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| Corbyn has a Washington ally on taxing the rich. But no, it’s not Trump | Corbyn has a Washington ally on taxing the rich. But no, it’s not Trump |
| (4 months later) | |
| Sun 15 Oct 2017 07.00 BST | |
| Last modified on Sat 2 Dec 2017 02.36 GMT | |
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| The International Monetary Fund has been on quite a journey from the days when it was seen as the provisional wing of the Washington consensus. These days the IMF is less likely to harp on about the joys of liberalised capital flows than it is to warn of the dangers of ever-greater inequality. | The International Monetary Fund has been on quite a journey from the days when it was seen as the provisional wing of the Washington consensus. These days the IMF is less likely to harp on about the joys of liberalised capital flows than it is to warn of the dangers of ever-greater inequality. |
| The fund’s latest foray into the realms of progressive economics came last week when it used its half-yearly fiscal monitor – normally a dry-as-dust publication – to make the case for higher taxes on the super-rich. | The fund’s latest foray into the realms of progressive economics came last week when it used its half-yearly fiscal monitor – normally a dry-as-dust publication – to make the case for higher taxes on the super-rich. |
| Make no mistake, this is a significant moment. For almost 40 years, since the arrival of Margaret Thatcher in Downing Street and Ronald Reagan in the White House, the economic orthodoxy on taxation has been that higher taxes for the 1% are self-defeating. Soaking the rich, it was said, would punish initiative and lead to lower levels of innovation, investment, growth and, therefore, reduced revenue for the state. | Make no mistake, this is a significant moment. For almost 40 years, since the arrival of Margaret Thatcher in Downing Street and Ronald Reagan in the White House, the economic orthodoxy on taxation has been that higher taxes for the 1% are self-defeating. Soaking the rich, it was said, would punish initiative and lead to lower levels of innovation, investment, growth and, therefore, reduced revenue for the state. |
| As the Conservative party conference showed, this line of argument is still popular. Minister after minister took to the stage to warn that Jeremy Corbyn’s tax plans would lead to a 1970s-style brain drain. | As the Conservative party conference showed, this line of argument is still popular. Minister after minister took to the stage to warn that Jeremy Corbyn’s tax plans would lead to a 1970s-style brain drain. |
| The IMF agrees that a return to the income tax levels seen in Britain during the 1970s would have an impact on growth. But that was when the top rate was 83%, and Corbyn’s plans are far more modest. Indeed, it is a sign of how difficult it has become to have a grown-up debate about tax that Labour’s call for a 50% tax band on those earning more than £123,000 and 45% for those earning more than £80,000 should be seen as confiscatory. | The IMF agrees that a return to the income tax levels seen in Britain during the 1970s would have an impact on growth. But that was when the top rate was 83%, and Corbyn’s plans are far more modest. Indeed, it is a sign of how difficult it has become to have a grown-up debate about tax that Labour’s call for a 50% tax band on those earning more than £123,000 and 45% for those earning more than £80,000 should be seen as confiscatory. |
| The IMF’s analysis does something to redress the balance, making two important points. First, it says that tax systems should have become more progressive in recent years in order to help offset growing inequality, but have actually become less so. | The IMF’s analysis does something to redress the balance, making two important points. First, it says that tax systems should have become more progressive in recent years in order to help offset growing inequality, but have actually become less so. |
| Second, it finds no evidence for the argument that attempts to make the rich pay more tax would lead to lower growth. There is nothing especially surprising about either of the IMF’s conclusions: in fact, the real surprise is that it has taken so long for the penny to drop. | Second, it finds no evidence for the argument that attempts to make the rich pay more tax would lead to lower growth. There is nothing especially surprising about either of the IMF’s conclusions: in fact, the real surprise is that it has taken so long for the penny to drop. |
