Tories back down on wealth redistribution plans

[TheEarl]

For those of you with no interest in English politics, it's been something of an interesting week for followers of the opposition party. At the start, the former Shadow Chancellor and current party policy director said that any future Conservative government should make wealth redistribution its goal. At the end of the week, the party chairman sort of backtracked and talked wafflingly about "not having any intention of 'bashing the rich'".

Personally, I'm much more in favour of the backtrack, as I'm in no way a fan of wealth redistribution. Taxation should be higher for the rich than the poor, but the wealth imperative is why capitalism works and to remove it creates the possibility of poverty traps, where people have no incentive to go out and work.

However, I bring this up because I think it raises an interesting question. Mr Letwin made that statement because he believes it is what the British public want to hear. The type of wealth redistribution mooted in that interview is a very left-wing policy, one which far outstrips anything talked about by Labour, the actual left-wing party, whose policies have been very right wing, because that's what they thought the British public wanted.

The question is, do you believe that the political parties should be so openly bereft of inherent principles and willing to change everything for the man in the street? Or should each party offer a viewpoint which doesn't move that much and allows consistency of policy, but runs the risk of being unfashionable for a time and staying out of power?

The Earl

 

[rgraham666]

No I don't believe parties should be bereft of principles.

The problem is a party with principles can't be elected. The voters don't want principles, they want paradise. That is a society where they have all kinds of perks supplied by society that don't have to be paid for.

The higher on the social strata a person is, the more likely they are to think this.

A party with principles would say you can have this, but it will cost either with higher taxes or by withdrawing service from some other segment of society.

We don't want to hear this and vote for people who tell us some fairy tale.

 

[amicus]

Earl, Happy New Year and all that stuff.

I have become so accustomed to Tony Blair in the 'questions' setting that I hate to look forward to someone else.

I am reminded of the Conservatives in both England and the United States in the time of the Iron Lady, Margaret Thatcher and Reagan here, it appeared to me that both those politicians did have principles and did get elected.

I also think the Bush administration adheres to principles and even won elections doing so, although the left still swear he stole both.

Your link wouldn't highlight for me so I was able to follow it.

Not sure I can answer your question, I see the left here, sidling over toward the middle perhaps in an attempt to leave the policies of the left behind and become more centrist in hopes of success at the polling booth.

I personally would like there always to be a party whose principles include those of the free market, small government and minimum taxation, but that may be a thing of the past.

amicus...

 

[fifty5]

Personally, I'm much more in favour of the backtrack, as I'm in no way a fan of wealth redistribution. Taxation should be higher for the rich than the poor, but the wealth imperative is why capitalism works and to remove it creates the possibility of poverty traps, where people have no incentive to go out and work.
...
The question is, do you believe that the political parties should be so openly bereft of inherent principles and willing to change everything for the man in the street? Or should each party offer a viewpoint which doesn't move that much and allows consistency of policy, but runs the risk of being unfashionable for a time and staying out of power?

The Earl

Personally, I still think that Marx's, "from each according to ability, to each according to need" has a great deal going for it.

I'm also convinced that any political party ought to be based on principle. The one I support has: "a free, fair and open society, in which we seek to balance the fundamental values of liberty, equality and community and in which no-one shall be enslaved by poverty, ignorance or conformity" in its fundamental statement of belief.

I think that it is the duty of those (I include myself) who are better off, to help those who are worse off - even if they live in a different country.

If the mass of voters don't agree, then I support their ability to do so, but deplore their lack of judgment and principle.

Enterprise deserves its reward, but should also contribute to those who are not able to show such enterprise. Taxation shouldn't be punitive, but should pass some of the benefits on to those who don't have that luck.

 

[R. Richard]

I started to work for an engineering company Z that believed that rewards (pay raises, bonuses, perks) should be awarded by seniority only with no real consideration of contribution to the company. [It wasn't quite that open, but that was the underlying principle.] A lot of people left company Z and I perceived that they were the most valuable employees that company Z had.

I left to go to work for an engineering company A that thought that rewards should be based upon perfomance and contribution to the company. A lot of people left company A and I perceived that they were the least valuable employees that company A had and good riddance.

After a time, company Z went under. Company A interviewed some of the staff of company Z to see if anything could be salvaged. Surprisingly, there were actually a few people worth picking up; very few.

The evil empire Soviet Union beleived as company Z did. The evil empire Soviet Union is no more.

JMHO.

 

[bloodsimple]

Earl,

On your general point, it seems to me that nowadays in Britain a party cannot get elected if it has principles, and cannot govern without them. This government is a case in point. It ditched all its' principles to become a fluffier, non-Thatcher version of the Conservatives. This left it bereft of a coherent ideology once it got into power. Now it shifts policies according to tabloid headlines, making it effectively useless at achieving lasting change of any kind.

