Taxes on Rich Rise Around the World - The Wealth Report - WSJ.
A familiar pattern is emerging around the world.
A country has a financial crisis or deep recession. Government revenue shrinks and budget deficits soar as politicians are reluctant to cut spending or raise taxes on the mass of voters. So they are left with one solution: raise taxes on the wealthy.
Quite right too.
1) They caused the crash
2) They benefited most from the bail out
3) They have the capacity to pay.
Your problem is?
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Why should it always take a crisis for policymakers to understand what is so bleedin’ obvious to the rest of us?
a) Cheap and easy credit maufactured by central banks (the Keynesian prescription used to ‘bail out’ the world from the tech bubble) caused the insane property boom and the inevitable bust as gravity reasserted itself.
b) Bankers benefited most from the bailout. They were rescued from the consequences of their insane mistakes that any real businessman would have gone to the wall on, and lost everythinig.
c) Why should entrepreneurs who started real business (let’s say making real things, employng people and grown with retained earnings, instead of massive debt) pay for the mistakes of central bankers and banks?
Oh yes, a few problems….
The rich caused the crash?
There was me thinking it was caused because banks had been compelled by US legislation to lend money to the African American underclass so that people with neither jobs nor prospects could pursue “the American Dream”.
Or are we now saying that lending on US property had nothing to do with the crash?
@James Tyler
Yet more blatant misinformation
Neoliberal economics informed this crash – promoted by libertarian right wingers
Yes – that’s you and your insane kind
Surely what caused the crash was fairly simple: lots of people borrowing money that they had no way of repaying, coupled with a lot of banks (aided and abetted by rating agencies) who failed to control their lending.
And the solution is apparantly to encourage the banks to lend much more and for states with no visible way of repaying debt to be the main lenders.
While all the time blaming the rich and the bogeymen (aka neo-somethings). At least it’s not the Jews (yet).
I think one thing we can all agree on: economics is politics.
sorry – I obviously meant that States are to be the main borrowers, not lenders.
Which assertion that I made is wrong?
I sympathise quite a long way with JT’s grumbles about real businesses picking up the tab for the bankers. However, it is established that government had little choice about the bail out. The bill has to be paid and it can only be paid by taxing those with the money to pay it.
What I hope we can all agree on is that our politicians need to take steps to ensure that never again does the government and taxpayer have to take responsibility for private sector liabilities. Anything government has financial liability for should be under govt ownership. If it isn’t under govt ownership, it should be allowed to go bust.
How did the wealthy “cause the crash”? Seems to me like quite an over-generalisation! Some wealthy people, who happened to be bankers, may well have caused the crash, but all of the wealthy?
My next-door neighbour is very wealthy, in his 60s. He inherited a big pile from his father, who built up a widgets factory in the Midlands of England after World War 2. My neighbour inherited the money in the 1980s and has largely been invested in government bonds and cash ever since as he is very risk-averse. Neither he nor his father “caused the crash”, and neither of them benefited from the bail-out, yet they are wealthy.
Your hypothesis fails. You need to be somewhat more specific when accusing the wealthy of “causing the crash”. Not all of the wealthy are aggressive financial speculators!
@mad foetus
“There was me thinking it was caused because banks had been compelled by US legislation to lend money to the African American underclass so that people with neither jobs nor prospects could pursue “the American Dream”.”
It was only the African American underclass who were loaned money? No whites at all? Anyway, it wasn’t just those with “neither jobs not prospects” who got into debt, and they generally did it to be able to afford the luxury of a roof over their head. The private sector was evidently failing in producing both jobs and affordable housing, so has to take at least some of the blame along with the banks.
