back to article Piketty thinks the 1% should cough up 80%. Discuss

Piketty's Capital in the 21st Century has the economics world agog: be the first among your friends to really understand it. Thomas Piketty's book, Capital in the 21st Century, has managed to top the Amazon bestseller lists as well as getting economists snarling at each other. It's the combination of these feats that is so …

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  1. Frankee Llonnygog

    That assumes continuation of state education and the NHS

    This government is doing all they can to undermine them - what happens to the thesis in this article when the state funded services are so poor that only the poor would use them, and the cost of not using them is high enough to make most people poor?

    1. Anonymous Coward
      Anonymous Coward

      Re: That assumes continuation of state education and the NHS

      Blah Blah Blah. Usual lefty default position, fingers in ears, close eyes, hum loudly.

      Labour sprayed money all over the the NHS, education, everything. Please could you point out where the improvements are? How is increasing funding for both in a time of austerity undermining them?

      Perhaps the problem is the people in those organisations... and I wonder who they are more likely to vote for?

      1. The BigYin

        Re: That assumes continuation of state education and the NHS

        > Labour sprayed money all over the the NHS, education, everything.

        Wrong. Labpur gave taxpayer's money to various people through PFI deals (a policy started by the Tories). So they ended up paying DOUBLE the price for hospitals etc, guaranteed the companies' profits and got no tax back on those profits because the company was actually offshore in a tax haven.

        That is a far, far cry from actually investing in the NHS etc.

      2. Shady

        Re: That assumes continuation of state education and the NHS

        The real problem with the NHS was the way Labour squandered the money. For example, when they came to power there was a shortage of Nurses so Labour poured a ton of money into employing.... Highly Paid Managers. To increase the efficiency of the Nurses time management.

        There was (is) also the problem of PFI. Launched by the Tories, the Labour government picked up the ball and really ran with this one, ending up with hospitals that cost many times as much to run privately on behalf of the NHS than the NHS could do directly themselves.

        The NHS is being undermined - by forced privatisation by the Tories and sheer incompetence by Labour. It needs more money to prop it up but that money needs to be spent on actual services, not on lining a private healthcare companies ledger or employing a gang of overpaid whip-crackers to make an over-worked Nurse work even harder.

        Maybe (and there is probably a better solution) one solution is to divorce management of the NHS from the state and make it a government funded, autonomous entity, as long as provisions were made to ensure funds made available for the NHS didn't just disappear into the deposit account of large, private healthcare companies?

        Disclaimer - I am a regular customer of the NHS. I am a type 1 Diabetic and also have a combination of Dyspraxia and Charcot joint disease, which between them have seen me taken to casualty on average once every three years of my life (I'm now 40, I've had about 12 admissions) with either a DKA or broken limbs, and on one occasion a suspected subarachnoid hemorrhage. I've had to clean a ward bathroom whilst an in-patient because the hospital could not afford to clean them every day and I didn't fancy showering whilst my fellow ward-mates vomit or faeces were staring at me from the shower tray - that was just four years ago.

        In the past I've also been told to make a single-use syringe last for three days (that's fifteen injections - and they are blunt as fuck after two) because the GP couldn't afford to prescribe more than one pack of ten a month.

        So yes, in my *experience* the NHS was and is severely underfunded.

      3. Frankee Llonnygog

        Re: That assumes continuation of state education and the NHS

        @AC -

        > Blah blah blah ...

        I'll be civil, even though you are not. I agree with you about Labour's mismanagement - it's possible to do that without also giving the Tories a free pass for their failings. You ask, "How is increasing funding for both in a time of austerity undermining them?" Where those increases are real, rather than just massaged figures, they're aimed at managing down state-funded provision and pushing people to for-profit providers. This is the agenda behind £9k uni fees and the rise of 'free' schools.

        1. Jagged

          Re: That assumes continuation of state education and the NHS

          "£9k uni fees"

          A Labour Party Policy.

          1. Frankee Llonnygog

            Re: That assumes continuation of state education and the NHS

            @Jagged. Not really accurate to say that £9k fees were Labour policy. Fees were capped at £3225 under Labour. The Browne report was commissioned under Labour but it was the Tories who enthusiastically acted upon it. Of course we'll never know what Labour would have done - probably the same thing, but not with the same intent to open up a for-profit market

    2. Anonymous Coward
      Anonymous Coward

      The welfare state and the lack of influence of the ordinary person

      I agree none of this article is any comfort unless the welfare state continues.

      Having read the article by Martin Giles and Benjamin Page (Testing theories of american politics...) which said that ordinary people (measured by income) have little influence on policy, we can't be sure of this at all.

      1. James Micallef Silver badge

        Re: The welfare state and the lack of influence of the ordinary person

        "I agree none of this article is any comfort unless the welfare state continues"

        The welfare state is really important and needs to be kept, however keeping in mind the way public pensions work (current pensioners getting money paid in by current workers) and demographic shifts (more pensioners per worker) is not sustainable in it's current state. The welfare state cannot be kept up unless and until pensions are really reformed - not just kicking the can further down the road but full sustainability for the indefinite future. the post-welfare calculations might work out a bit differently then.

        Also, a LOT of money goes to people who either do not need it (all the tax code loopholes that are effectively welfare for the rich) or who are fiddling the system for what they can get out of it (eg professional 'single' mothers). These leeches need to be taken off the government teat

        1. Tom 13

          Re: The welfare state and the lack of influence of the ordinary person

          The welfare state is really important and needs to be kept, however keeping in mind the way public pensions work (current pensioners getting money paid in by current workers) and demographic shifts (more pensioners per worker) is not sustainable in it's current state.

          The problem is that no matter how critical you think the welfare state is, it simply has no long term sustainability. You've identified the pension issue. You mention briefly but largely ignore the demographic issues. And you skipped key rational behaviors of the welfare state.

          Pensions: while I personally would prefer to have all of my retirement money invested in publicly traded companies (shares and bonds), even that hides the reality that current pensioners are always paid from current workers. That is fine as long as there are 20, 10, or even 5 current workers per pensioner. Which brings us to the demographic shift.

          I haven't independently confirmed that the UK has a baby boom issue similar to the US, but I imagine you do. Right now the number of people on pension is growing to the point that you have at best 2 people per pensioner and are rapidly shifting to 1 employed per 2 pensioners. There is no level of productivity that makes that work.

          Finally, you have the rational reaction to the welfare state. This was actually the key bit of the Laffer curve and which progressives are always in denial. If you have welfare benefits* to the tune of say $25,000/year, and someone offers you a job at $26,000/year, is it worth it to take the job? The rational answer is probably not. In particular, if at $26,000/year you lose the welfare benefits, your marginal increase is $1000. For which you are going to have to work 2000 hours. That works out to 50 cents and hour marginal gain. So from a purely self-centered view, you're better off keeping the free time than taking the job. It's a perverse incentive and it is only one of them. Even if you fix the pension and demographic problems, this part will eventually overwhelm any welfare state.

          *Using US numbers since there the ones with which I'm most familiar. While the specific values will change for the UK and various EU countries, the principle remains the same.

          1. Anonymous Coward
            Anonymous Coward

            Re: The welfare state and the lack of influence of the ordinary person

            > So from a purely self-centered view, you're better off keeping the free time than taking the job.

            > Even if you fix the pension and demographic problems, this part will eventually overwhelm any welfare state.

            This principle applies to the whole state and not just low income / welfare. Consider the other extreme of high net worth individuals. They face similar disincentives for different reasons: they make so much money off their assets (usually an inheritance) that there's no measurable difference between them not working or working. Consider a housewife in Texas who makes $1.2M/day off her inheritance. How do you create an incentive for her to work? If you don't create such an incentive and her wealth continues to grow (it would take a driven individual to spend $1.2M/day over a lifetime) she and her coffee latch will take down the state faster than any amount of welfare.

            We see executives being paid absurd amount of money (not $1.2M/day...maybe per week) with the justification the board needs to "attract and retain" people that would otherwise be unavailable due to thi disincentive. How does this principle not apply at the bottom of the market? Why is it that the top of the market must accomodate the Laffer curve through increased wages but bottom of the market must accomodate it through reduced benefits?

            As a final aside, the social safety net, while notionally created to provide a minimum acceptable quality of life, turns out to have real financial upside: preventative care turns out to be cheaper than crisis care.

            1. Anonymous Coward
              Anonymous Coward

              Re: The welfare state and the lack of influence of the ordinary person

              Pension funding: as with all the welfare state arguments, everyone forgets that it cost money to set it up - hospitals, services. This money came from taxpayers then, who contributed to their pensions as well as the rest, and was set up by a system funded by those gone before. Of course, when money is spent all over the place, the load is spread across current and future generations. The real oddity is that the state pension pot is not managed properly through investments or similar. The National Insurance is put into a pot that also pays for taking part in American wars, overpaid politicians and bank subsidies and, almost as an aside, for the health and pensions nominally "insured". One forgets too that the workers paying for current needs were not born independent, working and earning. Their pensioner parents, doctors, teachers, policeman all provided for their welfare, probably into their early twenties when costs were much higher than for some pensioner trying to make ends meet.

              As for the high "rewards" to get the best: if the man or woman is so greedy that they are poached away by unusable amounts of money, I question their loyalty and judgement and do not class them as good value. If a person gets some generous salary and still needs a big bonus to do his job, he is definitely the wrong person (try telling your manager that as you get no bonus you will do a bad job).

              Just look how well this worked and still works in European and American financial markets. All these highly rewarded people and not one of them could see the near criminality or lack of responsibility in what they did and most deny responsiblity even now, while Cameron seems to think he must perpetuate the system to get the best people.

            2. Tom 13

              Re: The welfare state and the lack of influence of the ordinary person

              Consider a housewife in Texas

              Please introduce me to all of these housewives. Can't? Thought not. Next strawman please.

              Why is it that the top of the market must accomodate the Laffer curve through increased wages but bottom of the market must accomodate it through reduced benefits?

              Well, for one thing the guy getting the bonuses for being the CEO is working. The guy at the bottom sucking up benefits isn't. If you can't wrap your head around this fact you are incapable of doing even rudimentary economic analysis.

              preventative care turns out to be cheaper than crisis care.

              I've heard that urban myth. Turns out it isn't true, which is probably the only good thing to come out of 0bamacare. It's why they wanted to discourage women from getting mammograms. The bits about the radiation effects on health were all just smoke and mirrors.

              Note that doesn't mean I think we'd all be better off using crisis care over preventative. Just that it might actually be more costly, and that being the case you have to figure out how to pay for it.

          2. strum Silver badge

            Re: The welfare state and the lack of influence of the ordinary person

            >The Laffer Curve

            Yet another wingnut who doesn't understand the 'Laffer Curve'.

            It's got nothing to do with benefits.

            Prof. Laffer simply proposed that there would be a level of tax (unknown then, unknown now), above which the state would gather less, rather than more tax.

    3. P. Lee Silver badge
      Facepalm

      Re: That assumes continuation of state education and the NHS

      More precisely, there is no wealth in the pension because pensions are not paid from savings, they are paid from (future) taxation. There is no accumulated wealth, only current income & current expenditure.

      1. Gannon (J.) Dick

        Re: That assumes continuation of state education and the NHS

        Yes, but there is a timing problem there. If you own a shop you put some currency aside at night to make change when you open in the morning. If that curency is stolen overnight, then you look for the thief. You can raise prices in the morning to cover the loss, but the "business" problem of making change depends on your ability to go to the Bank and withdraw currency - from retained earnings or as a loan. Here's the timing problem, what if the Bank said, "You have neither credit nor currency, so wait for our next Shareholder Report wherein we say we have plenty of currency and help everybody" ?

        So, as the author pointed out, if an Economist throws you under a bus, NHS will sweep up. Economists take credit for this sort of thing.

    4. Adam Nealis

      Re: That assumes continuation of state education and the NHS

      I disagree.

      The article claims that one should include the effects of welfare spending on the wealth of an individual.

      It's just a few more terms to add to the equation.

      Should any of state pension, NHS, state education, etc. be reduced or fall to zero, then the contributions due to state pension, NHS, state education, etc. also fall. The effect is to simply reduce the total wealth.

      1. Frankee Llonnygog

        Re: That assumes continuation of state education and the NHS

        @Adam Nealis: "The effect is to simply reduce the total wealth." And to leave poor people poorly educated and in poor health. But who cares, eh?

  2. grammarpolice

    Hmm

    "We have a welfare state, whose aim and purpose is to make us all richer."

    No it isn't. It's to prevent people from dropping off the bottom of the ladder and either dying (which makes our society look bad) or resorting to crime to survive (which damages lawful taxpayers).

    1. Anonymous Coward
      Anonymous Coward

      Re: Hmm

      If I was earning enough then I would prefer to buy private health insurance for my family. Does that mean that portion of state welfare is then lost to me, making me that much less wealthy? What about my dependants?

      I am quite confused by this whole argument. Why stop with the welfare state? If I were to put a pound into the lottery each week, would not my chance of winning a fortune also need to be counted as part of my wealth just as my chance of requiring cancer therapy. Would I count it as a pro-rata fortune/treatment cost versus the odds of it happening? What happens if I die before I win the lottery?

      I am not deliberately belittling the value of living in a wealthy country.

