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back to article Fat-walleted execs? Nope, it's a corporate tax swerve that REALLY ticks Brits off

Tax avoidance rather than executive pay is at the top of the UK public's concerns about business behaviour for the first time. Concerns about potential tax avoidance have topped those about executive pay for the first time in six years, according to the 10th annual survey of the British public's attitudes about business ethics …

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DJO
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Shurely shome mishtake

"The findings of the ICE survey showed that people aged 55 and above were more likely to think that businesses did not behave ethically than younger people"

Shouldn't that read "5.5" instead of "55". Does anybody think that large companies act ethically?

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Re: Shurely shome mishtake

The same people who believe that legal===ethical.

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Anonymous Coward

Re: Shurely shome mishtake

The younger one is, the more likely it is they get distracted by shiny things. Gadgets, movies, TV, and pop stars, are shiny. Taxes, pollution, and human rights, not so much.

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Re: Shurely shome mishtake

I know I've becoming more left-wing as I get older. By the time I hit 70 I'll probably be a full-blown Marxist. Either that or mainstream politics has been moving rightwing.

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Re: Shurely shome mishtake

Such a naïve view of course.

The law has giant holes that have been clear draws for immoral behaviour for a long time.

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Re: Shurely shome mishtake

@ Not That Andrew

"Either that or mainstream politics has been moving rightwing."

I will not win the upvotes for this but politics is leaning further left all the time. The idea is very lop sided that people want the services and stop sacking public workers but at the same time want someone else to pay for them.

The more recent stupidity is the desire of shiny power sources which are very expensive vs real energy production. Right now is a contest of people trying to afford bills and people trying to get more expensive forms of energy generation. The squeeze is on the power companies who obviously could reduce their profits a bit but not so much as to please anyone (and obviously the pensions then suffer).

Or the demand for cuts by the EU only to vote themselves a pay rise (yey lala land). The last gov wanted ID cards (what a waste) this lot want a train set.

One of the key issues labour screamed about was how cuts would cripple the country, but it turns out deeper cuts would have been acceptable as little impact was felt from them. The welfare state is permitted to continue and of course education and healthcare get to suffer which is no different than the boom years.

Regardless of peoples like/dislike of the right wing, we still have left leaning government. And we have a left leaning population who like to be bribed as long as the cost is passed onto someone else. If you dont believe me just think back to the fury over tax avoidance and the lack of comprehension of what is or isnt legal by the frothing masses. Or the instant branding that bankers were bad, people happy to tar them all with the same brush.

Balance between the left and right is important as neither are the answer on their own. But the lack of responsibility and desire to take something for nothing has pushed me further right for now. In the UK and in the EU

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Re: Shurely shome mishtake

I can't agree politics is leaning to the 'left' when we are now in such a position that such bizarre things as Army recruitment, and a lot of police back office functions are privatised (often to the usual bunch of hated incompetents G4S / Capita / Serco). A large proprotion of the public themselves may want a greater lean to the left in some areas (mainly to do with privatisation / bonuses / high wage culture) but they aren't getting it.

The top rate of tax is down from 50% to 45%. The bedroom tax is crushing the poor, despite there being very little alternative accomodation for those on housing benefit (of which many on it actually work). Even Thatcher thought railway privatisation was a step too far, and didn't dare to wreck the police or army the way this lot are doing. The only real cases where there has been a trend to the left now, is universal acceptance of the minimum wage, and some social issues such as various human rights, equality and EU directives.

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Re: Shurely shome mishtake

"I will not win the upvotes for this but politics is leaning further left all the time."

Indeed. At the last election. all three parties were in favour of the NHS, nationalising key utilities and the railways, more regulation of business, more free education, a larger welfare state and higher taxes on the richest.

No! Wait! The other one!

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Re: Shurely shome mishtake

Exactly.

It's "Legal" to structure business so that legal tax liability is disappeared away as if by magic. It's also "Legal" to spend vast sums on lobbying for tax laws to be passed in ways that allows business to be structured to avoid tax. It re quires quite some bare-faced cheek for such companies to tell governments "hey, you make the laws, we just obey them" when they know that many (enough) of the people making the laws are deep enough in their pockets that the companies need never worry about adverse changes in tax law.

In relation to that, I don't mind if successful* executives are well-paid.