| Growth rates have not picked up as taxes have been cut for the top 1%. On the contrary, they are much weaker than they were in the immediate postwar decades, when the rich could expect to pay at least half their incomes – and often substantially more than half – to the taxman. If trickle-down theory worked, there would be a strong correlation between growth and countries with low marginal tax rates for the rich. There is no such correlation and, as the IMF rightly concludes, “there would appear to be scope for increasing the progressivity of income taxation without significantly hurting growth for countries wishing to enhance income redistribution”. | Growth rates have not picked up as taxes have been cut for the top 1%. On the contrary, they are much weaker than they were in the immediate postwar decades, when the rich could expect to pay at least half their incomes – and often substantially more than half – to the taxman. If trickle-down theory worked, there would be a strong correlation between growth and countries with low marginal tax rates for the rich. There is no such correlation and, as the IMF rightly concludes, “there would appear to be scope for increasing the progressivity of income taxation without significantly hurting growth for countries wishing to enhance income redistribution”. |
| With a nod to the work of the French economist Thomas Piketty, the fiscal monitor also says that countries should consider wealth taxes for the rich, to be levied on land and property. | With a nod to the work of the French economist Thomas Piketty, the fiscal monitor also says that countries should consider wealth taxes for the rich, to be levied on land and property. |
| The IMF’s findings on tax provide ample and welcome political cover for Corbyn and John McDonnell, the shadow chancellor, as they seek to convince voters that Labour’s tax plans are not just equitable but also economically workable. By contrast, the study challenges President Donald Trump to rethink tax plans that would give an average tax cut of more than $200,000 a year for someone earning more than $900,000. The response from the US administration was predictable: mind your own business. | The IMF’s findings on tax provide ample and welcome political cover for Corbyn and John McDonnell, the shadow chancellor, as they seek to convince voters that Labour’s tax plans are not just equitable but also economically workable. By contrast, the study challenges President Donald Trump to rethink tax plans that would give an average tax cut of more than $200,000 a year for someone earning more than $900,000. The response from the US administration was predictable: mind your own business. |
| The IMF is not naive. It knows it is one thing to make the case for higher taxes on the rich but another altogether to get governments to implement them, because better-off individuals have more political clout. | The IMF is not naive. It knows it is one thing to make the case for higher taxes on the rich but another altogether to get governments to implement them, because better-off individuals have more political clout. |
| The argument that what is good for the super-rich is good for the rest of us has been demolished, but don’t expect the top 1% to give up without a fight. | The argument that what is good for the super-rich is good for the rest of us has been demolished, but don’t expect the top 1% to give up without a fight. |
| Climate change plan demands bold action | Climate change plan demands bold action |
| Looking at Theresa May’s energy price cap for the answer to reining in your electricity and gas bills? Then you were watching the wrong government announcement last week. | Looking at Theresa May’s energy price cap for the answer to reining in your electricity and gas bills? Then you were watching the wrong government announcement last week. |
| The solution to making energy affordable lies not in the draft legislation for the cap, which is a short-term stopgap that will do nothing to make prices fairer in the long term, but in a climate change masterplan launched by ministers at the Olympic Park in London. While the clean growth strategy is short on detail for a 164-page tome, it should be praised for putting energy efficiency front and centre. | The solution to making energy affordable lies not in the draft legislation for the cap, which is a short-term stopgap that will do nothing to make prices fairer in the long term, but in a climate change masterplan launched by ministers at the Olympic Park in London. While the clean growth strategy is short on detail for a 164-page tome, it should be praised for putting energy efficiency front and centre. |
| The plan’s bright idea is an aspiration to bring all homes in England and Wales up to a minimum of energy band C, by fitting new boilers, insulation and more efficient appliances. The potential savings on bills are enormous. Someone in an E-rated home would save £650 a year if it was overhauled to a C-rating. What’s missing are the sort of bold measures to make the aspiration a reality. | The plan’s bright idea is an aspiration to bring all homes in England and Wales up to a minimum of energy band C, by fitting new boilers, insulation and more efficient appliances. The potential savings on bills are enormous. Someone in an E-rated home would save £650 a year if it was overhauled to a C-rating. What’s missing are the sort of bold measures to make the aspiration a reality. |