      1. DaveyDaveDave

        Re: Hmm

        "If I were to put a pound into the lottery each week, would not my chance of winning a fortune also need to be counted as part of my wealth"

        I'm not an economist, but I'm guessing the answer is yes. So your wealth would increase by one thirteen-millionth of the average jackpot (about £5 million-ish?), and decrease by £1. No?

        (obviously we'd also need to factor in the other prizes, and odds of winning them, but my point is that statistically you'll lose money on the lottery, so your wealth must decrease with the purchase of a ticket, albeit by slightly less than the cost of the ticket)

        1. Clown Shoes

          Re: Hmm

          "So your wealth would increase by one thirteen-millionth of the average jackpot (about £5 million-ish?), and decrease by £1. No?"

          Only until they draw the numbers at which point the cost will still be £1 but the ticket's value will most likely drop to £0.

    2. Andrew Bolton

      Re: Hmm

      Yes it is. The welfare state does not take money from anybody (that's the job of the inland revenue). It gives money and benefits-in-kind to everybody (including NHS and education). So it does make us all "richer". That is the ENTIRE point of the article and if you don't understand it, you should read it again until you do.

      We can only go back to 19th century wealth inequality if the welfare state goes back to the 19th century. Which despite whinges about NHS going downhill etc etc just is never going to happen. Any NHS is better than none at all. Any state education is better than none at all, etc.

      1. TheOtherHobbes

        Re: Hmm

        >So it does make us all "richer".

        Er, no. It does not make us richer. It stops us being brutalised.

        Those are not synonymous.

        Far be it from me to accuse Worstall of flat-out lying, but I suspect if he was in court and was asked under oath if he genuinely believed that a state education is equivalent in financial value and cost-effectiveness to a private education, I'd be surprised if he said yes.

        Just as I would be surprised if all those parents paying for private educations decided that they were wasting their money after reading this.

        But then false-equivalency is what this article is really about. Yes, we have a welfare state. But the poor - which pretty much means anyone who works - have perpetual financial insecurity, and are subject to the mad whims of the traders and bankers who control forex, commodity prices, and interest rates, and to (mostly) corporate employers who can move their jobs offshore at the drop of a consultant's PowerPoint.

        The rich are the ones who benefit from their ability to control those things.

        That's the crux of Piketty's argument.

        Real equivalence will happen when that is no longer true, and market-making power-to-profit is more widely distributed.

        Otherwise the welfare state will continue to shrink, pensions will become more and more distant and less and less valuable, and the alleged value of Worstall's opinions will continue to shrink with them.

        1. DavCrav Silver badge

          Re: Hmm

          "Far be it from me to accuse Worstall of flat-out lying, but I suspect if he was in court and was asked under oath if he genuinely believed that a state education is equivalent in financial value and cost-effectiveness to a private education, I'd be surprised if he said yes."

          No, it isn't worth the £10k per year that he quoted, but it is worth *something*, that's the point. And free education isn't in the calculation of a poor person's wealth, so the calculation is wrong. This is the point. OK, so say it's £5k rather than £10k, it's still something.

        2. Dr. Mouse Silver badge

          Re: Hmm

          But the poor - which pretty much means anyone who works - have perpetual financial insecurity

          I do not know how it fits with official definitions, but this is what I view as wealth: Financial security. The ability to absorb unforeseen financial circumstances. You may have a good income, but if you have no savings and, say, the car you rely on for work dies, you will be in trouble.

          By this definition, the NHS should be factored in to wealth calculations, as should insurance policies and some welfare benefits. Without the NHS (or some form of health insurance) an illness or injury would impact on your wealth. Similarly, without buildings insurance, your house burning down would seriously impact your wealth, and without out-of-work benefits a period of joblessness would (even more) seriously affect your wealth.

          However, I do not believe education should be included as wealth. This would be a planned-for expense, affecting your income, not your wealth. The same could be said for some other forms of benefit, particularly long-term benefits. These affect income, not wealth (although of course the two are linked).

      2. grammarpolice

        Re: Hmm

        "The welfare state does not take money from anybody (that's the job of the inland revenue)"

        It is disingenuous to suggest that there is absolutely no connection between the two. We are taxed at least in part in order to fund the welfare state. If the article is predicated on this not being the case, it fails.

        1. Dr. Mouse Silver badge

          Re: Hmm

          Also:

          The welfare state does not take money from anybody (that's the job of the inland revenue)

          The welfare state does not just create money. It must, therefore, take money from somewhere. It takes it from government finances, which are raised through taxation. Therefore the welfare state takes money from us all.

          I am not saying this as an argument against the welfare state. On the contrary, I support it. It is disingenuous, however, to imply that there is no cost to it.

  3. DaLo

    NHS

    You caption a picture of an Air Ambulance with a comment about NHS funding. However the Air Ambulance is funded privately by charity donations with only the paramedics seconded from the NHS.

    1. Natalie Gritpants

      Re: NHS air ambulances

      The government would love to run the air ambulance service but luckily the people involved know what happens when government bureaucrats start to run things and won't play ball. Bit like the coastguards.

      1. jaduncan

        Re: NHS air ambulances

        The coastguards are a government body. You're thinking of the RNLI lifeboats.

        1. Anonymous Coward
          Anonymous Coward

          Re: NHS air ambulances

          The coastguards are a government body.

          There's a proposal to flog them off.

  4. Matt Bradley

    Some well made points

    Some very well made points in there, but...

    The effects of state services and benefits on inequality is only a factor where those services or benefits are /means tested/ - in the case of both state education and the NHS, the economic input of those benefits is equal for every member of society. The fact that some individuals have enough surplus income to be able to opt out of the state provision and into a private paid for alternative is largely irrelevant, as they still have access to that same level of economic benefit whether they use it or not.

    So, whilst it is useful perhaps to measure the metric of inequality after state benefits and services, we should be mindful that the largest and most significant of these are not means tested and therefore effectively cancel themselves out in the equation.

    1. Andrew Bolton

      Re: Some well made points

      That's ignoring maths and the measure of inequality (a ratio) - if someone has £100000 and someone has £1, the rich is 100000 times richer than the poor. If the state gives them both £100000, the rich is now ~2 times richer than the poor. That's a massive difference.

    2. Anonymous Coward
      Anonymous Coward

      Re: Some well made points

      "we should be mindful that the largest and most significant of these [state benefits] are not means tested and therefore effectively cancel themselves out in the equation."

      They don't cancel themselves out of the equation at all. Those on low incomes are paying disproportionally less toward the provision of those benefits than those on high incomes. The benefits are equal, but the contribution toward providing them is much lower for those on low incomes (less income tax paid) than it is for those on high incomes (more income tax paid).

    3. Ye Gads
      Megaphone

      Re: Some well made points

      "The fact that some individuals have enough surplus income to be able to opt out of the state provision and into a private paid for alternative is largely irrelevant"

      No - that's hugely dangerous. People who opt out of these services no longer care how well (or badly) they are run. Worse, they then resent having to pay for services that they aren't using.

      Take education: my kids go to private school. We do this because the local primary schools aren't particularly good. All the parents at the school are very fussy and push like crazy to keep standards up. Now, imagine what would happen if these parents were let loose in the local state primaries: they'd be on the board of governors, they'd be pushing the school about school meals, the quality of the homework and lessons and bugging the hell out of their local councillors to ensure that the schools standards were maintained.

      But, because they're not doing this, the local primary schools aren't pushed as much. If we want to keep services going we need to ensure people are bought into them.

      1. Matt Bradley

        Re: Some well made points

        Completely agree. I meant that it was irrelevant in terms of the value of those services in the equation.

    4. Tim Worstal

      Re: Some well made points

      "in the case of both state education and the NHS, the economic input of those benefits is equal for every member of society. "

      Indeed. But that changes the wealth ratio.

      Back a while one report said that the wealth ratio (90/10) was 100 to 1 in the UK. Top 10% families had £800k of wealth, bottom 10% £8k.

      Now add in the welfare state. The under market tenancy, the state old age pension (deliberately excluded from those figures), the system of social insurance itself (the existence of unemployment pay has some option and capital value to all). Sure, OK, let's say this is all worth £100k to all (just a made up number). Our wealth ratio is now £900k to £108k. Or, by eyeball, more like 10:1 than the original 100:1. Keep going with state supplied services (health and education) and it falls again.

      1. Matt Bradley

        Re: Some well made points

        It would certainly be interesting to measure these figures properly. Thanks Tim.

      2. TheOtherHobbes

        Re: Some well made points

        >Sure, OK, let's say this is all worth £100k to all (just a made up number).

        Bollocks, in other words.

        But even if the costs are as stated, you're still comparing protection from unavoidable costs - everyone needs health care, otherwise they die - with surplus disposable and/or investment income.

        (Pensions, as everyone knows, are irrelevant, because if a pension system is run properly the benefits are already paid for out of advance contributions.)

        In what bizzaro-world economic universe are basic, but steadily eroding, social benefits which exist solely to protect workers from unavoidable social costs remotely comparable to surplus free capital that can be converted into direct profit?

        1. Squander Two

          Re: Some well made points

          > Pensions, as everyone knows, are irrelevant, because if a pension system is run properly the benefits are already paid for out of advance contributions.

          And you don't think it makes any difference whether those advance contributions are paid for by the individual out of their own income or by the state out of the income of people richer than that individual?

          > basic, but steadily eroding, social benefits

          I know politicians on all sides like to make good use of claiming that the welfare state is suffering without them, but, in fact, state spending on the welfare state has been increasing steadily for decades. The worst that ever happens to it is a decrease in the rate of increase (which is all the so-called austerity measures amounted to). The last two governments to cut spending to the NHS, for instance, were Harold Wilson's and the current Welsh devolved lot.

          > ... comparable to surplus free capital that can be converted into direct profit?

          Surplus free capital than can be converted into direct profit? That sounds like the sort of thing millionaires have; certainly not a salient feature of my life. These discussions of income inequality aren't really about millionaires, much as people like to drag them into the discussion, as if we're comparing mill owners to matchgirls or something. Most of us non-poor simply have decent incomes and a mortgage; we don't have estates full of serfs.

        2. DavCrav Silver badge

          Re: Some well made points

          "In what bizzaro-world economic universe are basic, but steadily eroding, social benefits which exist solely to protect workers from unavoidable social costs remotely comparable to surplus free capital that can be converted into direct profit?"

          Because if there weren't an NHS you would want private healthcare. See the US, where there is (basically) no version of the NHS, and actual money is put down by people to buy the same thing.

    5. Anonymous Coward
      Anonymous Coward

      Re: Some well made points

      They do not cancel out:

      (a+x)/(b+x)<a/b for all x>0

      So inequality drops even if everyone benefits equally from state incomes. There are some schools of political thought which advocate this as a blunt financial payment: rather than providing services the state simply gives everyone an equal lump sum, funded from taxation and trusts the market to do the rest.

      1. Palf

        Re: Some well made points

        Iff a > b also

  5. Gordon 10 Silver badge

    Politics of Envy

    Isnt this a very simple argument at the end of the day.

    1. Its always been very easy to get the mob riled up with the right rhetoric.

    2. If that rhetoric is "Capital Inequality" (hello new socialists) or "Immigration" hello UKIP.

    3. The are only 3 fundamental choices:

    a) Aspire to be on the right side of the in-equality.

    b) Look around - be content with your lot.

    c) Eat the rich/immigrants or do something else to drag them down to a level that pleases the mob.

    Now c) has a whole range of responses ranging from mild taxation tweaks to public flogging, but lets not pretend we are doing anything but dressing up Envy in fancy clothes or "economic debate".

    Fact of the matter is there is a certain level of inequality that a society will tolerate, but there are plenty of people who will magnify that in-equality so they can get power.

    1. hugo tyson

      Re: Politics of Envy

      I think there's a certain level of inequality that society *requires* otherwise, as a later poster said, why bother striving in any of the various meanings of the word. Reward for effort towards common goals - ie. work, the common goals being "the economy continues" and "you don't rely on the state completely" must be selectively available.

    2. Anonymous Coward
      Anonymous Coward

      Re: Politics of Envy

      No it's not the politics of envy. In 1965 there was almost full employment, and the average median wage was roughly twenty times less than the highest paid executives. Today, the median wage is roughly 140 times that of the highest paid executives. Income was much more progressively taxed as well, and loopholes less easy to exploit (the top rate was either sixty or seventy percent in the 1970s from what I recall). This resulted in far less disparity between those at the top and the majority than we see today. Some countries still manage to have much less disparity and are also booming (Finland for example), but our politicians in the UK are in thrall to the city and the multi-nationals.

      Yes, we need wage disparity to drive a considerable part of people's ambition and to reward acheivement. What we don't need is the current disparity that's causing problems such as the impossibility for many first timers to buy a home in the South East. We also need to get away from the short termism of politicians, where they flog off public services under the false claims that it will improve quality and lower cost (in almost no case has it done either). As soon as a service is contracted out or sold into private hands the results are a race to the bottom in terms of quality as shareholder interests take over, not helped by the fact that most executives have their salaries padded out with massive share incentives.

      1. Squander Two

        Re: Politics of Envy

        > As soon as a service is contracted out or sold into private hands the results are a race to the bottom in terms of quality

        Yes, if only our smartphones were built by the Post Office.

      2. Anonymous Coward
        Anonymous Coward

        Re: Politics of Envy

        > Income was much more progressively taxed as well, and loopholes less easy to exploit (the top rate was either sixty or seventy percent in the 1970s from what I recall).