*What really pisses me off is that executives running businesses into the ground are also well-paid and on top of that receive giant bonuses for leaving even when they've been rubbish. Just cap CXO pay at a couple of millions, and then have unlimited bonus options that are concretely tied to company performance over 1 to 5 years. If you're not only competent but a star, you'll still make gazillions. If you're just barely competent, a couple of million is still a LOT more than many other much more competent people ever make.

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Re: Shurely shome mishtake

@codejunky - In all of the western world, in the last 30-odd years, median pay is stuck while average skyrocketed. Richest people are getting richer, poorer and middle class are barely moving. More populist recent policies have been more 'left-wing' redistributionist, but I think this is happening as a reaction to getting a smaller slice of the pie, rather than the politics / government being more left-leaning.

Unfortunately these 'left-wing' redistributionist policies are wrong. Taking more money from the rich to give more to the poor is stupid, because what is broken is the 'level playing field'. The playing field is heavily tilted in favour of the rich, so taking money from the rich to give to the poor is like rolling a boulder uphill - futile and unending task, as the money will quickly flow back to the rich. Screw redistribution, just level the playing field and things will sort themselves out*.

For instance, instead of taxing high incomes at 50%+**, just change tax law so that dividends, capital gains etc are all taxed at the same rate as ordinary income***.

*with the added benefit that less people are getting money for nothing

**which would mostly impact high-income professionals such as doctors, not truly rich people.

***Truly rich people don't get a paycheck, their income comes from capital gains and dividends, typically taxed at 10-15% which is less than what the typical wage-slave is taxed at.

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Re: Shurely shome mishtake

@ Snake Plissken

At the last election we were in a recession and while claiming to fix the country we had a mixed choice-

Labour: borrow out of the problem. Spend like before but harder. Cuts to make thatchers eyes water but borrow and spend our way out of this.

Tory: Bring down public spending. But protect public services X, Y, Z and be the greenest gov etc.

Libs: I rob from the rich to give to the needy, I take a wee percentage but I'm not greedy (yeah shrek).

Even the party to reign in spending (tory) were promising to protect the excesses. Bringing the countries finances under control came second to not wanting to upset the left. In the financial lacking country we had the main parties promising to take your money and throw it at liberal wet dreams. It was and still is nuts.

Free education (uni) was pulled from under our feet because of the liberal ideal vs real world. The idea was to send every kid and his dog to uni only to find they couldnt find a way of taxing people enough to support it. The dream became a nightmare when the cost was shown. It is even further a nightmare when people started comparing how much they spend for how poor an education. Before this cost still existed, but it was taken in tax. Any student crying about the cost of education to me gets told the reality that the cost always existed, they just passed it on.

Which party offered the real world? Cut the public costs to a realistic level? Reduce the public sector interference? Remove the green policies destroying our energy sector?

Instead we have help to buy schemes and other welfare systems to keep house prices high and growing. Green levies taken off the bill and pushed into taxation. Lack of decision over an extra airport runway (no spine to say yes or no definitively).

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Re: Shurely shome mishtake

I don't think "left" or "right" are helpful terms here in understanding what's happening in politics.

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Anonymous Coward

Re: Shurely shome mishtake

@codejunky - sez 'I will not win the upvotes for this but politics is leaning further left all the time ...'

Correct, you won't win many upvotes. Not because of your political leanings but because you are demonstrably wrong. You have made the classic 'confirmation bias' error.

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Re: Shurely shome mishtake

One way to curb the excesses of executive pay was tabled on the Mark Thomas Manifesto a few years ago. Don't limit CXO pay to a figure, limit it to not more than a multiple of the median pay within the company. It really doesn't matter whether that multiple is 10, 20, 100 as long as it's not the current 'sky's the limit'. That way, if a company is successful, it has to reward everyone in the company, and if the CXO wants a new helicopter, he has to negotiate payrises with the labour force.

Of course, I'd love to see the shop stewards in the boardroom negotiations going 'Nh, actually, the lads are very happy with their current wage levels. No need for an increase this year.' just to see the desperate looks on the faces of senior management.

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Re: Shurely shome mishtake

@ Nicho

"Correct, you won't win many upvotes. Not because of your political leanings but because you are demonstrably wrong. You have made the classic 'confirmation bias' error."

Thank you so much for showing me the light. Now I see through your reasoned and enlightened post that the entirety of my post which was based on facts and reasoning to arrive to my conclusion is entirely wrong because you put back a comment claiming I am "demonstrably wrong". My life will never be the same again (oh omnipotent one).

