Wealth doesn't trickle down – it just floods offshore, new research reveals

[breadandbutterfly]

www.guardian.co.uk/business/2012/jul/21/offshore-wealth-global-economy-tax-havens

""These estimates reveal a staggering failure," says John Christensen of the Tax Justice Network. "Inequality is much, much worse than official statistics show, but politicians are still relying on trickle-down to transfer wealth to poorer people.

"This new data shows the exact opposite has happened: for three decades extraordinary wealth has been cascading into the offshore accounts of a tiny number of super-rich."

...In fact, some experts believe the amount of assets being held offshore is so large that accounting for it fully would radically alter the balance of financial power between countries. The French economist Thomas Piketty, an expert on inequality who helps compile the World Top Incomes Database, says research by his colleagues has shown that "the wealth held in tax havens is probably sufficiently substantial to turn Europe into a very large net creditor with respect to the rest of the world."

In other words, even a solution to the eurozone's seemingly endless sovereign debt crisis might be within reach ? if only Europe's governments could get a grip on the wallets of their own wealthiest citizens. "

Ironic isn't it that the Guardian is so het up on this given how much tax they paid last year. (Less than my husband who works part-time on near minimum wage since you ask.)

It's not scaremongering, Niceguy, that the welfare state is being dismantled. I don't think the Tories would deny it, either. It's all part of their philosophy: people should be independent of the State, they want less govt intervention in people's lives, more freedom for the individual to steal from the public purse, survival of the fittest, the weakest to the wall, etc.

So they privatise hospitals and schools and help huge multinationals because if a large company finances a hospital that's one less that the taxpayers have to pay towards. And they want to reduce taxes because they want people to vote for them. Entirely consistent with everything they have done since coming to office.

Come on Solopower revolution is in the air, people are pissed off, sooner or later anyone with a couple of quid in the bank and plummy vowels will be doing a flying tap-dance from the nearest lamp post. Our country's survival depends upon people like you knowing these answers. If we are going to smash the system, let?s work out what the system looks like and what it is you rail against.

1. How much is far too much? - What level of relative income disparity is too much? 100 x average wage, 50x, 10x, 2x?
2. Who gets to decide how much is too much? ? Is it you, me, the homeless or a representative of Premiership Footballers?
3. How much wealth are you prepared to take of someone who is rich? 50% is the current upper rate of Income Tax, are you going to raise it as high as, say, 98%? What about share dividends, how much are you going to take from them?
4. When do the arbiters & enforcers become the ruling class? ? This is always a problem with sprawling bureaucracies that are backed up with almost limitless force no matter how well intentioned they start. How do you intend to prevent this?
5. How do you ?prevail? on someone without using the state? ? This isn?t a response to communism; it?s a response to your statement. You wrote ?those that have far too much could be prevailed upon to share?. I?m asking you how that would work without the threat of violence or the state stepping in to force that redistribution?
6. Does confiscation of wealth lead to a ban on wealth? ? This is a corollary of question 3.
7. Has this been done elsewhere and did it end up in a big pile of dead bodies? ? This is not in itself a function of communism, it is, however, a function of an over powerful state.*

* A quick body count puts the Commies well in the lead at being murderous bastards although Fascism (which I consider to be, along with communism, opposite ends of the same turd called socialism) and religion take silver and bronze respectively. An honourable mention should be given to feudalism too I think, if only for the innovative approaches of certain absolute monarchs such as Vlad Tepes. In all cases, the mechanism which allowed these leaders to create such carnage was a powerful state and a weak populace.

Solopower "It's not scaremongering, Niceguy, that the welfare state is being dismantled. I don't think the Tories would deny it, either."

Despite the fact that I see no evidence either, I bet the Tories would deny it most strongly if they were accused of dismantling the welfare state.

"It's all part of their philosophy: people should be independent of the State, they want less govt intervention in people's lives,"

Do you mean that the Tories want us to take responsibility for ourselves and for our own lives? That sounds beautiful.

"more freedom for the individual to steal from the public purse,"

Is a rich person legally minimising their tax liability any more morally reprehensible than a poor person maximising their benefit claims?

"survival of the fittest, the weakest to the wall, etc."

Will families be prevented from looking after their own in this Tory hell? Why would private care systems be forbidden? This sounds to me like you can't imagine any delivery system other than a government monopoly provision of services.

"So they privatise hospitals and schools and help huge multinationals because if a large company finances a hospital that's one less that the taxpayers have to pay towards."

Those multinational bastards eh? Building new schools and hospitals!

"And they want to reduce taxes because they want people to vote for them. Entirely consistent with everything they have done since coming to office."

I'm still waiting on a tax cut other than the token 50p to 45p higher rate income tax one - but still, if it fits the Guardian's narrative eh?