        In 1997 the top 1% of earners contributed 20% of all income tax received by the treasury. In 2007 it was 24.4% and now it is 29.8. Tax loopholes are getting harder to exploit, not easier.

        1. The Mole

          Re: Politics of Envy

          > In 1997 the top 1% of earners contributed 20% of all income tax received by the treasury. In 2007 it was 24.4% and now it is 29.8. Tax loopholes are getting harder to exploit, not easier.

          If the disparity between the top 1% earners and the median earners is going up significantly then the proportion of the total earnings that those top 1% make would also go up wouldn't it? Which means the amount they contribute goes up even if they are paying a smaller percentage of their individual earnings. This would be the case if the graph of earnings was more of an exponential curve going up steeply as you get to the top 1%, rather than a straight line even distribution.

          1. Anonymous Coward
            Anonymous Coward

            Re: Politics of Envy

            I don’t have the figures for 1997 but in 2007 the top 1% earned 10.5% of the income and today it is 8%.

            For those earning less than £50k the average rate of tax has decreased between 2009 and 2013 and increased for those earning more.

            91.5% of taxpayers earn less than £50k so have had their tax burden reduced.

        2. Tom 13

          Re: Politics of Envy

          Don't confuse the progressive fascists with facts. Especially when they are in the middle of a good 2 minute hate.

  6. GrumpyMiddleAgedGuy

    Wealth inequality is increasing because the nature of how we make our living is changing.

    A large proportion of "service" jobs do not require great skill - there is a large pool of labour (supply) for limited jobs (demand) => low pay. Those who have capital can use foreign workers where necessary =>relatively high returns.

    I would say educational opportunity is more important than the welfare state - it allows people to change their circumstances. The welfare state however ensures that those at the bottom aren't too badly off or too angry about it.

    1. Gordon 10 Silver badge
      Thumb Up

      I would agree with this. I think the 2 biggest crimes commited by the last 2 governments were Educational

      1. Labour convincing everyone they had the right to get a McDegree regardless of whether they have any benefit to society or the economy.

      2. ConDem's ramping tuition fees to £21,000.

      (3. allowing Michael Gove anywhere near anything important the gobshite)

    2. Tom 13

      Re: those at the bottom aren't too badly off or too angry about it.

      If you and your friend are running from one tiger, you may only have to run faster than your friend to survive. When you and your friends are running from more tigers than you've counted, it is likely you will eventually run out of friends to feed to the tiger. The modern welfare state attempts to feed rich friends to the tigers in an effort to make the rest of us feel safe. It is doomed to failure.

  7. Nigel 11

    Salary versus Equity

    I think that a very solid line should be drawn between those who are paid a salary regardless of whether they perform excellently, adequately or badly

    And those who founded a business and own some or all of the equity in that business.

    Frankly, I don't see much evidence that many (any?) of the fat cats paid six- or seven-figure salaries are worth any more than the employees several levels below them. Indeed, it's usually the lower levels that do the real work, and can see how the self-perpetuating clique of fat cats more often than not have zero or negative value. They give themselves 10% or 20% pay rises, while the staff that do the work get 0%. They aren't working for a living, they are parasitising those who do!

    In contrast, someone who put his own money and time into a business that is now thriving, should be allowed to enjoy whatever degree of success he is able to achieve, just as long as it is by way of dividends paid equally to all equity-holders, or sale of shares in that equity.

    So (for example) I'd be in favour of higher levels of income tax on very large salaries, but not the same levels on capital gains (especially not on long-term capital gains, and especially not capital gains made by founders of businesses on equity that was worth nothing at all when they started). Anti-avoidance rules would clearly be needed to stop the fat cats playing the system.

    Also there should be an outright ban on any salary greater than the Prime Minister's salary in any part of the public sector (including universities, quangos and suchlike -- not just the civil service). If a corporation wastes its money, it will sooner or later go bust. That's a crude self-correcting mechanism that eliminates the very worst excesses. Whereas if an organisation is funded by the taxpayer, its fat cats can and will carry on leeching off society effectively forever. (In the rare cases where such an organisation needs a specialist who really can command such a large salary in a free market, it should obtain that service by competitive tender, with payment under the laws governing commercial contracts, including appropriate penalty clauses. Never by employing that specialist on a salary. )

    Controversial, I know. Asbestos jacket in place ....

    1. Anonymous Coward
      Anonymous Coward

      Re: Salary versus Equity

      "I think that a very solid line should be drawn between those who are paid a salary regardless of whether they perform excellently, adequately or badly"

      So that would be any heavily unionised workforce.

      1. Nigel 11

        Re: Salary versus Equity

        Bad management gets the unions and workforce it deserves. (Those who can leave, have left).

        As an organisation at the other extreme, I'd cite the John Lewis partnership. Unions? Why? Everyone has an equity stake in the business, and it goes from strength to strength in a very competitive sector.

    2. James Micallef Silver badge

      Re: Salary versus Equity

      @Nigel - nail hit squarely on the head.

      True capitalists - people who build up companies from nothing and whose companies' offerings increase the quality of life of their clients should be justly rewarded.

      'Managerial' capitalists - people who never risked any of their own money in a venture but get to pay themselves giant salaries and bonuses without contributing any real value should be penalised.

      When the 'occupy' types protest against 'capitalism' it os mostly the second type they are protesting against, not real capitalists.

    3. Squander Two

      Re: Salary versus Equity

      > I don't see much evidence that many (any?) of the fat cats paid six- or seven-figure salaries are worth any more than the employees several levels below them.

      Well, there is one bit of evidence: the management of the Co-op Bank, who prided themselves on not hiring professional bankers for seven-figure sums. Turned out those expensive bankers probably can run a bank better than the cheaper alternatives.

      (N.B. Before anyone flies off the handle, note the difference between evidence and proof.)

      > there should be an outright ban on any salary greater than the Prime Minister's salary in any part of the public sector

      I want to agree with this, but I happen to know someone who worked his way up from the bottom to damn near the top of the civil service and (although I don't know for sure) I suspect ended up on more money than the PM -- and, frankly, deserved it. There are a lot of lazy parasites in the civil service, and a lot of ideologues abusing their position to push policy without having to stand in elections, but there are at least some incredibly hard-working guys doing absurdly difficult jobs, getting posted round the world whether they like it or not and having to drag their families with them, exercising impressive levels of ethical integrity and impartiality, and sometimes having to help with things like thwarting attacks by foreign powers -- and they deserve the big money. I'm not fully convinced we have a great system in place for distinguishing between them and the lazy arse-covering parasites when it comes to pay-review time.

      1. Anonymous Coward
        Anonymous Coward

        Re: Salary versus Equity

        Your evidence is back to front. The Co-Op had a majority of non-Bankers on its board, including a chairman who didn't know his credit from your debits. However, unlike RBS, Lloyds et al which were run exclusively by professional bankers the Co-Op has not received a penny from the tax payer (though it has benefitted from quantitiative easing by the BoE).

        The Co-Op bank bought Britannia without discovering their terrible commercial loans portfolio. That was a huge mistake that nearly cost the bank its existence. The bank then fell on its sword and has re-capitalised itself with money from the wider co-op and its bond holders.

        In short the non-Pro's wrecked their business, patched it up with their own resources and are moving on under their own, imperfect efforts. RBS, Lloyds, etc wrecked their businesses and then threw the keys to the taxpayer.

        1. Squander Two

          Re: Salary versus Equity

          > Your evidence is back to front. The Co-Op had a majority of non-Bankers on its board, including a chairman who didn't know his credit from your debits. ... That was a huge mistake that nearly cost the bank its existence.

          Since that was pretty much my point, I don't see why you're arguing.

          > unlike RBS, Lloyds et al which were run exclusively by professional bankers the Co-Op has not received a penny from the tax payer

          Yet.

          But, that aside, yes, which is why I pointedly made the distinction between evidence and proof. I'm not saying the Co-op were worse than the other banks in every way. I'm just replying to whoever-it-was who said that they couldn't see much evidence that the bankers with the giant salaries do anything better than people on much less money. The Co-op tried operating a bank on that basis, and have thereby supplied us with one quite good bit of evidence that -- surprise, surprise -- professional bankers are generally better at running banks than non-bankers. You may decide that the preponderance of evidence still points to the Co-op being better run than, say, Lloyds. Fair enough.

          Bail-outs are immaterial to this discussion, incidentally, as they happen (or don't) after a bank's management have demonstrated how good or bad they are.

    4. Anonymous Coward
      Anonymous Coward

      Re: Salary versus Equity

      > Frankly, I don't see much evidence that many (any?) of the fat cats paid six- or seven-figure salaries are worth any more than the employees several levels below them.

      You know a lot about what these fat cats do do you? You think they just sit around smoking cigars, drinking brandy, travelling the world?

      I doubt you fully understand what your own line mangers job involves let alone anybody further up the ladder. You shouldn't believe everything you read in the Socialist Worker or the Grauniad

    5. Tom 13

      Re: Salary versus Equity

      I think that a very solid line should be drawn between those who are paid a salary regardless of whether they perform excellently, adequately or badly

      And those who founded a business and own some or all of the equity in that business.

      That's the rub though isn't it?

      There are a lot of people out there who think Sam Walton didn't do that even though he started out with just one store. Conversely there are a lot of people who think Warren Buffet and George Soros deserve every penny they make despite decent evidence that Sam Walton put a hell of a lot more sweat equity into his business than they did into theirs.

      Progressive taxation is envy/greed dressed up in hypocritical sanctimony. Tax everybody at the same flat rate so everybody has equal marginal risk in the game when bad decisions are made. Part of the reason the freeloaders get away with the continuing expansion of the welfare state is they have no marginal costs in expanding it, only marginal benefits.

      1. Dr. Mouse Silver badge

        Re: Salary versus Equity

        Progressive taxation is envy/greed dressed up in hypocritical sanctimony. Tax everybody at the same flat rate so everybody has equal marginal risk in the game when bad decisions are made.

        Rubbish!

        A flat rate of tax is a ridiculous notion to anyone with any shred of compassion.

        There are fixed costs associated with living. Let's make a completely out-of-thin-air made-up assumption that it costs £6,000/year (£500/month) just to survive in this country, with no leisure expenses. I can't be bothered to do the research to get the correct figure, but the principals I describe apply whether this is lower or higher.

        Now let'd take three people: Poor, middle and rich (in terms of income).

        The poor man earns minimum wage. This equates, on a 40hr week, to approximately £13,500 p.a. salary. As we are using a flat rate of tax, I will assume (again plucked out of my arse) it will be around the same as our basic rate is now, which is approx 30% including NI. He will, therefore, take home less than £9,500. After taking into account living costs, he takes has £3500 remaining, or less than 26% of what he was paid.

        A middle income guy earns £30k/year. After tax he takes home £21,000 of which £15,000 is "disposable". So he has 50% of his income to play with.

        A rich guy earns £300k. He takes home £210,000 of which £204k is disposable. 68% is left.

        Can you not see that this is grossly unfair on the poor guy? Although the rich guy is paying the most tax, he can afford to. He has plenty to pay for it.

        A flat rate of tax hits the lowest paid the hardest. In a society which makes any claim to fairness, this cannot be allowed. Those who can afford to pay more should pay more.

        1. Anonymous Coward
          Anonymous Coward

          Re: Salary versus Equity

          > He will, therefore, take home less than £9,500

          His tax free allowance is £10k so he will only get taxed on £3,500 making his take home £12,450. Additionally there are tax credits and benefits.

          Don't you see how unfair it is? The poor guy gets nearly 75% of his income free of tax whereas the middle income guy on £30k gets 33% of it tax free and the rich guy only gets 3% tax free.

          1. Dr. Mouse Silver badge

            Re: Salary versus Equity

            His tax free allowance is £10k

            Then it's not a flat rate of tax. There would be no tax free allowance on a flat rate tax syystem, which is what we are talking about.

            Don't you see how unfair it is? The poor guy gets nearly 75% of his income free of tax whereas the middle income guy on £30k gets 33% of it tax free and the rich guy only gets 3% tax free.

            The point of the tax free allowance is that it is supposed to be a floor level of what you need to survive. The government don't tax the bit that everybody needs, just like they don't apply corporation tax until after the businesses expenses are taken out.

            So it is fair that the guy who is barely making enough to live pays tax on very little of his salary.

  8. Rustident Spaceniak
    Childcatcher

    Theoretically speaking, the article makes a perfectly valid argument -

    however, while we may not be going back to 1849 style of abject poverty of the masses, the inequality curve has certainly changed shape in the last 50 or so years; in fact, it appears to be getting steeper at the very top end, and more so for wealth than for income. That's a natural consequence of high returns on capital; which, in turn, is a predictable consequence of the absence of competition from other economic models. At the same time, we appear to be seeing the formation of a new type of "lower class" - people who are born near the bottom end of the wealth scale and have proportionally little hope of ever making it higher. Never mind they all probably have a nicer TV set than I do, they will still remain essentially dependent on welfare.

    What it all boils down to, is that there is a *perceived* level of inequality, not just of wealth but also of development chances, that might very well lead to social unrest and all its wealth-reducing consequences. Or it might not; but any government would certainly be well advised to consider the possibility. If the price to avoid that is to raise taxes for the very rich, I could understand those willing to pay it.