Back to the real world. Why is public sector spending so high? Why does it shoot up with regular joy and why do the public workers take great pleasure in pay rises during boom years and strikes when they are told of a pay freeze? Why is the NHS a holy grail which nobody can do anything to (I dont mean privatise) because the masses will cry privatisation? Why must government policy increase costs on everyone to steal increasing amounts of money to give to some? And why is credit, borrowing and inflating already unaffordable house prices the basis of the economy?

Too much left or right (or pretty much anything) is bad. But whatever label you like left/socialist/etc it is the leaning of the people and the gov. That you think I am wrong only shows how far left you believe to be the norm. Just as the US believe their position (much further right than us) is the norm. But even the liberal democrats were capitalists at one point fighting for the freedom of business and small government.

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bah

The idea that companies have any "ethical" basis is bizarre. Unless you mean "not breaking the law", in which case some only bend it.

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Turkeys and Christmas

So the IBS says we are all upset about corporate tax avoidance but totally chillaxed about alarming executive pay ? So says the IBS, who according to their website are a group of, er, corporate executives from industries such as media, insurance and banking, lead by Phillipa Forrester Back OBE, a career banker (surprise!) and vice-chairman of, er, the Institute of the Board of Directors...

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Re: Turkeys and Christmas

Isn't IBS an acronym for Irritable Bowel Syndrome?

(Not to be confused with IDS, which is something completely different.)

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Anonymous Coward

I always lose it when people try to claim that it's unethical to avoid paying tax. They clearly want to conflate avoidance with evasion and paint the whole lot as somehow dreadfully wrong.

Evasion is escaping legal obligations. Evasion cannot be ethical by definition.

Avoidance is escaping unnecessary burdens. How can it be unethical if you realise you are overpaying, and work out a way to avoid that overpayment? How is it ethical to bully people (or, yes, corporations) into paying tax that they don't legally owe?

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I understand your basic point, but what you fail to realise is that "Big Business" has lobbied hard to have tactics that were previously classed as tax evasion reclassified as avoidance. And how they have use a combination of bullying and bribes to persuade the present and previous governments and HMRC not to review the situation.

THAT is unethical, no matter how you look at it

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Anonymous Coward

Not quite that black and white

Broadly I agree with the sentiment, but there's a very large gray area at the border of avoidance and evasion as I can attest to personally. There are whole firms set up to advise the best way to exploit this and many complex (and expensive) schemes, bouncing transactions around offshore trusts etc. and exploiting the fact that they're arguably within the letter of the law if not the spirit.

FWIW I don't partake in this sort of planning any more because a) the Revenue are making it much harder, and b) I share the sense of disgust at firms like Amazon exploiting these loopholes, and hypocrisy is an ugly trait. It's the wrong thing to do, particularly when the country is skint.

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>Avoidance is escaping unnecessary burdens. How can it be unethical if you realise you are overpaying, and work out a way to avoid that overpayment? How is it ethical to bully people (or, yes, corporations) into paying tax that they don't legally owe?<

They're only 'overpaying' based on the fact they they've found ways to avoid paying the full amount. If there were no loopholes then you'd have no argument. None of us like paying tax, but most of us realise it's there for the benefit of the country as a whole; avoiding a fair contribution is simply immoral.

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Devil

It's unethical when the accounting firms lobby the governments on how to write the tax law that they have the prepared loopholes for to provide for their clients.

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avoiding a fair contribution is simply immoral.

But who decides what is "fair" ? Or to put it another way, how many El Reg commentards have voluntarily sent the revenue more than they were asked for in a tax bill, because they thought they were paying unfairly little?

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Anonymous Coward

Re: But who decides what is "fair" ?

Well, if you live in a democracy, presumably the people should decide what is "fair" (albeit perhaps moderated by their elected representatives). And if they make an unwise decision about how to implement or enforce that "fairness", they'll just have to live with it. Or change their minds.

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Anonymous Coward

Re: But who decides what is "fair" ?

Well, if you live in a democracy, presumably the people should decide what is "fair" (albeit perhaps moderated by their elected representatives).

Funny, that's pretty much how it works today, but people still whinge that Amazon et al don't pay a fair tax rate. Go figure.

