Today George Osborne plans to cut income tax for the richest people in the country by 10%. The Welfare Reform Act will have made it much more expensive to be poor. (If you’re unemployed and living on benefits, your scanty income is taxed at a higher rate than anyone else’s.)
The nonsense idea that if you cut taxes on the rich their increased wealth will trickle down to the poorest has proved an abject failure in every single economy in which it has been tried. It keeps being tried, though, for the main reason that many of the very rich love the idea.
What we need to boost the economy is increased public spending, not austerity measures.
Joseph Stiglitz, Nobel Prize-winning economist:
“The answer, even though they see over and over again that austerity leads to collapse of the economy, the answer over and over [from politicians] is more austerity,” said Mr Stiglitz to the Asian Financial Forum, a gathering of over 2,000 finance professionals, businessmen and government officials in Hong Kong. “It reminds me of medieval medicine,” he said. “It is like blood-letting, where you took blood out of a patient because the theory was that there were bad humours. “And very often, when you took the blood out, the patient got sicker. The response then was more blood-letting until the patient very nearly died. What is happening in Europe is a mutual suicide pact.”
Keep the 50% tax rate. Add on another even higher tax rate for a very small group of people (2011 Sunday Times rich list):
the 1,000 wealthiest people in the country are now worth a combined 395.8 billion, equivalent to more than a third of the national debt. The number of billionaires has risen from 53 to 73, while nine people have seen their fortunes rise by £1 billion or more during the past 12 months alone (May 2010 to May 2011).
There are 2.67 million unemployed people in the UK. They’re not jobless because they’re lazy or demanding too-high wages or think some kinds of work are beneath them. They’re unemployed because the jobs aren’t there – the economy is flatlining under Osborne’s vigorous blood-letting.
A handful of people are getting very, very rich. Osborne doesn’t want to cramp their style. They might have to cut back to just one yacht.
The notion that a high tax rate for the very, very rich somehow damages the economy is not borne out by historical experience or by anything known about economics. For governments to create a thriving economy they need a lot of tax income coming in. Osborne’s triple goals of high unemployment, lower pay for most workinhg people, and lower taxes for the very richest, are a perfect example of how to destroy a damaged economy. Things are bad already: we will see them get worse.
From this post, fourteen ways a high tax rate on the very very wealthy is good for the economy and the country, number one is:
It makes it take longer to end up with a fortune. In fact it makes people build and earn a fortune, instead of shooting for quick windfalls. This forces long-term thinking and planning instead of short-term scheming and scamming. If grabbing everything in sight and running doesn’t pay off anymore, you have to change your strategy. (h/t The Sideshow)
Live budget blog here. If you want to watch the trainwreck.