    1. Matt Bryant Silver badge
      Stop

      Re: Rustident Spaceniak Re: Theoretically speaking, the article makes a perfectly....

      ".....there is a *perceived* level of inequality, not just of wealth but also of development chances...." You mean there is a self-perpetuating insistence on victimhood. There IS a massive difference in attitude towards hard work and education at different levels of society. People like Sir Alan Sugar are very good examples of exactly what rubbish the whole "I'm too poor to stand a chance of being rich/successful so I might as well just give up." I know Indian immigrants that came to the UK in the Fifties and lived in very poor circumstances in areas like the Midlands, but worked hard. They sent their kids to school and instilled in them the hard-work-brings-success ethic and expected them to go to uni. Now their grandchildren are doctors and lawyers and some even members of The Rich that Picketty and co so blindly despise, whilst the non-immigrant families from the same Midlands areas are still moaning about "no chances".

      Also, the cornerstone of the Picketty mantra is that, once The Rich are rich, they cannot become anything but richer. This is obvious bollocks, as shown both by the decline of the noble families across Europe (many of which have had to sell off their lands, castles and holiday homes) and the way our bankruptcy courts are kept busy dealing with The Rich that ran out of cash. Democracy and capitalism offer all the chance of success, it's just that some seem better at whining than doing. As Will Smith put it, "it is the PURSUIT of happiness, not the GUARANTEE" - you still have to be willing to get off your arse and do the pursuing.

      1. TheOtherHobbes

        Re: Rustident Spaceniak Theoretically speaking, the article makes a perfectly....

        >You mean there is a self-perpetuating insistence on victimhood.

        No. Social mobility can be measured objectively. Levels of social mobility are not up for debate. They're not about opinion or story-telling about 'Someone I know...', or by throwing around emotive words like 'victim.'

        It's been proven time and again that societies that are better at redistributing income are better at social mobility.

        See e.g. here for a recent example: http://obs.rc.fas.harvard.edu/chetty/website/IGE/Executive%20Summary.pdf

        If you want to argue against this, let's see you do some real research of equivalent quality.

        1. Matt Bryant Silver badge
          FAIL

          Re: TheOrherHobbes Re: Rustident Spaceniak Theoretically speaking, the article....

          ".....It's been proven time and again that societies that are better at redistributing income are better at social mobility......" There is plenty of social mobility in the UK, as proven by the example of Sir Alan Sugar which you studiously avoided. When even Scousers tell you Boris Johnson was right it tells you a lot about both the levels of denial and political correctness at play.

          1. DavCrav Silver badge

            Re: TheOrherHobbes Rustident Spaceniak Theoretically speaking, the article....

            "".....It's been proven time and again that societies that are better at redistributing income are better at social mobility......" There is plenty of social mobility in the UK, as proven by the example of Sir Alan Sugar which you studiously avoided. When even Scousers tell you Boris Johnson was right it tells you a lot about both the levels of denial and political correctness at play."

            Repeat after me: the plural of 'anecdote' is not 'data'.

            Alan Sugar is an example. I can show you a lottery winner as well: doesn't prove that the lottery is a game with anything other than slim odds of success.

            1. Matt Bryant Silver badge
              Facepalm

              Re: DavCrav Re: TheOrherHobbes Rustident Spaceniak Theoretically speaking....

              ".....Alan Sugar is an example. I can show you a lottery winner as well: doesn't prove that the lottery is a game with anything other than slim odds of success." Yeah, but I note you cannot disprove that he is a very good example of exactly what is trying to be denied, that it IS possible to work your way up from 'the bottom'. Nice try with the lottery, but I bet Sir Alan would have a few choice words should you ever imply to his face that he got where he is just by luck. And Sir Alan is an extreme example, there being plenty of other people from low-income beginnings that have worked their way up to comfortable living if not the riches of Sir Alan.

          2. Dr. Mouse Silver badge

            Re: TheOrherHobbes Rustident Spaceniak Theoretically speaking, the article....

            There is plenty of social mobility in the UK, as proven by the example of Sir Alan Sugar

            I believe you are falling into the gambler's fallacy here. This is like saying "Everyone can get millions without working, just look at this lottery winner as proof".

            Sir Sugar is evidence that it is possible to rise from poor to rich. His rise does not mean that everyone can, nor that everyone who is capable can. I do not know his full story, but it is likely he had "lucky breaks" at one time or another. He gambled and won.

            Many will not be so lucky. They have skill and ambition, but they get an unlucky hand and go bankrupt. Others will make it part way up the ladder and get stuck. We know of Alan Sugar because he is an exception.

            In the same way, we know of those who fall from the "upper classes" because they are the exception. Someone born at the top doesn't have to work as hard to stay there as someone born at the bottom does to get to the top.

            I am not arguing that we need to work hard to eliminate this. It is an aspect of society which has always existed. But you belittle Sir Alan's achievements and many other people's struggles in this statement. It is possible to work your way to the top, but it is also possible to win the lottery.

      2. Rustident Spaceniak

        Re: Rustident Spaceniak Theoretically speaking, the article makes a perfectly....

        Matt, you raise two very valid points: The rich can get poor and the poor can get rich. Agreed. Absolutely.

        Now let's take a look at the averages. Social mobility is certainly higher in Europe now than it was in 1849, and thank your deity of choice for that. Nonetheless, average income and wealth of the top 10% and 1% of the income scale have risen in the last 30 years, despite the various financial crises - and risen more than average incomes have - and the top 1% more than the top 10%. At the same time, the bottom 20% have seen their income remain nearly flat. In some cases, moreover, the part of their income depending on welfare has actually risen, which means they're getting less self-sufficient. That may be due to their lack of skills, as often reported, or of ethic, which you suggest; I tend to agree. But what the reasons are, is not necessarily a factor driving the acts of those trying to capitalize politically on inequality.

        My point is, some agitators have managed to turn this insistance on victimhood into bloody revenge (as some agitators are trying against immigrants now). The most prominent example that comes to mind was a Russian medicine student in 1917; result, tens of millions of deaths. It's not something I would like to read in the history of the UK, or any other European country, written in 2114.

    2. Squander Two

      @ Rustident Spaceniak

      > Never mind they all probably have a nicer TV set than I do, they will still remain essentially dependent on welfare. ... If the price to avoid that is to raise taxes for the very rich, I could understand those willing to pay it.

      Raise taxes on the very rich and spend them on what? Well, if the whole point of the exercise is to reduce wealth inequality, then it would surely be politically toxic to spend them on anything other than wealth redistribution. So the result of that is to give more welfare to the people who, as you say, are essentially dependent on welfare. If their dependence on welfare is the problem, how does that solve it?

      1. The Mole

        Re: @ Rustident Spaceniak

        > Raise taxes on the very rich and spend them on what? Well, if the whole point of the exercise is to reduce wealth inequality, then it would surely be politically toxic to spend them on anything other than wealth redistribution. So the result of that is to give more welfare to the people who, as you say, are essentially dependent on welfare. If their dependence on welfare is the problem, how does that solve it?

        Training for the unemployed? Childcare vouchers for those in work. Tax breaks for low income earners. Low skill labour intensive projects that guarantee anybody who wants to work can get a job in a location they can get to.

        These are just some ways (some better than others) that wealth distribution can be done whilst meaning people aren't percieved as scrounging on welfare, and hopefully give them the ability to gain skills and experience to get better jobs and require less welfare in the long run. The big challenges is structuring things in a way so that it is financially worthwhile to transition from being on welfare to just being off welfare - at the moment arbitary transition points means earning more can result in less takehome pay.

        1. Matt Bryant Silver badge
          Facepalm

          Re: The Mole Re: @ Rustident Spaceniak

          ".....Training for the unemployed? Childcare vouchers for those in work. Tax breaks for low income earners. Low skill labour intensive projects that guarantee anybody who wants to work can get a job in a location they can get to....." Well, I would upvote you for sentiment, but as an earlier poster pointed out, immigrants have come in and taken plenty of jobs our scroungers CHOSE not to do, so why do you think they would be any more likely to give up the lazy life just because they have a greater choice of jobs to avoid? The reality is such projects would simply help the immigrants get ahead, not shift the scrounges into being a benefit to society.

      2. Rustident Spaceniak

        Re: SquanderTwo @ Rustident Spaceniak

        Actually, a lot can be done to increase social mobility - and at the same time to promote it and show people it works. Education is an important point, possibly the most important one - on all levels, from childhood to universities; but so are public-service careers, diversity, even public employment schemes in some cases (probably not in Britain right now).

        Mind, I don't exactly agree with Mr Piketty's ideas and proposals, but I still maintain that his book raises a few rightful concerns. Where I live, the idea of solidarity is quite popular; the rich (mostly) accept relatively high taxes, though far below 80%, as a necessary evil; and those taxes still don't stop most of them from becoming richer, even if maybe at a lesser rate than those in London. I think Mr Piketty has a right to provoke discussion; and if he can do so in such a sedentary and purely academic forum as El Reg, he might have achieved something.

  9. deadlockvictim Silver badge

    Simple Question

    I am not an economist, which is why I pose a simple question:

    What would be valid reasons not to have a very simple taxation policy based on income (and nothing else) with a tax-free base to spare those on low incomes. If say, all of one's income above the tax-free base rate was taxed at, say, 20%, would this be enough to fund government? And by income, I mean all forms of income: salary, interest, dividends, inheritance, rent, pension, corporation tax (yes, Ireland, I'm looking at you) and so on. It would mean the removal of all other taxes.

    I am thinking about this theoretically. The European Union would be less than happy if a member state reduced VAT down to 0%. It might even get people spending more. Those who consume more would not be penalised for doing so. The Apples and Googles of this world would not be happy.

    Those with valuable assets would be only taxed on realisation to income.

    Would it hit the middle classes disportionately?

    1. Tim Worstal

      Re: Simple Question

      " If say, all of one's income above the tax-free base rate was taxed at, say, 20%, would this be enough to fund government?"

      No, not nearly enough. All incomes do, by definition, equal GDP (everything eventually becomes someone's income. Might be rent, profits, interest, straight income, but everything is, in one way of measuring it, an income to someone).

      And currently government takes 45 or so percent of GDP. So, if we have just the one simple tax it would have to be 45% of everyone's incomes with no allowance at all.

      That really is how large government is.

      1. Anonymous Coward
        Anonymous Coward

        Re: Simple Question

        > That really is how large government is.

        And of course, the other reason for having such a large and diverse range of taxes is to hide that above fact.

        Even if it were feasible to fund government by a simple sliding scale tax, the government couldn't do it. Most people don't realise just how high the tax take is these days.

        The strawman that taxes are complex to feed the accountants and help ministers' tax schemes is convincing but hides the bigger horror of sprawling government.

        Back to the original point though: what most people are thinking about regarding expanding economic disparity is the difference between the middle class (which make up the bulk of the populous) and the "super rich" (the likes of Bill Gates). Once you reach a certain level of equity, unless you do something monumentally stupid, you can hardly do anything other than get richer at an accelerating rate. Imbalance, when it reaches a certain pitch, can only get worse unless corrected somehow.

        Meanwhile, the steady increase in the cost of living is effectively making the middle class poorer as average salaries can't keep up with mortgages, increased tax rates and educational costs for the kids which are steadily trying to gain parity with those in the US.

    2. Anonymous Coward
      Anonymous Coward

      Re: Simple Question

      Define government.

      If you mean to finance the welfare state as part of government, the answer clearly is no. On the other hand, a common tax for all types of income has some appeal; specially if one observes that many "rich" pay proportionally less tax than middle-income types. But it would probabl be closer to 40%.

      1. Tim Worstal

        Re: Simple Question

        Fair enough. If we look at government consumption (NHS, schools, defence, courts, prisons etc) then 20% of GDP is still just a little too small.

        ....I think so, at least....

    3. RealBigAl

      Re: Simple Question

      "Simple Question

      I am not an economist, which is why I pose a simple question:

      What would be valid reasons not to have a very simple taxation policy based on income (and nothing else) with a tax-free base to spare those on low incomes"

      It would be stunningly easy to dodge unless you have a very exhaustive definition of income. We've already seen the city bankers try to get round the short term bonus caps placed on RBS and the like by using payments via other means. At the very least there would need to be cross border agreements in place to prevent slaries being paid as non income payments to overseas banks.

    4. Tom 13

      Re: Simple Question

      Greed and Envy. They'll put on a wonderful stage show full of sound and fury claiming they are doing it for the good of the downtrodden, but don't believe it. The point of your question is exactly the one the flat taxers have been making since Reagan presided on this side of the pond and Maggie on yours.

      After thinking about it long and hard, I've concluded that with the possible exception of instance where the amount of money collected was less than the amount of money it cost to process, the person needs to be paying taxes. Not because the government needs their coppers, but because the 5 coppers collected from the poor man will be as precious to him as 1000K collected from the rich man is to the him. That gives them equal cause to watch the pigs at the spending trough like a falcon.

  10. Anonymous Coward
    Anonymous Coward

    Valuation

    I don't agree that valuing state benefits like this is valid.

    By buying an annuity from a company, you are getting something backed by assets with a contract that you can enforce in the courts. State benefits are unfunded (i.e. the state doesn't have net assets to meet its liabilities) and they are not protected by our (unwritten) constitution, so any government can change what the benefits are. You can only value a finanical instrument (such as an annuity) if you can reliably estimate the probability of it paying out. That's not the case with state benefits.