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Anonymous Coward

Re: Funny, that's pretty much how it works today

No, it's not. Today the big financial institutions "advise" government on what rules they should make and then "advise" their real customers on how to avoid them. It's not tricky to find out about this stuff, you sound ridiculously ill informed to be commenting.

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Anonymous Coward

Re: Funny, that's pretty much how it works today

you sound ridiculously ill informed to be commenting.

You sound ridiculously naive if you think it hasn't always been like that.

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Anonymous Coward

Re:You sound ridiculously naive if you think it hasn't always been like that.

I said that's how it is today. I didn't say whether that was a new thing or not. Stop trying to score points, you sound like a politician.

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Too right !

Yes indeed. Those execs sort of own the company so any 'short term' business that employ scum give away the right to ransack.

But scum like Amazon, Apple, eBay and Google do not have the right to ransack British coffers.

And are scum politicians lining their own pocket in support?

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Re: Too right !

In the case of say Starbucks, I really can't see if it would have made any difference if they were either booted out of Britain, or chose to leave by being forced to pay their obligations. There would be a ton of other alternatives just waiting to grab the market, who are willing to pay their share of tax.

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People really miss the point on this. If the corporate tax were lowered all those companies would move their operations here to avoid the high tax elsewhere. We shouldn't be angry at the companies for avoiding tax in the ways we wish we could personally. We pay too much tax and the companies are asked to pay too much tax. The problem here is an oversized state taking up all the resources, but the politicians want to shift the anger away from high tax and onto companies using legal means to avoid paying it. We should be angry at the tax rate, not the companies.

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Bollocks. Corporate tax, assuming full rate is paid (fat chance) is still at a rather low rate in both the US and UK, yet corporations engage in ridiculous tax evasion and avoidance measures.

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No, no they wouldn't come to you. But let's pretend they did. What's the point in having them in your country? If they came just because one set of laws changed, they'll leave as soon as somebody else offers them something more attractive.

It's a race to the bottom and only the consumer gets screwed as they absorb the costs, through taxes and utility rate increases, of upgrading infrastructure to support the businesses. They came to you because they didn't have to give back to move to your country, but you've got to give to them or they'll leave again. It's kind of like letting your girlfriend sleep around and paying for her drugs, then marrying her and signing a pre-nup that gives her lots of your stuff then being surprised to find she's screwing all your buddies and they've been paying her too. It's just a bad deal.

People get scared that businesses won't do business with them if you don't cater to their desires, but that simply isn't true. We're talking about the greediest people on the planet. If there's a dollar to be made they'll take it. Don't think for a second they won't.

Besides, paying taxes is built into the business. Getting out of some taxes is a bonus. They already planned on paying taxes when they started doing business in your country. Not having to is a laugh all the way to the bank. Lowering tax burdens is why CFO's get massive bonuses. That money was already allocated to tax and if you don't have to spend it then bonuses all the way around.

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"It's a race to the bottom and only the consumer gets screwed as they absorb the costs, through taxes and utility rate increases, of upgrading infrastructure to support the businesses."

Unfortunately its an international competition.

We can have any one of the following:

1) A corporate tax rate lower than elsewhere in Europe, taken from a significantly enlarged percentage of european companies.

2) The corporate tax rate we have now, and we have to make significantly deeper (actual) cuts.

3) The corporate tax rate we have now, and we have to pass an eye watering national debt to our children.

4) A higher corporate tax rate than we have now, taken from fewer companies, and make deeper cuts.

5) A higher corporate tax rate than we have now, taken from fewer companies, and pass an impossible national debt to our children.

No matter the party in power or the spin applied, those are the choices.

What we can't do is make it better by pontificating on the sidelines while the rest of Europe goes out and competes for that tax revenue. If it is a race to the bottom, then its a race we have to win, because refusing to take part only guarantees we lose. Only option A can work unless we have an EU wide corporate tax rate and allowances.

I realise I'll get a blizzard of downvotes for this, but those are the economic facts. Anything else is politics.

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Nobody wins in a race to the bottom, especially the countries willing to cater to bottom feeders. It's ultimately bad for everyone. Your 'economic facts' are terrible things for an economy.

Negotiating preferential deals for one off job creators is one thing, that's perfectly normal. But adjusting State scale economies to suit a handful of commercial interests is madness. By continuously reducing the private sector tax contributions to get companies you're catering to the most undesirable sort of businesses.

