Tuesday, 14 July 2015

Why it is fair and right that the wealthy pay more tax

In the run-up to the election, Ed Miliband very often said that, "Those with the broadest shoulders should bear the biggest burden," referring to tax increases on the wealthy in the form of a proposed mansion tax on homes over two million pounds and re-increasing incoming tax to 50% for those earning £100,000 or more
. It's all very well and good saying this, but this again typifies what I see as a very major problem with the Labour election campaign, never explaining their position. Why is it fair that the wealthiest should pay the most tax.

Don't park in the bus stop
Well the most obvious answer is a moral one, if you can still live very comfortably after your taxes have been taken then why shouldn't your taxes be used to help people who need it, the sick and disabled, the elderly, the jobless, etc. But there's actually a far more important argument than that, I think. If you are very wealthy then, chances are, you have benefited from the state far more than anyone else.

A lot of wealthy people are business owners, if you run a business you need workers. Those workers need to be educated, healthy, and possibly more importantly, be able to get to your place of business. All of these things are funded by the taxpayer: Your employees have almost certainly used the NHS, even if you have private healthcare; unless you are an insufferable snob, a large proportion of your employees were educated in a state school, and even if they didn't, went to a university funded by the taxpayer; all of your employees either use state funded roads or state funded public transport (privatised rail and bus services still use government subsidy) to get to work.

It seems fairly self evident to me that employees remaining happy and healthy benefits the employer, and unless employers, small and large alike, want to start paying for this out of their own personal pocket then I suggest that they be happy paying the lowest rate of corporation tax in Europe.

The companies don't just benefit from their employees though. Without customers who can easily get around, the businesses will suffer also. The same roads and public transport and health will mean that it is easy for customers to go to their shops, the agencies, etc. If the government provided infrastructure does not exist, business, and specifically new businesses, cannot be facilitated.

Of course, there are other ways to become wealthy, but listing every sort of wealthy person would take far more than one blog post and, arguably, business owners are most deserving of their wealth when compared to those who inherit vast sums of money or those who bought property 20 years ago.

If the state ceased to invest in the futures of its own people, then businesses that rely on educated workers, transport… nearly every business would fail. Businesses need the state to provide healthy, educated workers; businesses need customers. Without that… no businesses.

We currently live in a society where the poor pay the largest proportion of their income of their tax and the richest only pay a slightly larger percentage than everyone else. The wealthy only pay slightly larger percentage of their income than most people in tax, despite having their benefit from the state being far greater in more cases than not, because of the reasons described earlier. Fundamentally, this is unfair. The rich deserve to pay more not only because it’s the moral thing to do, not only because it makes the most actual sense, but because, in a modern society, business owners benefit the most.


  1. Businesses need the state to provide healthy, educated workers; businesses need customers. Without that… no businesses.

    You are advocating the social responsibility model.

    You forget one thing. The state needs businesses to generate wealth in which to steal via taxes. Without private enterprise there would be no taxes in which to provide any of those things.

    Private enterprise comes first. Look at Somalia no government there but there are private enterprises. China during the century of Chaos had no real government yet there was private enterprise.

    Anything the government does does not create wealth. State employees do not create wealth their taxes only pay back into the pot which somebody else paid.

    So if you tax the shit out of businesses and they leave or shut up shop. Then who funds the government?

    So in this chicken egg situation who is it more important to look after? The wealth generators or the destroyers?

    Secondly you assume government spending creates wealth. It doesn't it merely spends the wealth which was stolen off somebody else. If my income tax bill went to £0 tomorrow what would I do? I would go out and spend it therefore there is no additional demand created. Any tax you take from me is merely reducing my net realisable demand and transferring it to another person. There is no extra demand created.

    Unless you're an Enron type accountant who double counts.

    Ask yourself this

    Ten tax payers they make £100 each and pay 10% tax. So they all have £90 left. So the state employs somebody for £100 using all the proceeds of the tax.

    How much money is in the economy? £1000 or £1100?

  2. I would hardly call Somalia of anything stable.

    You're forgetting fiscal multipliers. If the government takes that £100 and invests it in a massive project, such as a road, meaning people can get around. Which means more people can go to those 10 people's businesses. Net gain for the business.

    1. That road my generate £50 worth of income because of the movement.