    1. John Sager

      Re: Valuation

      Not really true. The annuity can fail to be paid if the provider goes bust, as can a pension - many company pension schemes are under-funded because they took pension contribution holidays inadvisedly in the past. Similarly government could elect not to continue to pay benefits/pension etc. The issue here in judging the value of a future stream of income is the risk that it will stop or vary at some future point. You could argue that an annuity has less risk of stopping than a state benefit, but I could equally argue the opposite, based on market conditions, political commitments and a whole raft of other factors. That makes valuing the benefit income stream as an asset somewhat more problematical, but it doesn't completely destroy its value.

    2. Squander Two

      Re: Valuation

      > State benefits are unfunded ... and they are not protected by our (unwritten) constitution, so any government can change what the benefits are.

      True, but what you're talking about there is the stability and reliability of future income streams. If someone is receiving a state benefit right now, that's wealth, and there's nothing wrong with counting it.

      > the state doesn't have net assets to meet its liabilities

      Well, yes and no. The state has a working population, which, rightly or wrongly, it treats as an asset.

  11. Zog_but_not_the_first Silver badge

    The more it changes...

    I don’t have a problem with people getting rich from their talents through inventing things, improving existing devices and systems, delivering a service or giving people pleasure by, for example, playing football. Yes, even football.

    A simple taxation system where everyone paid their share should be able to provide the social and material infrastructure we all rely on.

    What I really, really struggle to understand is the value given to society by what could be loosely termed “high finance”. I’ve posted before that activities such as ultra high-speed trading seem little better than coin clipping.

    There is a narrative that runs from our very earliest societies where a group of clever men (sadly, usually men) say something along the lines of “you must give us a quarter of the harvest so that we may build our mighty temples and chant our mystic songs. If you don’t, the anger of the sky god will be turned against you”. It’s undergone a number of revisions but the current incarnation in our secular times seems to be “give us money and power, or the markets will punish you”. The outcome is made-up numbers in a computer justifying a transfer of assets away from ordinary people (who worked for, or paid for them) to a rich elite.

    A gross oversimplification, maybe. And I don’t know what the answer is.

    1. I ain't Spartacus Gold badge

      Re: The more it changes...

      Zog,

      The City does many things. Some of them great, some of them average, some of them rubbish.

      For example, with high frequency trading you can get all three. In a lot of cases, HFT performs a service to the market as a whole, by making transactions cheaper and quicker, and by increasing price transparency. There are various arguments why some of the HFT mob aren't performing a service, because they pull liquidity out of the market - and therefore why this might only be left to traditional 'market makers'. But in general it's not just coin-clipping.

      One of the arguments I have very little patience for is the ones who say we can ignore the markets - because they're just being evil capitalists when they threaten us. This often goes with the narrative of 'markets attacking something'. It also often comes from people very hostile to the markets, but who want their money.

      Take the example of the Eurozone. We had much smugness from our European friends when the US and our sub-prime markets crashed. I particularly remember Sarkozy, who'd said things about how he wanted to be the French Thatcher, and make the french economy more Anlgo-Saxon. But later moved into deriding the nasty anglo-saxon capitalist pigdogs - obviously for the easy popularity. The London markets were now a nasty parasite, and should be punished. This was a common theme from EU politics, although I particularly remember Sarko, few had been enthusiastic about the nasty anglo-saxons before the crash either.

      Yet when it looked like the Euro might collapse, and so international finance was running away from European government debt as fast as its little legs would carry it - the very same people criticised the markets for 'attacking them'. When actually the markets were doing what they should have done - getting their clients' money out of Dodge. Well actually they shouldn't have lent it in the first place, but that was an equal failure of Eurozone politicians lying about how much they'd support the Euro, and markets for believing them.

      So no, you shouldn't pray to the markets five times a day. Nor should you be too ready to listen them when they advise you on what to do, as it's bound to be self-interested. But on the other hand, you can't ignore them and ask them to give you loads of money, at one and the same time.

      In the Brown Boom, I believe the City was providing something like 13% of our tax base. That ought to get them a little say in how the economy was run. Although with some wariness that this was an obvious bubble, so would drop. But equally, even though we're now not happy with them, the UK government is still borrowing over £100 billion per year, so if we don't keep at least some of them sweet, they may tell us to get stuffed. This can be overstated. Financial institutions are forced to hold government debt, for various reasons. But everything is fine, until faith is lost, and then it's very much not fine, and can go from fine to disaster in days. See the Eurozone for details. The Euro has been days from collapse at least twice now. Probably several more times, when the histories of the last minute crisis meetings get written up.

    2. Anonymous Coward
      Anonymous Coward

      Re: The more it changes...

      George Orwell knew the answer. And how badly it usually ends. The key question no-one knows the answer to, and the political classes don't care to think about because it keeps them rich, is how to do that theory right in practise.

      Downvote fest now.

      BTW if you want to know why the NHS is a GREAT thing and must be protected (honestly reformed by protected) read this:

      http://www.theguardian.com/society/2014/jun/04/coalition-attacks-nhs-return-britain-age-workhouse

  12. Pat 11

    Thanks

    I hadn't realised Picketty was just talking about single developed nations. I thought it was about global inequality.

    Your argument doesn't mention the unwillingness of the wealthiest to contribute to the welfare state, the efforts of some of them to remove it. Seems a weird omission.

  13. earlyjester

    Swedish Model?

    That sir was a helicopter!

  14. TopOnePercent Silver badge

    Not bad, but not quite right....

    If we have children, we do not need to save to educate them

    Yes we do. State education is better than no education, but that is all it is better than.

    The UK continues its educational decline as the grade curve continues its ever upward trend. The kids aren't getting smarter, the teachers aren't getting better, its just the exams getting easier (or replaced entirely by course work).

    So yes, if you want a quality education for your child, you very much do need to save for it. Not only will those savings not be free of taxes, but you won't get a refund on the taxes paid for the state education you don't use.

    We'd all agree that if you've £100k in equity in your two-bedder somewhere then you've £100k of wealth. But what if you've an inheritable tenancy at £5k a year below the market rent in social housing? You might have another 30 years to live in that place: is that £150k in "wealth" or not?

    Obviously you have to count that £150k as wealth. The legally mandated subsidy (40%) provided to social housing must be counted as wealth in the same was as you imputed rent from a mortgage free home should be counted as wealth.

    The rich getting richer is inevitable - it has to happen. However, that does not imply that the poor must be getting poorer, for that is demonstrably not happening.

  15. TopOnePercent Silver badge

    Wealth inequality is only a problem if you suffer from spite or envy. I care not how rich Bill Gates may be, only about the standard of living I can provide to my family.

    1. Anonymous Coward
      Anonymous Coward

      Wealth inequality is only a problem if you suffer from spite or envy.

      Really? Try buying a place to live in London on the average salary of 27,800GBP [1] then. Average house price is just over 592,000GBP [2].

      [1] Office for National Statistics, average London salary (17,000 - 21,000GBP for the rest of the country).

      [2] Rightmove

      1. TopOnePercent Silver badge

        Really? Try buying a place to live in London on the average salary of 27,800GBP [1] then. Average house price is just over 592,000GBP [2].

        People on average incomes have never bought average properties because the average household formation is 1.x people, and because the average equity isn't zero.

        Lets say x is half a person, because I don't have the stats to hand, that now creates an income of £41,700. If we take a 4x multiplier on that we get to 166,800, and now we add a 10% deposit, and we're left a total of £183,480 which is more than enough to buy a 2 bed place in commutable distance of London. Rightmove has 100s of properties available for that price that are actually in London.

        I've earned multiples of the average London income for years and I couldn't afford the house I wanted in London so I moved out. It's always been that way and it will be forever thus.

        1. Anonymous Coward
          Anonymous Coward

          It was possible

          Buying a home in London was always difficult (unless you lucked out under Right To Buy) and required a few years of penny pinching, chasing the overtime and being polite to the bank manager. But it was possible for all of the post-war years up to the mid-80's and again from the early 90's to 2000.

      2. I ain't Spartacus Gold badge

        Chris Wareham,

        Which averages? Have you chosen median or mean? This really matters when you have huge outliers - like in London house prices.

        One of the reasons London house prices went up so much during the bust is that cheap stuff had gone down in value, partly because there weren't any buyers due to lack of mortgages. But there's loads of foreign money going in to £10m places in Park Lane, and they're buying for cash.

        Also, I believe that Rightmove report asking prices, not actual selling prices. Which the papers love, because they're higher. Offer prices are up by 15-25% in the last year in my SE market town, but of the actual selling prices I've seen the move has been just a few percent.

        Admittedly there has been a bubble in house prices. But I'm not sure how much that's down to wealth inequality, or if it's down to a massive increase in demand for housing in the South East. We've had historically high levels of immigration for the last 15 years, low interest rates, decreasing household sizes (both parties in a divorce often buying somewhere, for example), and house-building hasn't been growing to match demand. People don't like stuff being built near them - and many British people don't seem to like living in flats, in the way the rest of Western Europe do. Hence the flat market actually started to crash in 2005-6, before the banks and housing market did.

        In my opinion one of Gordon Brown and Ed Balls many mistakes was moving from RPI to CPI inflation. When the history of the recent boom is written I think it'll show that most people stopped getting better off before the turn of the century, because housing costs were rising too much further than incomes - and yet people were being told an inflation rate that didn't include housing costs - the biggest cost most of us have to cover in our lives. I said it was a bad policy at the time, but the press seemed to absolutely adore Brown for some reason. He could do no wrong back then. I was rather sad to see the Conservatives not reversing it, but apparently Osborne asked the Bank of England to look at sorting this in some way in 2010 - can't see him doing it in a pre-election budget though.

        Average incomes have been falling since 2005. I'd love to see some good figures that measure disposable income after taxes, bills and housing for the last 40 years.

        1. Anonymous Coward
          Anonymous Coward

          Which averages? Have you chosen median or mean?

          Median for salary, can't find clarification on the house prices.

          Also, I believe that Rightmove report asking prices, not actual selling prices.

          Again, can't find clarification. However, even if it's the asking price rather than the selling price, the likely difference is around 5% on a property of 550,000GBP. Assuming Rightmove do report asking prices then that makes the average house price in london 562,400GBP. Sounds about right to me based on personal experience of buying a house in North London.

          Average incomes have been falling since 2005. I'd love to see some good figures that measure disposable income after taxes, bills and housing for the last 40 years.

          I can only find figures for disposable income after tax that don't take into account housing costs. They show an almost continous rise in disposable income between 1979 and 2008. However, it has been continually falling ever since 2008. The figures I can find on housing costs (from the Department of Work and Pensions) suggest they have risen continually from roughly 10% in 1979 to 40% of disposable income in 2013 - with no fall since 2008.

        2. Tom 13

          I was rather sad to see the Conservatives not reversing it

          The problem with jiggering a key economic number badly is that once it's been badly jiggered there are a lot of people (many of them important) who are looking to fob off their bad investments before it becomes recognized that the numbers were jiggered badly.

      3. Tom 13

        @ Chris Wareham

        I don't live in the UK so I have no idea what your prices are like. I do live near DC. DC and London have something in common. They are both the capitals of their nations. As such the filthiest dogs of all congregate there (according to Twain "America's only native criminal class", I'm sure you've a similar quote from a similarly regarded bard). As unlike real capitalists all they need do is raise taxes to increase their salaries, or worse raise fears to increase lobbying income, the economies of the local region are quite disconnected from reality and only the gravest of dangers can return them to considering the real world. Median household income over hear for last year was a bit over $51,000. Median house price in DC was $460,000. Not quite as out of whack as your numbers, but it is the same effect.

        1. Anonymous Coward
          Anonymous Coward

          Re: @ Tom 13

          The difference between the US and UK is that in comparison we have a very high density of population. As a result, the entire South East of England has average house prices approaching that of London, and the "commuter belt" is constantly expanding as people have to live further afield but still need to travel to the capital since that's where so much employment is. This isn't helped by the last thirty years of British governments betting that the bulk of our economy can be based on financial services. Despite this lunatic policy, which has included a deliberate attempt to keep Sterling high valued to the detriment of exports, we do still have some industries producing real goods. But boy do they struggle. That struggle will become even harder if the swivel eyed loons of UKIP succeed in getting the main political parties to remove us from the EU, making trade with our biggest export markets even more difficult. Economic common sense says that we should join the Euro and focus on reforming the EC rather than leaving it. Even the majority of anti-EU Tory politicians favour this, but in the current political climate dictated by massive media exposure of a political party with no elected members of parliament that's not a vote winner.

          1. Matt Bryant Silver badge
            WTF?

            Re: Chris Wareham Re: @ Tom 13

            "....to remove us from the EU, making trade with our biggest export markets even more difficult...." Aren't you just repeating the FUD that leaving the EU means the automatic severing of all trade? After all, the rest of the EU does a lot of trade with us, so they would be cutting off their own noses to spite their faces if they decided to get too sulky. The Fwench might go for punitive tariffs it but the Germans probably would be more practical. And sitting outside the EU would allow us to retain control and avoid EU meddling in the one market we are actually much better at than the rest of the Europeans, the financial one you slighted.

  16. Anonymous Coward
    Anonymous Coward

    I mainly agree but...