| There are good reasons that people don’t both with insulation. “For some, energy efficiency measures’ upfront costs and hassle can be high. The payback period from lower energy bills can be longer than the time people expect to stay in their home,” the National Infrastructure Commission said this week. | There are good reasons that people don’t both with insulation. “For some, energy efficiency measures’ upfront costs and hassle can be high. The payback period from lower energy bills can be longer than the time people expect to stay in their home,” the National Infrastructure Commission said this week. |
| As the commission pointed out, the market hasn’t delivered: so government intervention is needed. Ministers’ last attempt to kickstart improvements was a disaster, and the number of homes being made more efficient has plunged as a result. More radical policies are required to convince householders that energy efficiency is worthwhile – and fortunately there is no shortage of ideas. | As the commission pointed out, the market hasn’t delivered: so government intervention is needed. Ministers’ last attempt to kickstart improvements was a disaster, and the number of homes being made more efficient has plunged as a result. More radical policies are required to convince householders that energy efficiency is worthwhile – and fortunately there is no shortage of ideas. |
| Lower stamp duty for energy-efficient homes, discounts on council tax and allowing people to take out bigger mortgages on greener homes (an idea that government is exploring) have all been mooted. Such steps are a big ask because they would require the Treasury’s buy-in. | Lower stamp duty for energy-efficient homes, discounts on council tax and allowing people to take out bigger mortgages on greener homes (an idea that government is exploring) have all been mooted. Such steps are a big ask because they would require the Treasury’s buy-in. |
| But the imperative for upgrading Britain’s leaky, draughty housing stock has never been greater. | But the imperative for upgrading Britain’s leaky, draughty housing stock has never been greater. |
| The clean growth strategy admitted that the best way to cut the carbon emissions from heating our homes is not yet clear. That means the mundane but vital job of stopping our radiators’ warmth leaking out through our walls and lofts is more important than ever – not just for our wallets, but for the planet too. | The clean growth strategy admitted that the best way to cut the carbon emissions from heating our homes is not yet clear. That means the mundane but vital job of stopping our radiators’ warmth leaking out through our walls and lofts is more important than ever – not just for our wallets, but for the planet too. |
| Cryptocurrency could miss target | Cryptocurrency could miss target |
| Classic descriptions of financial bubbles usually describe the final pre-pop stage as the moment when the general public is attracted by the whiff of easy money. In the 21st century, we should not be surprised that social media and celebrity are also part of the story. | Classic descriptions of financial bubbles usually describe the final pre-pop stage as the moment when the general public is attracted by the whiff of easy money. In the 21st century, we should not be surprised that social media and celebrity are also part of the story. |
| That is the context in which to view a tweet by football manager Harry Redknapp, which grabbed attention last week. “Proper excited about Mobile Cryptocurrency! I’m in, get involved!” he declared | That is the context in which to view a tweet by football manager Harry Redknapp, which grabbed attention last week. “Proper excited about Mobile Cryptocurrency! I’m in, get involved!” he declared |
| Redknapp might have read the cryptocurrency warning from the Financial Conduct Authority that any investor backing an initial coin offering should be ready to lose the whole investment. | Redknapp might have read the cryptocurrency warning from the Financial Conduct Authority that any investor backing an initial coin offering should be ready to lose the whole investment. |
| But it seems equally possible that the 750% surge in the past year in the value in bitcoin, the original cryptocurrency, has provoked a mania that feeds off itself. Electroneum, the venture that excites Redknapp, reported that four Premier League footballers had got in touch within hours of Harry’s tweet. Oh dear. | But it seems equally possible that the 750% surge in the past year in the value in bitcoin, the original cryptocurrency, has provoked a mania that feeds off itself. Electroneum, the venture that excites Redknapp, reported that four Premier League footballers had got in touch within hours of Harry’s tweet. Oh dear. |
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