The Guardian has reported this evening:
A group of progressive Europeans led by the economist and author Thomas Piketty has drawn up a bold new blueprint for a fairer Europe to address the division, disenchantment, inequality and rightwing populism sweeping the continent.
The plan, crafted by more than 50 economists, historians and former politicians from half a dozen countries, includes huge levies on multinationals, millionaires and carbon emissions to generate funds to tackle the most urgent issues of the day, including poverty, migration, climate change and the EU's so-called democratic deficit.
Oh dear. I admire the sentiment, but at the heart of this manifesto is the belief that nothing can be done to solve the crises we face without the taxes paid by the wealthy. I hate to say it, but I would really think Thomas Piketty would understand the relationship between tax and government spending better than that. I suggest he read this.
We need a manifesto to tackle inequality.
And to tackle climate change.
But we do not need one based on false premises. Or on a misunderstanding of how tax works. Let alone a false premise that the rich will pay for this when they won't.
I can hope the report is wrong. But I am not living in hope on this one. Thanks
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How can we ever be less unequal if we allow the rich to maintain their undertaxed wealth and income. Yes I did buy both your books and largely agree with your views. But, speaking as an historian rather than a political economist, I feel you underestimate the power that goes with wealth. Wherever a super-rich elite is permitted to exist, they will subvert democracy and fix the economy to further their own – and their children’s existence.
I am more than happy to tax the rich
But precisely because they are rich
And not because we are depending on them
I cannot be more straightforward than that
“And not because we are sending in them”
“I cannot be more straightforward than that” I think you might….I for one am not clear about what that means. 🙂
Corrected
Frederic Bastiat nailed this one in the mid 19th century:
“When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorises it and a moral code that glorifies it.”
So true
Chris Hedges provides some realistic insights in this 2013 interview (no need to watch in its entirety unless one chooses): The Pathology of the Rich – https://www.youtube.com/watch?v=wfFZtn2MU4A&t=319s. Having been through the private education system myself I concur with his observations and conclusions. As Sun Tzu famously advised – you need to know both your enemy and yourself!
I’m not sure you have understood the context of that quote Ken. Bastiat had in mind the protection of an individual’s personality, liberty and property from plunder being enabled by law created on behalf of the agents of the State.
‘When the law takes from some persons that which belongs to them, to give to others what does not belong to them’ would actually seem to describe Richard’s desire (‘I am more than happy to tax the rich, but precisely because they are rich’) rather succinctly.
No, not at all
Your mistake is to assume that a person owns the assets that represent the tax that they owe
They don’t: they are theirs only to the extent that they are available to0 settle a legal liability properly created in law
Pretending that they only have assets and no liabilities and that the law cannot define tax owing is far-right nonsense
And it’s trolling to use stupid pseudonyms
So if someone buys a house – do they own it? If someone buys a car do they own it? It someone buys a pint of beer do they own it?
I am confused as I think would be most people by your definition of ownership.
If a person buys a house with a mortgage do they own it? Only to the extent that they service the obligation of the charge. Tax is a charge in the same way.
Simon says:
“So if someone buys a house — do they own it? ” They have exclusive use of it for their lifetime (as long as law and order pertains).
“If someone buys a car do they own it?” Ditto, but for the ‘lifetime’ of the car.
“It someone buys a pint of beer do they own it?” Absolutely not. Beer is only ever rented. 🙂
David Kiernan says:
“How can we ever be less unequal if we allow the rich to maintain their undertaxed wealth and income. ”
Eat them ?
Unless and until the narrative about tax i.e. that government collects tax in order to spend ( a logical falsehood if ever there was one ) changes to government spends and collects tax to balance what it has spent ( to a greater or lesser degree ) then nothing will change to make the tax system fairer . Frankly I don’t think the question of fairness even figures in this or any recent government’s mind except as an afterthought . The present tax system is not just unfair ; it is archaic . Maybe a few smart guys in the Treasury know this ,but ‘ Making Tax Digital ‘ doesn’t do anything to change the narrative. That’s just let’s follow the lead of the corporations, the banks and the Big Four – it’s all just a digital process, isn’t it ? But ( and it’s a big but ) this doesn’t change the narrative . No-one, not even Piketty and co understand that those for whom tax is most valuable are not the poor but the rich because if tax isn’t paid and the currency fails they have the most to lose.