    I think I agree with the sentiment expressed in this article but I have my doubts on the arithmetic.

    Tim you are basically capitalizing benefits. You take a resident's right to receive benefit, which is a stream of income. You then say what sum of cash (i.e wealth) you would need to possess to have an equivalent return. That sounds reasonable and it gives a way of measuring something that is otherwise intangible - the intrinsic wealth of being a british resident.

    And it looks reasonable for the state pension. Except government pensions aren't really funded, so there is no pot of money. It's just welfare spending paid for out of taxes at that time.

    You've turned the benefits into wealth but really you should do the same thing for the money that pays for those benefits. The tax and national insurance that you might have to pay during your life can be considered to be a very large liability. As a british resident how much wealth do you have, given a right to the NHS, state education, tax credits, benefits and a pension? And now how much if you take off the debt you have by being a resident and therefore liable for taxes to pay for them?

    Nick.

    1. Gordan

      Re: I mainly agree but...

      "The tax and national insurance that you might have to pay during your life can be considered to be a very large liability."

      By that measure the inequality is even smaller because those on high incomes have enormous liabilities in terms of lifetime tax and national insurance contributions.

  17. Anonymous Coward
    Anonymous Coward

    How about everyone pays 100% tax and everyone lives on the same state hand-outs?

    Oh, right, then what would be the point in working?

    1. Identity

      One might be required to work for, say 20 years, in order to receive those benefits.

      BTW, in a totally unscientific poll I took some years ago among random people I know and met, when asked if they would continue to work if given some base level food, shelter, clothing, medical care, etc., by far the most common answer was, 'yes, but I'd do something else.' My take is, people need to fill their time and like a feeling of accomplishment. The idea that without the threat of starvation and deprivation they would lie on the couch and eat bon-bons or get drunk is more of a bugaboo than a fact.

      1. TopOnePercent Silver badge

        The idea that without the threat of starvation and deprivation they would lie on the couch and eat bon-bons or get drunk is more of a bugaboo than a fact.

        You've obviously no friends or relations dossing on welfare then. Before Labour opened the doors to all of Europe, we have millions of long term unemployed brits. After they opened the doors we still had the same amount of unemployed brits, but we also had several million eastern europeans that came here and miraculously found work. Work that wasn't supposed to exist.

        How can that be if the long term unemployed brits were not choosing to make themselves so? Perhaps they were lying "on the couch and eat bon-bons" or getting drunk?

        1. Identity

          Truth to tell, I know only one welfare sponger — a former drunken 'tenant' who didn't pay rent and who forced me to take her to court, then kept it going for 20 years!. She had a cell with her name on it at the local police station, due to the frequency of drunk-and-disorderlies. Even she has a job. The experience with immigrants is different here, as they tend to work (illegally) far below the going rate, pissing off those who work and expect a decent day's wage.

        2. Clown Shoes

          <i>"How can that be if the long term unemployed brits were not choosing to make themselves so?"</i>

          There are a host of possible explanations.

          If the only one you can think of is, "the unemployed are just lazy", it's a good indicator that you may be suffering from fuckwittery.

      2. DavCrav Silver badge

        "BTW, in a totally unscientific poll I took some years ago among random people I know and met, when asked if they would continue to work if given some base level food, shelter, clothing, medical care, etc., by far the most common answer was, 'yes, but I'd do something else.' My take is, people need to fill their time and like a feeling of accomplishment. The idea that without the threat of starvation and deprivation they would lie on the couch and eat bon-bons or get drunk is more of a bugaboo than a fact."

        Well, sure. But they might not be mining, sweeping roads, taking out rubbish, etc. You'd have a lot of artists and musicians though.

        1. Identity

          Once again, this is them triumph of bias over fact. Here's an example: in one West Virginia town [can't remember which one, but some diligent searching will probably find it], the coal mine ceased operation, due to being "tapped out." All the miners were forced to find other work. Some years later, technology allowed that mine to reopen with better extraction methods. The miners, who had become established in new employment, went back to the mine! There is, apparently, some kind of brotherhood and pride among miners...

          On the other hand, 'Obamacare' has relieved what has come to be known as job-lock — people forced to stay in a job to keep their insurance. A significant number are now quitting to start their own businesses (surely, you must applaud such entrepreneurialism), or work in something more to their liking.

          Road sweepers and garbage men, here, make a pretty good living (often on a government paycheck).

  18. Anonymous Coward
    Anonymous Coward

    Sod It

    Lets Smash the state, A politician head on a streak outside every major town, who's with me

    1. I ain't Spartacus Gold badge
      Happy

      Re: Sod It

      Is that supposed to be a streak, a stake, or a steak?

      Can I have the surf 'n turf please? I'll have a 12oz rump steak with the head of Alex Salmond...

  19. Flocke Kroes Silver badge

    A new 80% tax on the rich would be a complete waste of time

    They would just avoid it like they avoid the current taxes.

    1. I ain't Spartacus Gold badge

      Re: A new 80% tax on the rich would be a complete waste of time

      The rich don't avoid all taxes.

      Of UK income tax the top 1% of earners contribute 25% of all government income tax receipts.

      If you widen that to the top 10% of income earners, they cover 53.3% of all UK income tax receipts.

      Those figures are from 2008-9, I believe that the top earners are paying a bit more than that now, partly due to the changes in the tax thresholds.

      Sadly I couldn't find more up-to-date figures that I've seen, or the proper data on the ONS site (which is a nightmare to search), so this'll have to do: BBC linky

      1. Anonymous Coward
        Anonymous Coward

        Re: A new 80% tax on the rich would be a complete waste of time

        What proportion of all taxable income does that top 10% earn?

        1. I ain't Spartacus Gold badge

          Re: A new 80% tax on the rich would be a complete waste of time

          No idea. I wasn't trying to argue that the rich don't avoid taxes. I was arguing that the rich don't avoid all taxes. Perhaps I should have highlighted that fact before, so my downvoter might have realised that I was simply injecting some facts into the discussion.

          There may be a problem of wealth inequality in Britain. There may be a problem of tax evasion/avoidance. But even the rich will end paying some tax. Apart from anything else, VAT is often harder to avoid. Although there are always ways.

          One of the problems is that the figures are hard to gather. People who are avoiding paying tax, tend to be a touch shy about it - so it's hard to judge how much.

          One thing that's pretty much a nailed on certainty though is that you can't tax all of it. When some left wing think tank comes out and says there are a few hundred billion (or even trillion) of untaxed cash sitting somewhere, so all we need to do is tax it and cancel income tax for a year (or spend), you know they're living in la-la land. There are certainly things to do to capture more money. However unless it's sitting under a mattress somewhere, all money is doing someothing. So if you tax it, you'll lose whatever it was doing out of the economy, thus someone else won't have a taxable income to pay taxes from.

          Like the Tobin tax enthusiasts who were saying that there was €200 billion in free money out there for the EU - just for the governments to spend. Yummy! Even though the actual tax proposed was only supposed to raise €35 bn odd, and they've had to scale that back becuase the EU Commission report on it says that it'll destroy more in GDP than it raises. Also they were going to tax transactions on Eurozone government debt, which might well have been the straw that broke the camel's back and broke the Euro. So the new proposal exempts bonds and is now an order of magnitude less on shares, so I guess it'll be a lot of effort to raise a couple of billion.

  20. Stephen Channell
    Unhappy

    wrong type of regression curve

    If you extrapolate linearly the higher rate of return on capital (relative to economic growth), you end up with all the wealth in the hands of very few, wider poverty and social unrest. After 1848, the threat (&fact) of revolution and war provided a social counterbalance, that no longer exists.The welfare state was not the greatest redistribution of wealth in human history, that honour goes to the black-death which levelled indiscriminately. Wealth distribution is not even as significant as "peak labour", where jobs are being automated at a faster rate than new ones created.

    Wealth tax might be one instrument, inflation is another, quantitative easing is sneakier, antibiotic resistant pandemic or crop-blight crueller; but politics will find an answer because if there is one lesson from history: hoarders eventually get their comeuppance & sharing is better alternative.

    1. Destroy All Monsters Silver badge
      Holmes

      Re: wrong type of regression curve

      Protip: These "hoarders" HOLD THE CAPITAL NEEDED FOR INVESTMENT.

      Of course, in the nice new world of Keynesian Retards and Egalistards, we fake up the capital by printing in central banks, making everyone paper wealthy while the while world falls apart around us.

      But all of this has happened before -- and it will happen again.

      The way of surviving is of course being the first in line when the uniforms are handed out. Moral qualms, me? I have no problem making sure people stay in their assigned camps when the time comes, thank you.

      1. Stephen Channell
        Facepalm

        Re: wrong type of regression curve

        Many German Jews fought with distinction in WWI & kept the medals & uniform.. didn't help them much, but Martin Niemöller poem says it better than I could

      2. Anonymous Coward
        Anonymous Coward

        Re: wrong type of regression curve

        > Protip: These "hoarders" HOLD THE CAPITAL NEEDED FOR INVESTMENT.

        How much do you know about central banking?

        Under "normal" economic circumstances - i.e. before September 15, 2008, banks were required to hold a certain amount of reserves - cash or AAA-rated marketable securities - with the central bank. That was true for the US, UK and the Euro zone, most likely Canada too.

        If a bank exceeded the amount it was required and allowed to hold in reserves, the bank was penalized on the excess reserves it held. That was a matter of deliberate monetary policy: the central bank wants to encourage investment. I.e. don't hold the money at the Fed in extra reserves because you will get penalized - lend it out instead, where the bank can make money on interest.

        After September 15, 2008, the Federal Reserve started paying interest on bank reserves. In doing so, the Fed has all but eliminated any incentive for banks to lend. Any bank will just sit pretty on USD billions in reserves at the Fed, and get paid 0.25% interest on it.

        According to Bloomberg:

        http://www.bloomberg.com/news/2014-03-27/banks-lending-like-it-s-2007-belied-by-10-trillion-hoard.html

        As of March 2014, US banks were hoarding USD $10 Trillion in cash at the Fed. This is money not being lent out, and not contributing to economic growth.

        The same is true for corporations. According to the St. Louis Fed, corporations are hoarding record-high amounts of cash:

        https://www.stlouisfed.org/publications/re/articles/?id=2314

        Again, this is money sitting idle and not contributing to economic growth.

        So when someone - a Keynesian Retard - talks about "hoarders" - that is what they are referring to: banks hoarding cash at the Fed, and corporations hoarding cash at their bank, which, in turn, goes on hoarding it at the Fed.

        One way to spur investment and discourage cash hoarding by banks and corporations would be a 80% tax on excess reserves. The proceeds from that tax would then be used by the government to finance its own infrastructure expenditures.

    2. TopOnePercent Silver badge

      Re: wrong type of regression curve

      Wealth tax might be one instrument, inflation is another, quantitative easing is sneakier, antibiotic resistant pandemic or crop-blight crueller; but politics will find an answer because if there is one lesson from history: hoarders eventually get their comeuppance & sharing is better alternative.

      If there's only one economic lesson from history that lesson would be this:

      Communism doesn't work! Socialism doesn't work. Capitalism has flaws but works better than any other system yet devised.

      1. Stephen Channell
        Facepalm

        Re: wrong type of regression curve

        Safety, Security & rule-of-law have a market price.. in a liberal market economy a progressive tax system is cheaper than buying protection from gangsters, better to make informed decisions while you have choices.. hiding gold hoards in fields work as a tax-haven.. until somebody finds it

      2. Anonymous Coward
        Anonymous Coward

        Re: wrong type of regression curve

        Communism doesn't work! Socialism doesn't work. Capitalism has flaws but works better than any other system yet devised.

        I agree, but we don't live in a world of free market capitalism, but corporatism, a.k.a. socialism for the corporations. Such concepts as "too big to fail" simply do not exist in a truly capitalist society. Getting the 99.9% to pay for the economy-crashing cock-ups of the 0.1% seems to be the way it works nowadays.

        1. Matt Bryant Silver badge
          FAIL

          Re: AC Re: wrong type of regression curve

          ".....Getting the 99.9% to pay for the economy-crashing cock-ups of the 0.1% seems to be the way it works nowadays." Another Leftie myth! The top 10% of earners pay more than half of ALL taxes, therefore the top 10% did the majority of the bailing out. The bottom 20-odd% paid bugger all. And this after the typical bottom 20-odd% of voters helped vote in the socialist morons that caused the crash! Do you seriously think many of the top 10% voted Labour?

          1. Tom 13

            Re: AC wrong type of regression curve

            Another Leftie myth! The top 10% of earners pay more than half of ALL taxes, therefore the top 10% did the majority of the bailing out. The bottom 20-odd% paid bugger all. And this after the typical bottom 20-odd% of voters helped vote in the socialist morons that caused the crash! Do you seriously think many of the top 10% voted Labour?

            While that's all true, much of what he said is true as well. It was a bunch of 1%ers who cause the housing market crash and all the rest of us working stiff, including 90% of the top 10% and probably 90% of the top 1% bailed them out.

            As for how many of the top 10% voted Labour... More than I'd like, and a hell of a lot more than acknowledge it. Even in Britain campaigns and lobbying cost money. That money is almost certainly coming more from the top 10% than the other 90%.

            1. Squander Two

              Re: AC wrong type of regression curve

              > It was a bunch of 1%ers who cause the housing market crash

              The housing market crash was caused by sub-prime mortgages, which by definition have nothing to do with top earners.

