Tax Break

Who said tax is boring?

Losing Marx

Stiff upper lip or not, there must be some outlet for one's emotions

Stiff upper lip or not, there must be some outlet for one’s emotions

“Another decade is traveling through, and I’m here, and you are there.”

Growing up in England, I was always taught that showing emotion was a weakness. So, as I read the above line in the New York Times the other day a fleck of dust must have popped into my eye and made it, and its twin, lightly water. Written by a mentally ill and physically handicapped woman to her successful writer sister (who authored the article), it highlighted that, well before considering any human failure, the world is not a fair place. All men may have been created equal but some were definitely created more  equal than others.

As the running of the western world has been gradually wrested from the Church by rational thinkers, advances in science have done much to close the natural gap. In the moral sphere too there have been major advances in recent centuries with the individual finally achieving centrality in the scheme of things.

But the fact remains that, while we may dream of a Utopian society where all burdens and benefits of life are shared equally, the fundamentals, whether they are interpreted as God-given or Big Bang-given, do not imply that outcome. Success in life is about managing to fit your own lyrics to a predetermined tune – like fitting the “I did it my way” to the “dum-dum-di-dum-dum”.

At dinner last week with a very dear relative who can best be described as an unreconstructed 1960s socialist (and worst described as a Bloody Lefty), we got to discussing that age-old yawn – the equitable redistribution of income. The watered-down social democratic version of Marx’s “From each according to his abilities to each according to his needs” has been experiencing yet another revival with the recent social protest movements.

The Communist Manifesto of Marx and Engels, of course, had much to recommend it. The manual’s main problem was that it was a bit short on what Communism meant. What had become apparent 150 years after its publication was that Communism, as it came to be meant,  was not the ticket for two reasons; firstly, it didn’t work; and,  secondly, judging by the number of Russians , Chinese and assorted comrades who ended up at the end of a gun barrel or rope, the manual was not very user-friendly

Who said Communism is dead?

Who said Communism is dead?

What must be said regarding the durability of the equitable redistribution of income is that, despite the fact that Communism eventually accepted it had got itself wrong and gallantly fell on its own sickle, that concept still keeps knocking at the door of democratic nations across the globe (though not, it must be admitted, at 2 o’clock in the morning with an unmarked black car waiting on the street outside)

Much has been written about the merits or otherwise of  the redistribution of income. Intuitively, the average post-Neanderthal man, woman or other would tend to agree with taxes being charged disproportionately to fund health, education, unemployment and pensions – though progressive taxes can cause disequilibrium in the economy to the detriment of all.

The interesting thing is that almost all efforts over the last century and a half at leveling the socio-economic playing field, be they inspired by Marxist equality of income or Liberal equality of opportunity,  have bombed across the globe. The Economist ran an interesting article recently in which a number of studies on social mobility were reviewed. Previous studies based on a sample of two generations showing 50% of socio-economic standing as inherited, had been unfairly skewed because it was quite regular for a wealthy father to have a child who did not work in gainful employment or chose charity work and suchlike. However,  by following the fortunes of rare surnames from the 18th century to the present it was established that “70% to 80% of economic advantage seems to be transmitted from generation to generation”.

That means that, currently, all bets are off on comparative social progress. The implication is that, while efforts at serious redistribution of income –  around for quite a while now – have not worked (and, evidently, cannot work), enlightened governments should concentrate on absolute social progress. In the 1960s the miserably inadequate British Labour Government hiked tax rates on investment income as high as 105% and the nation reaped the benefits until Margaret Thatcher finally brought a sledgehammer to the Trade Unions in the 1980s. One Labour minister in that wonky administration summed up the philosophy of the time in a hurriedly conceived reply to an attack by the Press who caught him traveling in the First Class compartment of a train. It was his ambition, he retorted, that the entire nation would one day travel first class.

That was not as stupid as it sounds (although it was totally stupid to say it). If, instead of wasting endless energy  on the elusive Holy Grail of redistribution of income, the education systems of countries and their means of assessment of students were revolutionized from the bottom up to meet the economic needs of the country, while businesses were freed of all but the most essential red tape (eg. conditions of employment, anti-trust and financial sector regulation),  as well as punitive taxes, greater opportunity should bring across the board increases in standards of living. As prophesied by that jerk of a Labour minister, workers may indeed then be traveling First Class, albeit that their bosses will be traveling  Heaven Class while the super-rich will opt for Seventy-Two Virgin Class.

Did you hear the one about  Regressive Consumption Taxes? How about Flat Taxes?

Did you hear the one about Regressive Consumption Taxes? How about Flat Taxes?

Socialism has brought much to the world – spawning an important safety net for workers in Free Market economies that should never be underestimated. There has, however, also been a lot of hot air which might have been summed up by the other Marx – Groucho: “I worked my way up from nothing to a state of extreme poverty”.

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