In terms of wealth redistribution, most policies explicity aimed at producing this tend to backfire. This government's tax changes have mainly hit lower-income and middle-income groups, especially those without children and living in rural areas. Blunt instruments like huge petrol taxes, the racheting up of Council Tax, and the ludicrously expensive and complex Family Tax Credits soak the middle earners. Rich people hire accountants - most multi-millionaires actually pay no income tax at all. Poor people remain trapped by poverty. The middle bears the brunt.

If the government intended to reduce social mobility, allow the rich to avoid paying for public services, and confuse everyone with bureaucratic systems that companies (rather than the government) have to administer, they've done very well.

I view that as a result of incompetence, rather than any ideology.

 

[LadyJeanne]

Parties were formed to help people get elected, presumably people whom the party promotes because of the views those politicians pledge to represent.

Certainly, parties should be expected to modify their platforms over time as circumstances within the nation and world change. However, there should be some fundamental principles that the party supports that don't change.

 

[TheEarl]

Bump to see if anyone else has an opinion.

The Earl

 

[dr_mabeuse]

I don't know, Earl. Issues change, parties change. No one's advocating the gold standard anymore, though at one time that was a passionate partsan issue over here. Fifty years of failure by communist governments to produce a worker's paradise have kind of made that issue an embarrassment that no party's going to espouse, not if they want a chance at being elected.

Politics reflect not only a society's values, but they way they do things too. In the west now, politics had adopted the values and ethic of Big Business where the goal isn't integrity but sales numbers. They're not fighting for principles anymore, they're selling a product. It's McPolitics: bland, acceptable, and inoffensive. They get into office and do what they want and then spin their way out, and no one remembers by the time the next election comes along.

 

[R. Richard]

In terms of wealth redistribution, most policies explicity aimed at producing this tend to backfire. This government's tax changes have mainly hit lower-income and middle-income groups, especially those without children and living in rural areas. Blunt instruments like huge petrol taxes, the racheting up of Council Tax, and the ludicrously expensive and complex Family Tax Credits soak the middle earners. Rich people hire accountants - most multi-millionaires actually pay no income tax at all. Poor people remain trapped by poverty. The middle bears the brunt.

You have seen the key point! You can't tax the old rich, they have lwayers and accountants and they will didge any scheme you can dream up. At one point Britain tried to tax certain categories at 105% of earnings. The Beatles left for the South of France.

You can't tax the poor too heavily. they just don't have the money to pay.

As for the middle class BOHICA!

 

[Colleen Thomas]

Wealth distribution is always popular among a certain segment of intellectuals and those who think it will improve their lot overnight with no work on their part. It rarely lives up to the promise, as their are attendant problems the intellectuals idealize away and the underclass don't comprehend.

Parties change. For many years, the US had something called the solid south. Southerners wouldn't vote for the Republicans because the repubs were the party of Lincoln, the party of abolition and the party of vindictive reconstruction. Now the Dems are the ones who cannot win a southern state to save their souls.

By and large, political wealth distribution schemes are the province of the party that is on the outside looking in. It's always seen as a quick way to develop a groundswell of support. It has to be disturbing when you see it from a party who should be diametrically oppsed to it, but you have to view it in political reality terms. It dosen't matter what you stand for if you can't beat the other party. They make the rules, they pass the laws, they develop the policies. Being the loyal opposition sucks.

After long enough out of power, you either change, adapt, hope for a radical event, or die. Politics is really a very good example of natural selection as Darin first expoused it.

 

[BlackShanglan]

Politics reflect not only a society's values, but they way they do things too. In the west now, politics had adopted the values and ethic of Big Business where the goal isn't integrity but sales numbers. They're not fighting for principles anymore, they're selling a product. It's McPolitics: bland, acceptable, and inoffensive. They get into office and do what they want and then spin their way out, and no one remembers by the time the next election comes along.

Amen. It's Orwell meets Madison Avenue. Why have a platform when you can have a brand image?

 

[bloodsimple]

Some good points made there.

But I would suggest that this lack of principle among political parties, is at the root of our lack of trust of politicians. When you know what a politician actually stands for, and truly believes, then you can have a measure of trust in their integrity. When a politician changes their fundamental principles as they get their snout nearer to the trough, you have no trust.

Without that trust, change cannot be made, as the British government has found, and as Bush is now finding. Once someone doesn't believe a word you say, why should they follow what you want them to do? Which means change is not achieved, which means the pitiful results must be spun and lied about, which further erodes trust and therefore effectiveness.

The abandoning of principles (even if you disagree with those principles) has eroded trust and respect and increased cynicism. And that, ultimately, benefits no-one.