              This is the bit where people (myself included, I admit) like to hurl blame at the US Senate for the legislation that eventually led to the crash, but that's not completely fair. What is interesting about the chain of events that led to the crash is that every single stage was made up of either good intentions or reasonable mistakes: wanting people to be able to buy decent homes no matter what colour they are isn't exactly an evil plot; and neither is giving a derivative product made up entirely of mortgages the same rating as you'd give to an actual mortgage.

      3. Anonymous Coward
        Anonymous Coward

        Re: wrong type of regression curve

        > Communism doesn't work! Socialism doesn't work. Capitalism has flaws but works better than any other system yet devised.

        ...or we as a race lack the imagination to think of something better.

  21. Anonymous Coward
    Anonymous Coward

    This article misses the point entirely.

    If you are rich, it doesn't matter. You can always pay the correct people to arrange your finances and you will pay near-zero tax.

    If you are dirt-poor, it doesn't matter. The welfare state will prevent you from have too horrible a life.

    If you are in the middle, you are buggered. Got a house? Sell that you pay for your child's education. Got a pension? Well kiss you state pension goodbye. Got savings? Forget any support should you ever lose your job. And so on. Because it's not free at point of use. If "free at point of use if you have no money or have enough money to make it appear like you have no money".

    In the UK the entire tax and welfare system is set-up to the upper-working class and lower-middle class get shafted good and hard. MPs like this arrangement because it keeps their rich friends happy and keeps the poor suckling on the teat of the state (as there's more poor people, they keep voting the same bastards in as they don't want the gravy to stop).

    What we need is a fair system where the rich actually pair their fair share (based on ability to pay); the poor get help when needed and moved off benefits (i.e. benefits will stop after a year, except in exceptional cases); and the upper-working/lower-middle class get a fucking break!

    Oh yeah, and we get law reforms so the UK stops being the global leader in tax evasion.

    1. Squander Two

      Re: This article misses the point entirely.

      > If you are rich, it doesn't matter. You can always pay the correct people to arrange your finances and you will pay near-zero tax.

      Terry Pratchett said that he kept reading about this so contacted his accountant and asked him about it, and received hollow laughter as a reply. Tax-dodging is not as easy for the rich as some would have you believe.

      > If you are in the middle, you are buggered.

      Agreed.

      1. Anonymous Coward
        Anonymous Coward

        Re: This article misses the point entirely.

        > Tax-dodging is not as easy for the rich as some would have you believe.

        A LLP (to pick one) makes tax very easy.

        Avoiding billions in unpaid tax only costs one meal. Very easy.

        No having to pay interest (circa £20 million) is also very easy, just takes a few handshakes.

        I am sorry to say, but you are clearly deluded if you think the rich pay anything likes the same levels of tax as the middle or the poor. Perhaps if they did, we wouldn't be suffering the serious cut backs (which hit the poorest hardest) that we are.

  22. This post has been deleted by its author

  23. ScottME
    WTF?

    Has anyone commenting here actually read the Piketty book?

    I'm about half way through it and I have to say that so far it's pretty convincing. If Piketty is correct, all of Mr Worstall's arguments would seem to centre on how the crumbs from the table are divided up. It was ever thus.

    1. Anonymous Coward
      Anonymous Coward

      Re: Has anyone commenting here actually read the Piketty book?

      *I'm about half way through it and I have to say that so far it's pretty convincing.*

      Nutcases often are.

    2. graeme leggett Silver badge

      Re: Has anyone commenting here actually read the Piketty book?

      I listened to the (short version) of the podcast of BBC Behind the Stats.

      They had something to say about the exact methodology and some discrepancies in how Piketty reached his numbers and though the central premise of his conclusions was not disputed.

      When challenged on the discrepancy between the ONS and his way of calculating something (household survey vs tax receipts?), he seemed to admit (a bit tetchily?) that there were uncertainties in measuring such things as wealth.

  24. Anonymous Coward
    Anonymous Coward

    This is why wealth inequality is a problem

    Super rich hold $32 trillion in offshore havens

    Rich individuals and their families have as much as $32 trillion of hidden financial assets in offshore tax havens, representing up to $280 billion in lost income tax revenues, according to research published on Sunday.

    The study estimating the extent of global private financial wealth held in offshore accounts - excluding non-financial assets such as real estate, gold, yachts and racehorses - puts the sum at between $21 and $32 trillion.

    The research was carried out for pressure group Tax Justice Network, which campaigns against tax havens, by James Henry, former chief economist at consultants McKinsey & Co.

    He used data from the World Bank, International Monetary Fund, United Nations and central banks.

    The report also highlights the impact on the balance sheets of 139 developing countries of money held in tax havens by private elites, putting wealth beyond the reach of local tax authorities.

    The research estimates that since the 1970s, the richest citizens of these 139 countries had amassed $7.3 to $9.3 trillion of "unrecorded offshore wealth" by 2010.

    Private wealth held offshore represents "a huge black hole in the world economy," Henry said in a statement.

    http://in.reuters.com/article/2012/07/22/offshore-wealth-idINL6E8IKF6120120722

    With all the tax avoidance going on, the services, such as the NHS, that benefit all the little people and which you say should be counted as a form of wealth, are steadily getting hollowed out. As for mentioning pension schemes - was that some kind of sick joke? Everyone knows that the current implementations are simply not sustainable when coupled with an ageing population and those that start work today will be very lucky to see any form of payout within a natural human's lifespan!

    It really doesn't take a genius to work out that wealth will naturally concentrate without some form of external intervention and with today's global economy, that means a robust form of global wealth taxation. Of course, those that could implement such a scheme were long since bought out by those that control the wealth, so we shouldn't hold our breaths!

  25. Britt Johnston

    deja vu

    80% tax for the rich is so France 2012, I think Hollande's aides must have read the book.

    1. Gordan

      Re: deja vu

      "80% tax for the rich is so France 2012, I think Hollande's aides must have read the book."

      And look how well that is working out.

  26. TopOnePercent Silver badge

    Divide the wealth equally today...

    .... and by this time next year, you'll once again have the rich and the poor. It may not be all the same people that are rich, but a good number of them will be. Almost all of the poor will once again be poor.

    1. Gannon (J.) Dick

      Re: Divide the wealth equally today...

      "It may not be all the same people that are rich, but a good number of them will be."

      Um, there's a problem.

      I live in a High Density Urban Cluster of self-serving opportunists (Texas, USA). Sometimes I feel sorry for Brits. If you can not find a con man in Texas, you may be a corrupt government functionary, but you are most certainly the worst archaelogist who ever lived because they have been here forever and are buried all over the place.

      Do as you say and a good number of them will be rich. Models of social justice should start with the assumption that the probability of finding a pit in a peach is 100%.

  27. Bluenose

    Another "stop picking on the rich" article

    having read my earlier post I realised it did not communicate what I was trying to get across so withdrew it, Hopefully better second time around.

    This article is typical of those who try to draw attention away from the facts; the rich are getting richer and the poor poorer both on an income and wealth basis. It is that widening gap that Picketty is trying to show and actually achieve in his book.

    By using the word "benefits" the author is seeking to suggest that only the poor will benefit from state handouts perhaps saying Govt assistance might even the field because when use different language people start to think about tax breaks and financial assistance given to the rich as well as the income supplements and replacements that constitute "benefits". Who remembers all those rich people making huge financial returns because the govt did not tax tree plantations the same as other assets?

    Wealth is measured on the basis of its economic utility. The NHS and state pension cannot be converted to cash since removing the NHS would not necessarily result in a fall in taxation and the state pension paid from general taxation has no underlying value only that which can be received at the point in time it is paid (and in most instances is an income replacement benefit).

    The rich on the other hand have wealth that can be readily converted to cash. Selling the farm is swapping an asset for cash, as is selling shares. The liquidity means that the rich can move their money in to investments and activities that deliver a better rate of return which means that their wealth will always increase unless they make stupid investments. This is not an option available to people at the bottom who do not have the surplus income to get in to the wealth generation business nor to procure the services of those who will happily reduce the amount of tax an individual pays.

    The author of this article is trying to defend the the indefensible, an increasing wealth gap is not good for society (as Czar Nicholas) there needs to be some sort of steady state position whereby there is a gap but it is not seen as unfair or subject to material change over long periods which is the problem today. One only has to look at the US to see even the mega wealthy there are concerned about this growing inequality in both wealth and income. Sensible people see the risks and want to address them. Foolish people write articles that try to hide the truth by distraction in an effort to continue the current trend.

    1. Anonymous Coward
      Anonymous Coward

      Re: Another "stop picking on the rich" article

      For starters, +1 to your post.

      It's very funny watching the 1% Ruling Class - and their sycophants - meltdown into sheer panic because of a very academic Economics book. "THE COMMUNISTS ARE COMING AND THEY WILL TAKE MY CANDELLABRA!!!!!"

      The idea of progressive taxation is not new. It's been practiced in the US for quite a long time. It so happens that, during that peroid, the US experienced the greatest growth in economic output and the greatest rise in standards of living. I am talking about the post-WWII period, 1950 - 1980. The 1950's also happens to be the time of the Marshall Plan, when the US invested very large sums of money in rebuilding Western Europe. Like it or not, the Marshall Plan was a government economic support plan. Side-note: this time period also happens to be the time when the world banking system stayed very stable and boring - which is exactly how a banking system should be.

      Please don't even try bringing up "1970's stagflation". That was caused by an economic shock, itself caused by a ten-fold increase in the price of crude between 1974 - 1975, followed by another three-fold crude price increase between 1975 -1979:

      http://en.wikipedia.org/wiki/Price_of_petroleum#mediaviewer/File:Crude_oil_prices_since_1861.png

      This didn't affect the US exclusively, it affected everyone, and it had nothing to do with progressive taxation.

      What's sad is that a large number of people have apparently bought into this "You too will be a Millionnaire" bullshit, which has been sold in the media by a certain school of economic thinking - based in Chicago, IL USA - starting in the 1980's.

      The cold reality is: chances are overwhelmingly against you ever becoming a millionnaire, let alone a billionnaire. Don't believe me. Just choose a past year at random - any year. Tally up the total number of people born in the US that year, and then tally up how many of them went on to a net worth of USD $1 million+. You will be shocked at how small that number is. Your realistic chances are that you will earn a decent living if you work hard, but not much more.

      The is fundamental problem with this "inequality is a reflection of my awesomeness, I'm rich because I'm awesome, you're poor because you suck" - if you live in the US, throw in some "ordained by $DEITY" reference in here - is that it intentionally ignores its medium and long-term consequences. Creating and maintaining a society where 90% of the wealth is concentrated at the top 1% and the rest of the 99% are fighting for the scraps is a sure-fire recipe for a recessionary death spiral. 99% of the people earning less and less will have less and less money to spend on goods and services. Suppressed demand will suppress output, which will lead to suppressed wages, which will lead to suppressed tax receipts, which will lead to tax rate increases on the 99%, which will lead to less take-home pay (i.e. suppressed wages), which will lead to suppressed demand, etc etc etc. Sooner rather than later, this will affect the 1%: you may have a lot of money on paper, but that money won't be worth anything because there is no economic output to support its value.

      The insanity of this "I'm in the top 1% tax bracket because I deserve it, therefore I have no responsibility whatsoever towards the society and economic system that enabled me to reach the top 1% tax bracket" mentality is also reflected in the remedies being proposed to this inequality problem by the few of the 1% who actually understand that this extreme wealth and income inequality is indeed a problem.

      One remedy idea appears to be grounded in nostalgia for the Black Plague. Nothing beats a genocidal epidemic in taking care of the great unwashed masses. This being the 21st Century, we could do Ebola instead of Black Plague; it's quicker, spreads faster, and there's no known cure to boot. The downside is that the Ebola virus doesn't choose its next host based on said host's last year's tax returns.

      Then there's the inherent contradiction embedded in this 1%-er belief "I'm rich because I deserve it": it implies some sort of determinism. 1%-er wannabe did X, Y and Z, and these actions determined the outcome: 1%-er wannabe became a true 1%-er.

      Oi, 1%-ers! This determinism you advertise so much is Marxist, and you didn't even know it! What you're trying to do here is an ex-post-facto real-life application of historical determinism. All of you 1%-ers know what historical determinism is, because all of you have read Das Kapital, right?

      So, 1%-ers, you need to pick a side: you're either Marxists, in which case you accept historical determinism and wealth redistribution by means of progressive taxation as canonical economic dogma, or you're not. If you're not Marxists, then your entire marketing bullshit about how you became rich because you deserved it falls apart, and it becomes all too apparent that you just got lucky. It's fine having good luck and fortune in life, but relying on good luck is not a sustainable economic policy for an advanced society.

      1. Anonymous Coward
        Anonymous Coward

        Re: Another "stop picking on the rich" article

        @AC: this 1%-er belief "I'm rich because I deserve it"

        You got it wrong on just about all counts.

        First of all, top 1% isn't that hard a club to get into. Most self employed people worth their salt and those at the top of their game in salaried jobs are in it. Last I checked it takes about £100K/year to be in the top 1% (it may have drifted up with inflation over the last few years).

        Second of all, it's not a case of "I'm in the top 1% because I deserve it". It's a case of "I'm in the top 1% because I have spent the last two and a half decades (one in education and one and a half in work after that) working my ass off, and am continuing to do so."

