Thursday, 24 March 2016

It's not the money

The SNP's decision not to create a 50p top rate of tax is an odd one. 

According to the Scottish Government's analysis, published a few days ago, there are just 17,000 people, 0.7% of the taxpaying population, who would pay the tax. The analysis says that there is a risk that this handful of high earners would move home/job/residence to England, and thus that the Scottish Government would not benefit from the tax revenue.

They might. But they might not; France has a wealth tax (ISF) which is paid by about 300,000 people there. They have not moved en masse to Switzerland. (OK, ageing rock star Johnny Hallyday has, but that still leaves 299,999 ISF tax payers in France.) People of wealth will stay in Scotland because that's where their family is, where their work is, where they love to be. As the Lallands Peat Worrier points out, extra taxes mean better services, and that means you and me, as taxpayers, benefit.

But that is not the point.

Thomas Piketty, in 'The Economics of Inequality'* demonstrates that tax does not close the wealth gap. Yes, the wealthy pay more and the poor pay less, but tax alone does not effectively redistribute wealth from rich to poor. He says that 'the countries where household income inequality is slight are the countries where salary differences are small, and vice versa, and not the countries where redistribution by tax would have reduced an initially large salary gap.' 

OK that's not very readable; what Piketty is saying is that this is cultural. That countries with large differences between top and lowest salaries cannot close that gap with tax.  Countries - such as some of the Scandinavian countries - with smaller differences in salaries have those smaller differences because they think that is the right way to live. It is how we want to be, not how we are taxed that defines the size of our income, and wealth, gaps.

Iain Macwhirter says the same in today's Herald; 

But revenue raising isn’t the only function of taxation, as the financial geographer Danny Dorling has argued. It is about fairness, equity and the kind of society you want to live in.
Does Scotland really want to create that more communitarian, harmonious Nordic society where income differentials are held in check and top rates are up to 60 per cent? Or are we content to join the low tax, devil-take-the-hindmost society of the UK under the Tories?

I hope the SNP will rethink. It's not the money. It is the signal that we are giving as a society in Scotland. We should be signalling equality, fairness and a fight against poverty. The 50p, or 60p tax band will help send that signal to all of us. 

And no, 17,000 people will not leave our lochs and glens. They like it too much to go.

PS: Happy Independence Day. Next time, it's a YES!

*Piketty, T., 2014. L’économie des inégalités, Paris: la Découverte, p101.


  1. Haha, independence day. That'll be Dependence Day - deny it all you want; be myopic and put your head in the sand as much as you want for you are clearly a fool. There can be no left-wing equality...go ask Fergus Ewing for starters. He's one of a number as you will know of the SNP's MSPs who are 'further-right-wing-than-Margaret-Thatcher.' Does he support Piketty? Of course not especially when the left-wing government of Piketty's own country don't agree or want him anywhere near them. If you want a planned economy then go live in either North Korea, Cuba or Zimbabwe. Be a good chap and close the door as you go.

  2. Excellent! There is a certain coming of age when one has one's first troll on a blog. Thank you Mr Muir for being there for me.

    But your anger would be better directed at a more worthy foe. Trolling here, sadly, is wasting your time; there are much bigger, more important windmills at which you could tilt. But thank you all the same for helping me grow up.