 

[rgraham666]

The best wealth redistribution is wealth creation.

This requires that jobs with decent wage levels and staying power be created. I prefer them to be created by the business community.

Unfortunately, the business community is more focused on short term profits which requires them, they believe, to lower wages and make as many jobs part time as possible.

Strange, as their workers are also the ones they often sell their products to. How is a business going to make money if people can't afford to buy their products and services?

And Richard is correct about how taxes now work.

In the late 50s, early 60s, the large jointly held corporations carried about 30 to 40% of the tax burden. A decade ago they carried between 10 and 15%.

As my favourite authour says, much of the debt crisis in The West is actually a taxation crisis.

 

[R. Richard]

In the late 50s, early 60s, the large jointly held corporations carried about 30 to 40% of the tax burden. A decade ago they carried between 10 and 15%.

As my favourite authour says, much of the debt crisis in The West is actually a taxation crisis.

Yes! It is not possible to tax a viable corporation. To oversimplify, a viable corporation produces product(s) and/or service(s) at a cost. The viable corporation then adds a profit margin to the cost of the product(s) and/or service(s) it produces. The viable corporation then sells the product(s) and/or service(s) it produces at the cost plus the profit margin. If the corporation is taxed, it simply adds the tax cost to the cost of the product(s) and/or service(s) it produces. If the corporation is taxed, it adds the cost of the tax to the cost of the product(s) and/or service(s) it sells. Who pays for the final cost plus profit margins of the viable corporations? Why the same people who pay income taxes, PLUS THE PEOPLE WHO MAKE TOO LITTLE TO PAY TAXES! Taxing corporations is a nasty, hidden, REGRESSIVE tax that the politicians love because it hides how much citizens pay in taxes.

BOHICA!

 

[rgraham666]

So what you're basically saying, Richard, is that a corporation can exist in a society, take advantage all the tools a society supplies (including money), but is under no obligation to pay for any of them?

Must be nice.

 

[R. Richard]

So what you're basically saying, Richard, is that a corporation can exist in a society, take advantage all the tools a society supplies (including money), but is under no obligation to pay for any of them?

Must be nice.

No, not quite. What I am saying is that the corporation is not really an entity, but a conduit. Taxing a corporation makes as much sense as taxing your wallet, separately from you, because it contains money. Individuals need to be taxed to support society. However, taxing corporations really makes no sense. That said, a reasonable system of fees to support the costs of administering a coporation is not unreasonable.

My point is that individuals need to be taxed directly. In that way, an individual realizes exactly how much tax he is paying. The individual can then weigh the costs and the benefits and try to influence the levying if the costs at what he feels is a reasonable level. Hidden taxes inevitably result in foolish expenditures of government money.

 

[rgraham666]

I'm afraid I don't understand Richard.

In my opinion, corporations are an entity. They are extended the same privileges, rights and protections as individuals. And they are controlled by the same laws.

To my mind, they have the same obligations as individuals as well.

Shrugs. Last I'll say on the matter.

 

[TheEarl]

So what you're basically saying, Richard, is that a corporation can exist in a society, take advantage all the tools a society supplies (including money), but is under no obligation to pay for any of them?

Must be nice.

Not to go all amicus on you, but the free market should sort out this problem. Any corporation which makes silly amounts of money ought to have its profits reduced down to normal 'reward profit' level by new entrants into the market. However, lack of perfect freedom of resources, workers and knowledge means that this doesn't always happen.

However, if it doesn't, then the abnormal profit goes to people, which is income, which should be taxable.

Theoretically speaking, the system should work without taxing corporations.

Theoretically.

The Earl

 

[R. Richard]

Not to go all amicus on you, but the free market should sort out this problem. Any corporation which makes silly amounts of money ought to have its profits reduced down to normal 'reward profit' level by new entrants into the market. However, lack of perfect freedom of resources, workers and knowledge means that this doesn't always happen.

However, if it doesn't, then the abnormal profit goes to people, which is income, which should be taxable.

Theoretically speaking, the system should work without taxing corporations.

Theoretically.

The Earl

Any corporation which makes "silly amounts of money" in a free market will soon be faced with competition, eager to make "silly amounts of money." The competition will force the profits back below the "silly amounts of money" level.

In the real world, the corporation which is making "silly amounts of money" by innovation will use research to try to maintain the "silly amounts of money" level of profits. The need for research and quality control will create new jobs, good paying jobs. If the corporation is making silly amounts of money" by peddling commodity products and/or services, they will soon find themselves with visious competition that will reduce their profits well below the "silly amounts of money" level.

There is one, well know exception to the above rule. If you can put the ball in the basket, put the ball in the end zone/net, or put the ball in the cheap seats [or prevent any of the preceeding], you can make "silly amounts of money" as long as you can do what you do!