John Hope says:
“those for whom tax is most valuable are not the poor but the rich because if tax isn’t paid and the currency fails they have the most to lose.”
That’s an interesting theory, John, but in reality the poorest always loose most because they are not losing money they are losing their lives. Often in a very literal sense. The majority of casualties in any collapse of civilised society will always be the poor because the wealthy have the means to protect, or remove themselves, from the crisis.
In a slightly less apocalyptic scenario it is logically true that those who generate their wealth by rental plunder will inevitably run out of ‘customers’ eventually. My recollection of the Monopoly board-game is that the winner only wins by default because the other players can no longer ‘afford’ to participate. The winner ends up with a pile of useless cash, some plastic property, no friends, and nobody to play with. In short, the game stops. In real life the losing players don’t ‘take their bats home’, they take them out onto the streets and wreak havoc because they feel they have nothing left to lose.
To give a personal example; my telecoms provider thinks it reasonable that I renew my contract with a 30% charge increase. My telecoms provider is wrong. I would baulk at such an increase even if I could afford it, but I can’t, so it is not an option. My options are to join the churn of customers by seeking a different provider, accept a reduced level of service or …. go to the library and use the publicly available service ?
My provider is losing income whichever choice I make.
Andy, the point I was making, but didn’t spell out was that in the contemporary world where currency is not backed by anything and government controls its creation that places a responsibility on government to maintain the value of the currency for all the people. Now I take your point that the poor are always the losers ( ‘ the poor are with you always ‘ ) , but we decided through the ballot box way back in the last century that there should be some levelling out of the differences between rich and poor . Not an easy thing to do, but the government of 1945- 51 did just that . Since around 1980 the gap between rich and poor has grown massively . Piketty has proved this with his research. But neither our government , nor any other that I can see is prepared to rebalance the huge disparity of wealth that exists everywhere now . Why ? Because politicians the World over are in the thrall of the rich ( I have spent enough time in the company of politicians who refer to them as ‘ wealth creators ‘ ) to know this at first hand. Into that vacuum at some point ( as you point out correctly ) come the pitchforks which is where we are right here, right now . But if that’s what it takes to wake up the politicians to realise that it is they and not some hedge fund that is in charge of the money then so be it.
The Observer article referred to 800 Billion. Presumably this is the EU which uses the Euro. Since the EU cannot even address Greece’s problem it’s unlikely to be able to conjure up that amount of money without mentioning raising it through taxation.
Hard to say anything on New Euroland when the Euro was so misconceived. More politician-led bureaucracy seems an unlikely starter. My experience in EU research and project funding was both successful and unpalatable. Audit was stressful and pointless. Cheating was rampant. What’s in the Guardian won’t help. We need something bottom up in principle, audited at that level on veracity of spend and social capital, funded by government spend with tax as a control in the general economy. Another tax and spend authority is just more of the same.
As much as I respect and admire Picketty’s work, if you are right about the Guardian then I concur with your sentiment.
I would put it like this: we are living in times where we need new (base/real) money upfront in the world economy first before anything else. That would be the quickest and most effective thing to do. And of course the key point is where that cash injection would be (i.e. not through the banks – not all of it anyway).
I’ve just sent an e-mail to my Tory MP, Alan Mak, to ask him to support any vote for Proportional Representation. I don’t have much hope of a positive reply.
Picketty is obviously well aware of the forces that will oppose him. Among them, in the UK at least, are the safe-seat Tory MPs. Rocking the boat, even on vital topics where someone might be forced to find another oar for the boat, is out when you’re hoping for a small post in Theresa May’s next government reshuffle – if she survives to make one.
>>So true<<
Then why criticise Pikketty? He is dealing with todays issues. Your MMT is not necessarily up to date. QE has skewed the whole theory. You make the point that inflation is controlled by taxation to remove money from the system. QE has been rampant for the last few years but no significant inflation. Why?
I have answered this many times
Because there was no full employment
That’s what MMT says will happen if there isn’t full employment
Please keep up
Barry says:
” You make the point that inflation is controlled by taxation to remove money from the system. QE has been rampant for the last few years but no significant inflation. Why? ”
I’m not sure I’m technically correct about this and Richard possibly (probably) doesn’t agree with me on this, but I suggest there has been considerable inflation since 2008.