Any company you did attract is only there because the tax rates are low, but that's not going to stop them for lobbying for more reductions. By starting off low you've already surrendered your leverage and you'll have to give more to keep them. They'll also want infrastructure improvements but you've got no money to make those investments. So again, they've got you over a barrel. You're going to have to acquiesce to their demands or they'll threaten to leave and they'll turn your citizens against you out of fear of losing all the jobs that were created.

They'll keep making demands and you'll keep meeting them and one day you'll wake up and realize the company left anyway, off to strangle another country. So you've lowered your income and the companies you did it for are gone and now you've got to raise taxes back up to where they were before you started the mess. It's an untenable political situation.

Instead of catering to the undesirable types of companies, government should create value worth paying for. Giving away value isn't the road to stability. If your primary selling point is price you'll never get ahead. Somebody can always do it cheaper.

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"Nobody wins in a race to the bottom, especially the countries willing to cater to bottom feeders. It's ultimately bad for everyone. Your 'economic facts' are terrible things for an economy."

Someone wins every race. Instead of "race to the bottom", which is just an emotive term unions and public sector workers cling to for comfort, look instead at the prize of the winner. A share of most of the corporate tax in Europe. Even at a 0.5% tax rate that is a lot of money. Economic facts often are terrible for socialists, but that doesn't make them untrue and it certainly doesn't make them escapable. Keeping high tax rates will mean people and companies go elsewhere and then we'll have to massively cut spending to account for the lost taxation.

"By continuously reducing the private sector tax contributions to get companies you're catering to the most undesirable sort of businesses."

Private sector tax contributions are the only kind of tax contribution that actually exists. If you don't have it, then you have zero tax revenue and can afford zero services and spending. Tax paying businesses are, economically speaking, exactly the kind of business we need to attract. Remember, public sector staff don't pay taxes (if everyone worked for the state and paid a 50% tax rate, where does the other half of their pay come from?).

"You're going to have to acquiesce to their demands or they'll threaten to leave and they'll turn your citizens against you out of fear of losing all the jobs that were created."

If a company headquarters in the UK and pays 0% corporate tax, but creates jobs paying £!Bn of income taxes, then it simply doesn't matter that the company paid no tax. It the jobs and the taxes paid by them which matter.

Ultimately, unless you are a higher rate tax payer for most of your working career, and you spend all of that career in the private sector, then you are a net beneficiary of the state as you don't pay enough taxes to cover the services you receive cradle to grave. That is just a fact.

There is a global competition for tax revenues, from both corporates and higher earners, and if the UK doesn't start to compete to win that race, then the prize, and all the tax funded services which accompany it, will go elsewhere.

"Soak the rich" may be an easy rallying cry, but its failed whereever and whenever its been tried.

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The people who win the race to the bottom are those who never got in the race. If you're entering the race solely on low cost you've got nothing else to offer. Why would a company want to stay there? Take what you can then leave. It's a common misconception that companies won't pay their dues, but that isn't true. They'll pay, and pay happily, if you're giving them something of value in return.

No company wants to spend money on useless things and if all your attractions are useless then the only thing you've got is giving away your resources to keep them happy. If you had something worthwhile and advantageous companies would make that investment with nary a peep of complaint. But if you want to play bottom feeder that's fine, you'll have a few years with those companies then they'll move on and you'll be stuck with a bunch of jobless people and no money to fix the mess you've made.

Companies tend to settle where they have the most advantages. Low taxes are an advantage, but one that's easily offset by other factors. You've just got to have those other factors or you're no more than a pitstop on their road to prosperity. Instead of asking how low you are willing to go, ask what you could offer.

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You re-published an Out-law article...

of which half is dedicated to one of Pinsent Masons' tax solicitors talking up their own "government has no remit to investigate corporate tax" POVs!!! And then kindly note that Pinsent Masons underwrites Out-law.

What utter tripe El Reg. You have just become a mouthpiece for the 1%...

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Unhappy

The question of course is who *wrote* those laws.

Quite often it was accountants.

Seconded from one of the "Big 5" accounting firms

Who then go back to lecturing "Continuing Professional Development" courses for other accountants.

On tax avoidance. Or would you prefer "income protection"?

Remember it's all legal.

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One doesn't exclude the other.

And people (of all political persuasions except libertarians) SHOULD be concerned about income inequality.

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