@mad foetus
We can put the blame for the crash on al sorts of mechanisms. Of course there is good reason to do so when those mechanisms need reform – as many do
But the real issue is systemic
In the pursuit of a false vision of wealth – money – mortgages were sold, sliced, diced and repackaged and the loot hidden
So long as those with wealth felt wealthier as result they asked no questions
Now they point particular fingers of blame
But the real blame is on them – for not asking questions, for putting greed first and asking questions later
And for now asking others to pick up the pieces
Yes, my accusation is sweeping
But it’s also completely logical
Richard,
I agree with your conclusion, but not the whole of your reasoning. If you’ve got it, you should be taxed on it. For me, the question of whether someone helped cause the meltdown is secondary.
If the evasion was dealt with, and 40% actually meant 40%, would we even need 50%?
@Tax Research LLP
The problem with your analysis is its too simplistic. We (the UK) had a house price bubble which burst when the credit dried up, which was probably mostly caused by the aftershocks of Fannie Mae and Freddie Mac. So was the cause the bubble which burst, or the pin that burst it. And was the pin the fact of the market reaction to Freddie and Fanny, or was it a result of the regulatory aftershocks. Put your politics aside and you stand a better chance of a rounded view.
But what is constant is that it takes a Conservative Government to step in and fix the messes caused by the Labout party; and what is equally true is that everyone loses.
But, your point is?
Oh dear, oh dear, oh dear. The CRA Myth rears its ugly head again…
You need better trolls, Mr Murphy!
“In the pursuit of a false vision of wealth – money ”
Much as I disagree with most of what you think, that hits the nail on the head.
“So long as those with wealth felt wealthier as result they asked no questions”
It wasn’t just those with wealth who felt wealthier, it was everybody – poor included.
It takes two parties to agree a mortgage contract and borrowers were only too pleased to mortgage themselves up to the armpits.
Simply blaming rich bankers, whilst making one feel morally superior, doesn’t address the much broader culture of “buy now, pay later”.
@James from Durham
Unfortunately James, the problem we have is that the entire banking sector runs under licence from the Bank of England, is insured under a (now explicit) government protection scheme and makes of a unique set of accounting rules – namely that they do not have to ‘make whole’ their current liabilities.
If you compare the balance sheet for a big corporate you will notice that ‘current liabilities’ and ‘libilities’ are seperated, it having an obligation to provide for the current liabilties. (Richard, pease correct me if I misunderstand it).
Look at Barclays, and you see only a broad ‘liabilties’ section. This is the mechanism by which they take your Tesco’s money, and then turn it into 10 year alphabetty spaghetti credit derivatives earning 10%.
This is the engine at the heart of the boom/bust, and we are doomed to repeat again and again until mankind has the savvy to recognise this sad fact.
“Your problem is”
My problem is this: the rich tend to be the ones that fund start ups and business expansions that provide jobs. The poor tend not to be big employers of other people. I certainly have never had a boss who was poor. Have you?
Getting expansion of jobs is a pretty important issue right now.
I accept the excessive spending over the past decade needs to be paid back and it will probably be the rich who do it.
But it will come at a price, in the form of slower job creation. Not good news for those who have lost their jobs recently, and pointing the finger at who caused what won’t help them.
That is tosh….
I am a wealthy company owner who has never borrowed a penny. Please explain how ‘I caused the crash’ through running a successful manufacturing company in the UK.
I manufacture products that create wealth and employment. You simply manufacture words….
@Adrian
This is the ultimately stupid comment
So the rich are genetically pre-conditioned to be employers, the poor their serfs? I know many who are rich who think this
Actually the reason why those without resources can’t start businesses is fundamental market failure – denying access to capital in contravention of all the assumptions of market economics – so creating a scenario where the rich can exploit and earn super normal profits from market distortions they deliberately perpetuate (as banks are doing now).
The answer is of course the distortion should be removed so that the bright poor can create the business of which they are capable and he dumb rich (of which there are ample) need to be taxed to ensure the redistribution of their wealth
You present a stunningly good case in consequence for taxing second generation business inheritance
As well as proving how horribly conceited you are
@Peter
Another totally absurd comment.
You say “It takes two parties to agree a mortgage contract and borrowers were only too pleased to mortgage themselves up to the armpits.
