...a blog by Richard Flowers

Thursday, October 04, 2012

Day 4295: Wealth is the Enemy of Growth


Returning from his holiday, Captain Clegg talked to the Grauniad and mentioned a WEALTH TAX.

You'd think this would be entirely UNCONTROVERSIAL. It's Party policy after all, and we've talked Mansion Tax enough for everyone to know that.

But BOTH other Parties ATTACKED him.

Predictably, the Conservatory right called it "politics of envy", then warned that it might "drive wealth creators away".

Meanwhile Hard Labour sneered disingenuously that if he wants to tax the wealthy he shouldn't have voted to cut the top rate of income tax.

But we're NOT talking tax on INCOME. We're talking tax on WEALTH.

Mr Milipede has already been called to task over his DODGY MATHS and FALSELY accusing Mr Balloon of getting a £40,000 cheque from the treasury.

(Because that's how tax works in New One Nation Hard Labour's heads – ALL your money goes into the Treasury and then Mr Bully Balls decides how much he will generously allow you to have back.)

And it's very interesting that Mr Milipede OBSESSES with the top rate of INCOME tax. And IGNORES or RUBBISHES the actually more important question of WEALTH taxes.

People who are WEALTHY (that is have lots of ASSETS, whether that is money in the bank or estates in Oxfordshire or another small Picasso) do not necessarily have a lot of INCOME.

If the house is paid for, and the kids school fees are covered by the trust fund and there's money in the bank to pay for the next holiday... you don't have to EARN money, and so you don't pay tax. Oh, you might have to pay a bit VAT but by and large you can arrange matters to avoid most of the unpleasantnesses of Inheritance or Capital Gains Taxes.

People who are WEALTHY are NOT necessarily "WEALTH CREATORS" either. If you don't have to work, you don't have to build a business or employ people or invest in anything. Largely you can sit on your pile of dosh and cream off the rents from your properties. (Literally rent if it's buildings, but it could also be dividends from shares.)

Jobs and growth are "created" by small businesses. This has always been the case.

Oh we all LIKE the idea of WEALTH, of being, as Lord Mandy so memorably put it, intensely relaxed about becoming filthy rich, We'd love to have so much money that we don't need to work. It's why the Lottery and Downton Abby remain so popular. But at the same time, we all secretly know that it's totally PARASITIC.

If you are WEALTHY already – like, say, those good COMMUNISTS, the Milipedes – then you don't NEED to EARN lots of money. No, you can afford to take unpaid internships, getting on the inside track, and the old boy network paves your way up the greasy pole (to well and truly mix that metaphor).

But economic GROWTH, at least in a CAPITALIST society, depends on money being INVESTED to earn a PROFIT. That way your society has more money at end of the year than it did at the start. And then you reinvest it again.

WEALTH, on the other fluffy foot, means taking money OUT of the economy and parking it in a piggy bank. Or "house" as we usually call them in Great Britain, what with the ridiculous runaway house price inflation we've contracted, with the full collusion of every government and pretty much every homeowner. After all, when you're spending SO MUCH money on a house you REALLY don't want the value to go DOWN.

Wealth is about EXTRACTING productive capital from the economy. It actively harms growth.

That is why Captain Clegg is COMPLETELY right to say we want to move tax OFF the income of working people, and ON to the wealth of the well-heeled. It's not JUST about FAIRNESS – though obviously it IS more fair – but also about rewarding the people who are ADDING to the Growth while at the same time getting hold of some of that locked-away money and putting it back to work for the benefit of all of us.

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