 

[LadyJeanne]

Any corporation which makes "silly amounts of money" in a free market will soon be faced with competition, eager to make "silly amounts of money." The competition will force the profits back below the "silly amounts of money" level.

In the real world, the corporation which is making "silly amounts of money" by innovation will use research to try to maintain the "silly amounts of money" level of profits. The need for research and quality control will create new jobs, good paying jobs. If the corporation is making silly amounts of money" by peddling commodity products and/or services, they will soon find themselves with visious competition that will reduce their profits well below the "silly amounts of money" level.

There is one, well know exception to the above rule. If you can put the ball in the basket, put the ball in the end zone/net, or put the ball in the cheap seats [or prevent any of the preceeding], you can make "silly amounts of money" as long as you can do what you do!

There are barriers to entry that make this a fallacy - see oil industry.

Earl, I don't understand what you mean by abnormal profit goes to people - do you mean corporate execs and shareholders? It typically doesn't go to employees...

 

[Liar]

However, if it doesn't, then the abnormal profit goes to people, which is income, which should be taxable.

Which is where it usually goes titsup, because with the right means, there's always a way around it.

As you said. theoretically.



Anyway, I am on the same line as RG, to some extent. If a company does not pay taxes, should it then reap the benefit of tax financed things, like infrastructure and justice systems? They transport stuff on public, tax financed, roads and railways. They use tax financed telecommunications (ok, those are private in some parts of the world, others not), they take up valueable and expensive time in tax financed courts. Hell, they even cry for direct financial alms payed for by the people when things go downhill.

If they didn't do all that (or payed a market price fees for the services they actually use), then sure, don't tax 'em.

 

[TheEarl]

There are barriers to entry that make this a fallacy - see oil industry.

Earl, I don't understand what you mean by abnormal profit goes to people - do you mean corporate execs and shareholders? It typically doesn't go to employees...

I meant corporate execs and shareholders. However, as Liar said, the richer people are, the more creative their tax accountants tend to get.

Barriers to entry are what I was talking about with lack of freedom of movement of resources, workers and freedom of knowledge. These are the things that don't exist in the wonderful theoretical free-market land.

The Earl

 

[R. Richard]

There are barriers to entry that make this a fallacy - see oil industry.

Earl, I don't understand what you mean by abnormal profit goes to people - do you mean corporate execs and shareholders? It typically doesn't go to employees...

There are barriers to entry in almost every industry. I am an investor in oil companies. If you don't think there is competition in the oil [and natural gas] industry, think again. The oil companies compete for new oil finds, for pipeline capacity and for a lot of other things that would take too long to explain.

Are the oil companies making big profits? Of course they are. With the price of oil around $60 per barrel, they are making big money. A few years ago, the price of oil was around $20 a barrel and the oil companies were mostly not making money.

A company does not like to pay workers a lot of money. A sane company [there are some insane companies] does like to get a lot of production out of their workers, especially when profits are high. Well paid workers are more productive than lower paid workers. The desirre for low paid/high productivity workers leads to wins for the workers. If you don't believe me, look at what constitutes poor people in the United States versus what constitutes poor people in a counry like Bolivia.

If you can tell me what oil companies are making really excess profits I would be most grateful. I will invest in those oil companies and make bit profits. The problem is, people who invest in oil companies check things like that. The current stock prices fully reflect the perceived value of oil company stocks. Trust me.

I am not trying to tell you that companies WANT to pay workers high wages, only that they will pay employees high wages if and only if the company thinks they can make more money from the higher paid employees. That's business.

If you stock shelves at Wal-Mart or flip burgers for Mickey-Ds, you will make very low wages. Why would anyone take such a job when there are much higer wage jobs avaiable? The higer wage jobs require SKILLS. The people working for low wages typically have low salable skills. I am still waiting for someone to pay me big bucks because I know "In 1492, Columbus sailed the ocean blue."

 

[bloodsimple]

What about transfer-pricing?

As I recall (my degree was fifteen years ago, mind), the theory is that multinationals will deliberately adjust prices across markets not only to reflect costs, but also to reflect taxes. This means that, for example, they will make big profits in a low-tax country like the UK, and low profits in a high-tax country like Sweden. European car prices are a classic modern example of this.

This promulgates the idea that low-tax countries are "good for business" because large profits are made there. In fact, it is the other way around - large profits are made specifically to make the most of a low-tax environment. That way, the multinational maximises its NET profit around the world.

In terms of the original concept of the thread, I would have thought that this means that raising taxes (to redistribute wealth) merely encourages multinationals to deliberately make lower profits in that country, thereby reducing the tax take, and defeating the original aim of the policy. Therefore, fiscal manipulation does not produce greater income equality.