What there isn’t is inflation within the normally measured ‘shopping basket’ of consumer spending. In the arena of asset prices inflation is rampant. Share prices are generally reckoned to be way over the level of underlying company asset values floating on a sea of cheap borrowing, pumped up by various rather stupid market behaviour like self perpetuating indexed funds producing a positive price feedback and companies buying their own shares to further fuel the bubbles.
The inflation in property prices in the domestic market is not so obvious because the major crash in house prices which would have been expected to follow the 2008 GFC was largely prevented by government (BofE) injections of cash into the financial sector, and the reduction of interest rates.
You are quite correct in your assertion that QE has skewed markets. I’m not sure that anyone has yet worked out whether they are merely ‘skewed’ or in fact ‘screwed’. Nor indeed, whichever it is, how badly.
The sort of financial inequality which economists point out is increasing within our society is now so extreme that some people (really quite a lot of them) are managing for a week to live on an amount of money which would not buy a half decent bottle of lunchtime claret in the City. The UK no longer has, in any meaningful sense, a common currency.
Richard, I am coming to this debate late, so please be patient. You summarise Picketty by saying: “at the heart of this manifesto is the belief that nothing can be done to solve the crises we face without the taxes paid by the wealthy.” Is it implicit to this belief that there is a finite quantity of wealth globally, and the only real question is who owns it and how it should be distributed? Credit Suisse’s Annual Wealth Report seems to support this assumption. Likewise, Wolfgang Streek in “Buying Time” argues that neoliberalism has so undermined states’ capacity to tax that public services are increasingly supported by private capital, eg international bondholders in hedge funds. Mazzucato also emphasises the movement away from the “welfare state” in her book, “The Enterprise State.”
What is your take on these explanations for austerity funding, low taxation and increasing debt?
I have explained this often and have not the time to do so again
Seriously, try my book The Joy of Tax
Richard, your misgivings about Piketty’s manifesto are ‘on the money’. (Sorry) The same flaw occurs in his book as well. Great data but flawed neoliberal macroeconomic argument on how to deal with the inequality shown by the data. He appears to have no deep understanding of how the fiat monetary system really works. Has he read no Keynes? Not that Keynes was entirely clear on everything.
Agreed.
If you want rid of Right-wing populism, then you invest it out of existence.
Taxing consumption is just too indiscriminate as the poorest or poorer find it really hard going. (as Richard has pointed out many times).
Barry, QU was nothing more than an asset swap and did nothing to deal with the system’s economic inequalities. Fiscal spending in the real economy was what was needed and in some places the reverse was what took place.
Richard I quite agree with your post. I would add that the type of tax matters too, and also surprises me. I like the analysis by Hyman Minsky, whose work inspired Central Bankers to call the Great Recession, a Minsky Moment. Minsky proposed that corporate income taxes and corporate contributions to payroll taxes should be eliminated and replaced by a Value Added Tax, to make business more competitive and Government revenue more reliable. Cutting those taxes would also end preferential taxing for dividends and capital gains since there would be no double taxation. Randy Wray of MMT likes to say that we tax things we do not want.
Which is why Randy Wray is wholly aligned with right wing fundamentalism and why I reject the dogmatic analysis of some in MMT
As I do your own hopeless analysis which would shift all the burden of tax from capital onto working people
Wow, that’s tax justice in reverse if ever I saw it
And a complete misunderstanding of how tax works as well.
It’s so crass it is staggering
Line up with Farage if you like – because that is what you and Randy are doing – and if that is being an MMT purist then I reject it out of hand
Yikes – I was just repeating Minsky. I have no original ideas 🙂
Think about what you repeat then
Just because the name is big does not mean it is right
I unthinkingly repeat your exquisite comments to friends all the time 🙂
By the way, my impression was that most non personal income taxes, most business taxes are essentially hidden sales taxes.
Search Kim Klausing in tax incidence
No they are not
That’s nonsense created by Said Business School at Oxford, who are sponsored by big business
Joe Polito says:
“I unthinkingly repeat your exquisite comments to friends all the time ..”
In traditional societies this is the behaviour of the wash house. It is called ‘gossiping’.
Lest this offend by appearing to be a sexist remark, I would add that the discourse of the tap room is little different for the most part, but frequently less coherent because of the effect of alcohol intake on brain function.