29 April 2009

Incentives Do Matter: It's A Pity The Right Only Acknowledge This When It Suits Them.

Stumbling and Mumbling points out the wrongs of labelling people 'evil poor' and also the hypocrisy of right-wing rhetoric on incentives. Overstate the effects of a 50% tax rate and say nothing bad about the weak morality of those who avoid tax. Yet big up morality on the 'evil poor' on crime or welfare dependency when dismal education, poor parenting and poor job prospects offer them impossible odds out of their fate.

When the numbers on welfare rose from around 3m in the 70s to over 7m in the 80s under Thatcher, does that really mean we have 4m more 'lazy scum' than we had before, or is government policy to blame? Is it not obvious that lower welfare payments and poorer job prospects are bound to tempt more people into both violent crime (through frustration at their lot) and/or possessions crime.

The big question is (or should be) what is a more efficient and nicer society to live in? One with growing inequality and inevitable resentment, or one where society decides that there are reasonable limits on the gap between the haves and have-nots?

9 comments:

  1. Neil, look, as a simple matter of maths the 50p tax rate will not raise much additional revenue (and might even lead to a fall).

    But now is a good time to point out that most welfare claimants or tax credit claimants face effective tax rates of 70% to 100%.

    I may be 'right wing' but at least I'm consistent. I'm against any effective tax rate over 30% and that's that.

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  2. "right-wing rhetoric on incentives"

    In this case pointing out that some of the incentives are wrongly set up. Whats the problem with that?

    As for "The big question", do you want to live in a society where no matter what you do, the government puts a limit on sucess?

    It is far better to have a society where we are all richer even if some are richer still. Inequality is inevitable and provided that you make sure people are not starving in the street and have the opportunity to make their lives better then I don't see the problem with it.

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  3. Falco, Mark, Even right wingers like yourselves say you care about social mobility (i.e opportunity to progress up and crucially go down the ladder). In which case the steepness of the ladder does matter. The countries with the highest social mobility are also the most equal, coincidence? Then the is the morality and happiness of the most wealthy - without a 'limit on success' as you put it, extreme wealth chasing has its own downside for everyone. How much wealth is moral or fair? Is it fair or moral that the richest 1% have more wealth than the poorest 57%? Do they really deserve this wealth? Have they earned it? Of course most wealth is inherited. This is not good for opportunity or aspiration and not an efficient way of running an economy. Obviously we need some inequality and where we draw the line will always be arbitrary, is not 20 times the standard of living of the poorest plenty and any more just corrupting and greedy? The best way to decide is to have proper democratic procedures and complete transparancy on what people earn (so they can justify it). I would also have a high IHT - maybe 100%. That would be the fairest way to prove that someone eally did deserve vast wealth.

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  4. "Obviously we need some inequality and where we draw the line will always be arbitrary, is not 20 times the standard of living of the poorest plenty and any more just corrupting and greedy?"

    No, provided that people have a basic standard of living what possible reason is there to limit peoples income at any level? (Other than envy of course).

    Any refs for the social mobility / equality stuff, I'd like to take a look. I don't really see the causation unless the study includes countries where there is either no opportunity due to income differentials, (starving in the street level), or mobility is simply easier because the ladder is so slanted as to be almost flat, (which creates other problems).

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  5. A reference here for the social mobility/equality stuff.

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  6. No, provided that people have a basic standard of living what possible reason is there to limit peoples income at any level?
    Their wealth should not be 'capped' but it should be subject to a progressive tax rate. Let's remember. The rich don't make their money in some political and social vacuum. They make it thanks to the society they live in, its political, legal and social structures. They should repay to that society proportionately what they have derived from it. They should pay up without whining, out of a sense pragmatism, as the rest of us should also. The reason why they can make their money is because we have a red in tooth and claw capitalist society. Taxes and benefits and social security, stabilise capitalist society. If they want to live in a libertarian wet dream then let them also put up with food riots and anarchists taking pot shots at any plutocrat who breaks cover.

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  7. stephen - on this we can agree. Couldn't have put it better myself.

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  8. Stephen: "The rich ... should repay to that society proportionately what they have derived from it."That's good logic, but you are missing the point - that is an argument for taxing land values (which are derived 100% from society at large) and not for taxing incomes - there are some high earners who deserve every penny and others who are just leeches, but having a 50%-plus tax is a sledgehammer that misses the nut.

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  9. Neil, you're not that much younger than me and you hate Thatcher nearly as much as me, so on a point of order, Thatcher was elected (not by me - my first vote was Labou) partially on a ticket of getting us back to work in 79 when unemployment was, IIRC about 1.5 million - and she had the audacity to sneer at Labour and say it had never been so high.

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