Simply blaming rich bankers, whilst making one feel morally superior, doesn’t address the much broader culture of “buy now, pay later”.”
In saying so you assume — crassly — that those who borrowed were wholly informed free agents.
This is risible. You utterly ignore the climate of fear created by banks / builders / media / financial services — suggesting those that did not borrow would never get a house unless they did
You utterly ignore the enormous resources put into imposing credit on people
This vast wall of cash — all ultimately designed to impose a mortgage — literally “the grip if death” on people — is not spent without reason. It is spent to ensure people are enslaved by that debt — so they are not free of the system from which an elite profit and are not free to choose for themselves. The resulting lives of quiet desperation created by financial services are all around you.
And you’re blind enough not to see. Your blind faith in a false idol – the god of neoliberalism means you have no comprehension of reality
But have no doubt these debts were not chosen.
They were imposed.
@alastair
The joke will be on you.
In less than two years we’ll have rising unemployment, massive cuts in services, no fall min debt, interest rates rising, no growth and the risk of inflation despite that v(very different from the sort I suggest).
That’s what this Conservative government will deliver.
@Ray Gordon
See comment 11
And don’t be so conceited
Do you pay fairly?
Is your supply chain ethical?
Is your product fairly priced?
How do I know
Your claims are unsubstantiated
At least my words are transparent – even if you do not like them
And you can’t argue with the price
Move out of your trailer park into this mansion, or!!!!
It must have have been a terrifying experience, I hope I never to put my family through this.
@Ted G
I’ll take your contempt as a denial of the truth
Your brutish nastiness an indication of your contempt for most of humanity
@Ray Gordon: I am a wealthy company owner who has never borrowed a penny.
If you’ve never had to borrow a penny then you must have inherited a pile to start off with. So basically you have made money out of money. It’s labour which creates wealth, not financial capital.
Carol
Well said
And true
Since the time Aristotle said it
Richard
@Carol Wilcox
Actually I started my business in the back bedroom with money I earned as a student and my first job on leaving education.
So your assumptions are incorrect.
I have not inherited any money and you do not not always need huge amounts of capital to build a successful business.
Judging from the tone of your comment I would guess that do not run a business….
@Richard Murphy
Oh, I see now….Because my business is successful and I am ‘The Rich’ (whatever your definition is) I must therefore (by default) have made my pile out of being unethical, ripping my clients off, and paying minimum wages. And this leads directly to my culpability in ‘the crash’
Doesn’t sound like my business.
I enjoyed your blog up to a couple of months back (I agree with much of it – at least the sentiment). Lately, however, you have been ranting like an 80’s student selling ‘Socialist Worker’ clutching their newly discovered copy of ‘Das Kapital.’ i.e. Please cut out the ‘them & us’ conceited attitude as it undermines your underlying message which is valuable and needs to be heard (even if IMHO the proposed solutions are not always pragmatic).
@Ray Gordon
I remain quite unfamiliar with what you do…so I have no idea whther you’re culpable or not
What I can say is this: we need a major culture change
I’m not, as you imply, a Marxist. I am a social democrat. Yes, that’s left of centre. Of course it is. It’s also bang in mainstream politics.
And as a chartered accountant with considerable business experience I can offer three opinions.
First, the system is not working. Isn’t that plainly obvious?
Second the change required is not minor, it is systemic. Again, isn’t that obvious?
Third, that change requires reallocations of resources within and between societies
From developed to developing countries
From banks to real productive activity
From saving to investment
From net exporters to net importers by changing the balance of trade
From those with wealth to those without
The crisis is a reflection of these imbalances
defending the status quo – saying in effect the wealthiest (and you say ayou are one of those) is your right
But I can say without a shadow of a doubt that these imbalances caused the crisis
And reallocation is required to restore balance
Does that make me a Marxist?
No. It makes me a hard headed analyst who might pay more tax as a result
Now – what’s your choice? Do you want to solve this problem? or perpetuate it?
Richard
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