What are you most scared of, MrJP? A powerful state or powerful populace? Are you really happy to hand over control of your finances to un-elected profiteers?

Because as I see it, it's the state's role to protect the people and give them value for money when they pay their taxes. Without this protection, they might well descend into revolution, and they certainly won't pay their taxes then.

I think you'd find the Tories would completely deny it. Not that you'd believe them anyway. There are plenty of people who wouldn't believe a word they say regardless of what the content actually is.

In principle I fully support less govt intervention, more individual freedom to succeed (or fail). The only proviso is that I expect the state to provide a minimum safety net. Emphasis on 'minimum'.

I'm infinitely more scared of a powerful state than a powerful populace and I fail to draw a distinction between unelected profiteers and elected ones, except to say that un-elected profiteers don't hold the power of imprisonment over me should I choose to withhold my money from them.

Whilst I share your opinion that the government should always maximise value for money, in practice it seldom does - a brief read of the excellent Lewis Page (a defence correspondent who's book 'Lions, Donkeys and Dinosaurs' should be enough to convince even the most ardent socialist that the state is financially incompetent) or a visit to the Burning Our Money section of the Taxpayers Alliance should soon cure you of your optimism.

Why would they deny it, Niceguy? Nothing that I wrote is anything to be ashamed of imo. It's a perfectly valid, coherent political philosophy.

I just don't think it is working for enough people. I would like to try something more humane and more likely to benefit more people.

In fact I used to be a bit of an idealist, thinking that human nature was basically good. I really don't want to let go of that belief, but when you see the bankers being given so much rope that they hang themselves and huge companies profiteering at the expense of us humbler folk, I feel I need to revise my views.

For capitalism to function at all, it requires trust, doesn't it? If we can't trust the bankers etc, we'll have to regulate them.

Ah, MrJP, we agree on some things then. Yes, elected/unelected profiteers, both bad - totally take your point. But at least the elected profiteers should be more likely to use the money for the common good, and they are also subject to the law. The unelected ones just leave when things get too hot.

And yes, this state is financially incompetent.

Solo Trust me on this; the Tories won't be dismantling the welfare state any time soon. Similarly, healthcare will still be free at the point of use for the foreseeable future.

The Tories are in an unenviable position. What they are accused of doing is beyond the pail of the left, whilst what they are actually doing isn't cutting it with the right of their own party either - hence the frequent and vocal calls from UKIP.

I suspect they'd deny because it's not true. The welfare state is still there, it's just been scaled back a bit because we cant afford it.

As for trust. I agree trust is the fundamental ingredient in any economy. And on that note history shows that I can't trust the government to spend my money better than I can.

"But at least the elected profiteers should be more likely to use the money for the common good, and they are also subject to the law."

Both profiteers are subject to the law, but putting on my tin-foil hat, I have more faith in a body that cannot change British law/rules than one that can.

Yes. The sooner they are out and we have someone inpower who can actually govern, the best for us.

Of course I trust you, MrJP. Why wouldn't I?

"I can't trust the government to spend my money better than I can."

Perfect - couldn't have put it better myself.

'I can't trust the government to spend my money better than I can .. on myself and my family. Agreed.

But the govt also has to think of people who don't have any money to spend on themselves, and I'm afraid they ask you for a relatively small proportion of your money to go towards the less well-off. Also towards the roads and hospitals and schools which they assume you will need at some point in your lives.

I read something a few years ago about offshore tax havens like Guernsey, Jersey and Isle of Man.

The article pointed out that successive UK Govts of all colours had found it convenient to retain these offshore tax havens close to our jurisdiction to provide a safety valve for the super rich to escape taxes without the UK Govt having to pass special laws to allow them to do so.

Politically, it is impossible to put legislation in place that allows the super rich to have their tax capped (eg at a maximum of £5 million per year) as many people argue they should. A handy local tax haven does that job while still encouraging the super rich to live, work and invest in the UK.

Tax havens are nothing new, and in a flourishing economy you could argue that they don't do the rest of us that much harm (though it still sticks in the craw that some people feel the need to do this).

But when the government says it can't afford to look after the people properly, surely it's pay back time for the tax avoiders?

That 'relatively small proportion' of my money works out at around 50% of my total salary when you add all the various taxes I pay together.

Also, I cannot see what is wrong with turning the health budget and the education budget into funding services - the so called voucher system. This way, we all know what we are spending and we all know what we are getting. Let's face it, if you are poor and need food, the government doesn't arrange for a delivery of groceries to your front door. Everyone agrees that it makes far more sense to give all of those who need it some money and put the individual in charge of how they spend their cash. The government?s attempts to manage all parts of the healthcare and education system remind me of the (now defunct) blogger Mr Eugenides' post about what the state should and should not do...

