportional to what you earn, which means that those who are lucky enough to benefit from a country that wilfully subscribes to a capitalist economic model pay the most back. After all, the free market system that has propelled you into this position dictates that we all must be participants of it, so the upkeep of a fair, healthy, safe and well educated country is in your interest.
But a response to a Tweet earlier in the week has prompted me to pen a few reasons why tax is one of the few resources we have to maintain some semblance of balance, albeit a crumbling resource at that. @LandlordXX – who I sense won’t mind being quoted – replied to a Tweet on Oxfam research that found the 85 richest people in the world own the same wealth as the 3.5 billion poorest people by saying: “yes the poor need to stop breeding uncontrollably and we need more rich people”.
My initial reaction was that such a half-witted, senseless, moronic reply could only have been from some sort of parody account out to stir a reaction on Twitter. But further investigation and later replies – “don’t have children if you can’t support them” – led me to conclude that this was purely moronic. So for their sake, and for any other disillusioned beneficiary of the free market, here’s a little bit about why capitalism warrants a progressive tax system.
Why should rich people pay more? The obvious reason is that rich people can afford to pay more, and increasingly so. A global wealth report by Credit Suisse found the UK was a country that enjoyed stable income-to-wealth ratios for the first 70 years of the last century, but that ended during the 1980s and we’re now at a point where despite the country seeming rich from the outset, its riches are increasingly held by the few.There has been a 30.5 per cent increase in millionaires in a year which has also attracted millionaires from overseas, but the wealth creators have decreed that the share of the total taken by the majority will diminish as the share taken at the top continues to rise, which is a problem.
Fairness is a lost word in a capitalist generation, but it’s worth a shout. Most of the wealth we create as a nation goes to the richest few, so it makes sense that they would give a little back for the health of the nation. To the nurses, the doctors, the teachers, the street cleaners and the refuse collectors. To the law enforcers and firefighters, the roads and the railways. It’s not just fair, taxes support the very pillars upon which this corrupt capitalist system is built.
But of course the richest people work the hardest, and so they deserve to keep what they earn, right? Not right. This notion of people being ‘deserving’ of wealth is why people even question progressive tax systems in the first place. As if some are ‘deserving’ of attending private schools and some are ‘deserving’ of relying on school meal tokens, or that some are ‘deserving’ of being raised in an Indian slum or an African shanty town. If the rich are ‘deserving’ of being rich then they must be equally deserving of paying some of it back.
The Great Tax Myth
The greatest injustice is yet to come, because the rich don’t pay half as much tax as we think they do. According to a report from the Equality Trust the British public dramatically underestimate what the poorest pay in tax and wrongly believe the richest face the biggest tax burden. The research found that the poorest ten per cent of households pay eight percentage points more of their income in all taxes than the richest – 43 per cent compared to 35 per cent – with not a single respondent in the poll knowing how much the richest and poorest paid in tax.
So as a matter of fact, the highest tax rates in the UK are the poorest, who are being punished by indirect taxes and the very fact that tax at the bottom is unavoidable, whereas at the top it’s almost like a discretionary charge.
But there’s no documentaries to showcase that. No ‘Benefit Street’ for tax avoiders who cost the government £5 billion a year, far more than benefit fraud ever cost. Which is why we’re left with people like @LandlordXX who believe that the answer to the problem is some sort of mass sterilisation of the working class. It’s time to wake up, Britain.