"The main argument now, increasingly, is between those who view the state as an enabler and those who view it as, at best, a sometimes necessary irritant. To employ a massively oversimplified analogy, statists seem to think that the state should act as captain, coach, physio, kitman, ballboy, PR department, groundsman, ticketing department, FIFA representative, the guy with the half time oranges, agent, translator, WAG, turnstile operator, matchday police, the guy selling the big flags outside the ground and the guy confiscating the big flags on the way into the ground. Libertarians just want a guy with a fucking whistle."

Off on a tangent maybe, but just before I go to pick up my grand daughter from nursery ...

Have you ever played a game of football where the rules are changed arbitrarily, people get sent off for no reason, one team has to play while hopping on one leg, the ref is massively biased, etc? We did this at the 'Make Poverty History' demos in Edinburgh. It was designed to show just how unfair life is for developing countries, and it wa brilliant.

But Solo, your demonstration of how unfair it is to have the rules changed on you is also applicable to the rich.

Let's say you own a successful company you've built from the ground up. You employ lots of people who thanks to you all earn a decent living and they all as a result contribute to the UK economy and in turn pay lots of income tax. You yourself pay your income tax, capital gains on dividends, not to mention employers NI, business rates and whatever other taxes I haven't thought about. And despite all this, you've still manage to tuck a significant amount of money away.

The way you'd likely see it is that you've earned it, you've paid your dues and you should be allowed to enjoy it. And if that enjoyment is to stick it all in a bank account and stare at the numbers, who is anyone else to say otherwise?

But under the socialist mentality, this is wrong. That money somehow morally belongs to the state!?!?! And that the government should now change the law to grab this money to be used for 'the greater good'. Does that sound fair to you?

No-one is saying that it all belongs to the state, just more of it. The chancellor can change the tax we pay in any budget, we all know that, and it affects us all.

I've also heard people say, 'I've earned this money, I've paid my dues, why should I give it to the state?' Assuming that you are not one of those who avoids or evades taxation, you keep the money for yourself, you contribute a bit to the economy by buying things from other people, you provide a few jobs and your heirs pay inheritance tax. So what's wrong with that?

Nothing, if the amounts we are talking about are reasonable. But if you are mega rich then I think you should share more of it.

How would you start to put a value on 12 or 13 years of free schooling? Free health care. Safety as you go about your daily business. And the 101 aspects of the society you grew up in that enabled you to do so well out of life? Why is it wrong to ask rich people to pay a bit more of that back into the public purse?

And what is the alternative? A wider and wider social divide and then what? How long before the situation gets dangerous?

But if you are mega rich then I think you should share more of it.

Why? If you've already paid taxes due on the money then why should YOU or the government for that matter decide what the rich person should spend/not spend their money upon?

I think that's the fundamental principle here isn't it? In a free democratic country, just how do you make a rich person spend their money in a way you would like to see without the rather dangerous precedent of double taxation?

Also please bear in mind that most of the 'mega rich' don't have billions sat in a bank account. What I mean is that Mark Zuckerberg is 'worth' $15 billion. This doesn't mean he has $15b sat in a Cayman island account out of reach of the US authorities. In reality he probably has a few million cash to hand. So just how do you tax someone like that? Well in the UK you tax them when they sell their shares (CGT). We do that already. He's still rich though...what now? Tax him again because he's still flipping rich?

"Well in the UK you tax them when they sell their shares (CGT). We do that already. He's still rich though...what now? Tax him again because he's still flipping rich?"

Err......yes. That's the point of taxation, it's a way of sharing out the wealth. The government needs lots of money at the moment, there is a recession on. You can't get money from poor people as they don't have any, so making rich people pay more tax is a good idea.

Solopower You seem to think it is perfectly fair game to rip up all existing agreements and punitively confiscate wealth from those that have worked hard, been successful, and managed to save up a lot of (already taxed) income.

Would it also be fair game to punitively deny benefits to fit and healthy people, who have never worked, never contributed and have no intention of paying tax any time soon? If it isn't fair game then why not?

rosabud

Err......yes. That's the point of taxation, it's a way of sharing out the wealth.

It depends upon your political views as to the 'point' of taxation. Civilised people believe that taxation is a way of raising money to fund essential services. Vile socialists believe that it's a way of 'sharing out the wealth'

The government needs lots of money at the moment, there is a recession on.

The government needs to stop spending quite so much.^

You can't get money from poor people as they don't have any, so making rich people pay more tax is a good idea.

The top 5% of the population pay something like 30% of the income tax take in the UK. If your earnings are in the bottom 60%, then you're never going to pay more in tax than you cost. Rich people are paying plenty.