        I fully accept that I carry a certain amount of responsibility toward contributing to the society, but ethically I only feel such responsibility toward other members of the society that have peristently worked as hard, and are demonstrating their willingness to pull their weight to the best of their ability with the same determination in the future. That is really what the debate is about. It's about a safety net for those temporarily out of luck, not about the permanent life support for defeatists too idle to take responsibility for themselves.

        1. Anonymous Coward
          Anonymous Coward

          Re: Another "stop picking on the rich" article

          Typical 1%-er inconsistent and self-contradictory bullshit:

          "First of all, top 1% isn't that hard a club to get into." Followed by "it may have drifted up with inflation over the last few years". So it's easy, but not that easy, it might even be quite hard, I don't really know. So I'll just deny there is any barrier to entry.

          Simple arithmetic fact: earning £100K/year for 10 years does not make you a millionnaire. You pay taxes, and you spend your earned money on other things. You cannot save £1 Million in 10 years by earning £100K/year for 10 years. Take inflation into account. You're paying now more than you paid 5 years ago for the same good or service. Assuming a constant earnings rate of £100K/year, you're saving less now than you were saving 5 years ago. Therefore, your yearly savings rate is sloping downwards.

          Nice try, though.

          "I fully accept that I carry a certain amount of responsibility toward contributing to the society, but ethically I only feel such responsibility toward other members of the society that have peristently worked as hard [ ... ]".

          And who makes that determination? You? Someone who earns a minimum wage living doing hard physical labor - do they work harder than you, just as hard as you, or less hard than you?

          Is a minimum wage pay rate an accurate reflection of laziness? That is what you seem to be implying.

          What is your time span commitment for higher taxes? You only pay higher taxes for three weeks/year because that's the maximum amount you'd tolerate?

          What is your definition of "temporarily out of luck?" Are you aware that, at any given point in a continuous time series, there exists a certain percentage X of people who are "temporarily out of luck"? This percentage does not go up or down according to your wallet wishes. Therefore your tax rate must remain a constant.

          Perhaps you should look into taking some remedial math classes.

          1. Anonymous Coward
            Anonymous Coward

            Re: Another "stop picking on the rich" article

            @AC: *£100K/year for 10 years does not make you a millionnaire.*

            Who said anything about millionaires? You don't need anywhere near £1M to be in the top 1% of earners:

            http://webarchive.nationalarchives.gov.uk/20121106103415/http://www.hmrc.gov.uk/stats/income_tax/table2-4.pdf

            The threshold to be in the top 1% is at about £156K/year (you score half a point, I hadn't explicitly checked the exact number before my first post, but the point remains).

            *And who makes that determination?*

            The determination is based objectively based on how long they have spent working vs. how long they have spent being propped up. About 90% skewed toward working seems reasonable.

            *What is your time span commitment for higher taxes?*

            Lifetime, provided piss takers are removed from the system.

            *What is your definition of "temporarily out of luck?"*

            No more than 12 months in a row, and no more than 10% of working life except where very strongly medically justified.

            I guess you don't need math - you are doing just fine trying to spend other people's money as it is in your imaginary world where everything is someone else's responsibility.

            1. Anonymous Coward
              Anonymous Coward

              Re: Another "stop picking on the rich" article

              > I guess you don't need math.

              No, I do need math, because I prefer not typing bullshit numbers I made up out of thin air over the last 7 minutes.

              You, however, seem to believe that you don't need math, because the world you live in is exclusively centered around you, your wallet wishes and your own economic axioms you just invented. And when reality does not obey your wishes, there's always bullshit propaganda to fall back on.

              Marketing hint - I'll give you this for free: bullshit propaganda is much more effective WHEN YOU TYPE IT IN ALL-CAPS.

              That's OK, there used to be a time when most people believed that the Earth is flat, and is also at the center of the Solar System.

              1. Anonymous Coward
                Anonymous Coward

                Re: Another "stop picking on the rich" article

                *You, however, seem to believe that you don't need math, because the world you live in is exclusively centered around you, your wallet wishes and your own economic axioms you just invented.*

                Hey, I cited my sources, while you failed to provide any shred of evidence that your opinions came from anywhere but your back orifice.

                1. Anonymous Coward
                  Anonymous Coward

                  Re: Another "stop picking on the rich" article

                  > Hey, I cited my sources, while you failed to provide any shred of evidence that your opinions came from anywhere but your back orifice.

                  1. John Maynard Keynes - The Inflation of Currency as a Method of Taxation, 1922.

                  2. John Maynard Keynes - A Treatise on Money, 1930.

                  3. John Maynard Keynes - The General Theory of Employment, Interest and Money, 1936.

                  4. Milton Friedman - A Monetary History of the United States, 1867–1960, 1963 (reprint)

                  5. Karl Marx - Das Kapital, 1867, Gateway Books reprint from 1996.

                  Which of these books have YOU read?

                  1. Anonymous Coward
                    Anonymous Coward

                    Re: Another "stop picking on the rich" article

                    Ah, Keynes. The economist that, unlike Hayek, didn't win the Nobel prize for economics.

                    1. Anonymous Coward
                      Anonymous Coward

                      Re: Another "stop picking on the rich" article

                      That's not what I asked.

                      I asked which one of the books I quoted as sources YOU have read.

                      I take it the answer is "None of the above".

                      But, you know everything there is to know about monetary theory, Keynesian vs. neo-classical, monetary vs. fiscal policy as methods of taxation, central banking systems, etc. You must have been born with this knowledge.

                      I envy you. I had to spend time reading and understanding these books.

                      1. Matt Bryant Silver badge

                        Re: AC Re: Another "stop picking on the rich" article

                        "..... I had to spend time reading and understanding these books." The problem seems to be that you read them but failed miserably on both comprehension and application of their theories, probably due to the preconceptions you lumbered yourself with before starting your 'study'. It's ironic that you list Keynes and Freidman seeing as the latter became one of the former's biggest critics. Maybe you should take the time to,go,back and read them again?

                  2. Matt Bryant Silver badge
                    FAIL

                    Re: AC Re: Another "stop picking on the rich" article

                    ".....Which of these books have YOU read?" All of them except Das Kapital - it got REALLY boring half-way through Volume 2. The problem is you not only limited your shallow reading to what obviously sat with your preconceptions, you also failed to read any critiques of them, or took a step into the real World to see the difference between theory and practice. Try leaving the ivory tower sometime, learn more than the words of dead men, it helps.

                    1. Anonymous Coward
                      Anonymous Coward

                      Re: AC Another "stop picking on the rich" article

                      > The problem is you not only limited your shallow reading to what obviously sat with your preconceptions, you also failed to read any critiques of them [ ... ]

                      @MattBryant

                      And how exactly do you know which and how many Economics and Financial Theory books I have read up until today?

                      I provided a list of sources in support of what I had stated in my original post. That's not the complete list of Economics book I've read in my entire life.

                      But, perhaps you can provide a reference in support of your earlier millionnaire calculations. ;-)

                      1. Matt Bryant Silver badge
                        FAIL

                        Re: AC Another "stop picking on the rich" article

                        "....That's not the complete list of Economics book I've read in my entire life....." I don't doubt you have read a great many books, you just seem to be lacking in the ability to apply their knowledge. After all, reading without comprehension is simply gathering educational Brownie points to try and impress the rest of the chattering class. For all the relevance you seem to be able to bring to bear you might as well have studied the economic theories of Brer Rabbit.

                        ".....But, perhaps you can provide a reference in support of your earlier millionnaire calculations." The fact that you seem unable to counter it gives lie to your pretence at economic superiority. I admit the sums are simplified but surely you don't need Keynes's help,to prove or disprove it, or is it that all you can do is regurgitate the thoughts of others rather than actually doing the test of the theory yourself? If you wish to pretend the simple sums I posted are tosh then please do astonish us with your insight.

                        1. Anonymous Coward
                          Anonymous Coward

                          Re: AC Another "stop picking on the rich" article

                          > The fact that you seem unable to counter [ ... ]

                          @MattBryant

                          I can't counter bullshit. Your calculations are not only wrong, they just aren't calculations at all.

                          You take the initial hypothesis "become a millionnaire in 10 years by earning £100K/year" - which is mathematically impossible because of the economic reasons I've already outlined.

                          To this hypothesis you add some unknown-about investment fund which was never part of the initial hypothesis, then some inheritance which again was never part of the initial hypothesis, and then you somehow magically prove yourself right.

                          Do you even understand the difference between bullshit and math?

                          Here's a brief introduction to Logic 101: You cannot alter the initial hypothesis during the course of a logical reasoning, when you discover that the initial hypothesis cannot possibly support your preconceived desired conclusion. This works in Marketing, it doesn't work in Math or Logic.

                          Please go back and post about Solaris, SPARC and how HP-UX is so much better. That's your turf. Math and logical reasoning are not your cup of tea.

                          1. Matt Bryant Silver badge
                            FAIL

                            Re: AC Another "stop picking on the rich" article

                            "I can't counter bullshit. Your calculations are not only wrong, they just aren't calculations at all...." So it should be really easy for you to debunk them then, right? This should be entertaining! Do you wish to argue that 10% of 1m is not 100k? Or maybe you have a problem with my pegging inflation at 3-5%? Or could it just be you're just lost because Keynes doesn't have a chapter on calculating the returns on investments?

                            .....You take the initial hypothesis "become a millionnaire in 10 years by earning £100K/year" - which is mathematically impossible because of the economic reasons I've already outlined....." Again, try actually COMPREHENDING rather than skim-reading. You would find I posted no such premise, I actually suggested the 'rich kid' that inherits a million and then lives off the interest from investing it has the same effective income as someone that earns $100k per annum, therefore the person that earns $100k, whether it is over one year or ten, is 'living like a millionaire'. It seems the only area you are consistent in is your ability to fail to comprehend. Are you dyslexic?

                            ".....To this hypothesis you add some unknown-about investment fund which was never part of the initial hypothesis...." Actually, that was my hypothesis. You do know that they first thing they teach you in school is to READ and UNDERSTAND the question before you try to answer it?

                            ".....Do you even understand the difference between bullshit and math?...." It seems you do not, seeing as you have provided neither mathematical proof nor been able to prove my simple example is the 'bullshit' you claim it is. Please do remember, you don't get any marks if you don't show your working out, and just leaping to a wrong answer without showing any working out is a guaranteed path to failure.

                            ".....You cannot alter the initial hypothesis during the course of a logical reasoning....." It seems you were so filled with righteous moral outrage you have confused my example with the original posters, can I suggest you go back, read the thread, take a chill pill and then try again? Just to give the readers some more comedic material.

                            1. Anonymous Coward
                              Anonymous Coward

                              Re: AC Another "stop picking on the rich" article

                              @MattBryant.

                              Dude, I'm done trying to reason with you. You are a waste of time.

                              Go back to HP-UX on Itanium pre-sales consulting, or whatever it is that you do.

                              1. Matt Bryant Silver badge
                                Happy

                                Re: AC Another "stop picking on the rich" article

                                "....I'm done trying to reason with you...." Which translates to you having finally realized you should have beaten a retreat a long time ago.

                                ".....You are a waste of time...." So you have all that time to read all those (boring) economic texts and Marxist claptrap yet simply don't have enough time to debate them? And yet you claimed you could debunk my 'bullshit' maths with ease! Wow, how do you run so fast with your tail between your legs? ROFL.

                                1. Anonymous Coward
                                  Anonymous Coward

                                  Re: AC Another "stop picking on the rich" article

                                  @MattBryant:

                                  > So you have all that time to read all those (boring) economic texts and Marxist claptrap yet simply don't have enough time to debate them?

                                  No. I don't have time debating YOU. YOU are a waste of time.

                                  Marx, DeSoto, Keynes, Friedman, Samuelson, Krugman, are not a waste of time, they are quite an interesting read. And, unlike you, they can carry a logical argument from hypothesis to conclusion. Whether or not I agree with everything they write, that's another matter.

                                  But it's good to know you are comparing your own Internet posts to Marx, Keynes or Krugman.

                                  Next up: Matt Bryant as Ghandi. ABC mini-series.

                                  1. Matt Bryant Silver badge
                                    FAIL

                                    Re: AC Another "stop picking on the rich" article

                                    "..... I don't have time debating YOU. YOU are a waste of time....." Excuse my obtuseness, but didn't you insist that my simple example was 'bullshit' and easy to debunk, so it really shouldn't take much of your uber-econimically-knowledgeable time to disprove, right? After all, you say you have no time to waste but have posted many times since first querying my example, so it would seem you DO have plenty of time to waste. Or is it that you now find that you have painted yourself into a corner? LOL!

                                    ".....Marx, DeSoto, Keynes, Friedman, Samuelson, Krugman, are not a waste of time, they are quite an interesting read...." You could argue the same about thousands of texts, but the real value - which you seem to be in short supply of - is the ability to take their teachings and APPLY them to discussions. Rote learning for the sake of rote learning is just a trick for parrots. I do hope your parents took advantage of the free education available, and didn't pay through the nose for your wasteful time spent ticking off titles on your reading list whilst learning SFA. Seeing as that TLA is not in Marx, Engels or any other of your religious texts, you may need someone who spent more time outside the library in the real World to explain it to you.

                                    "....But it's good to know you are comparing your own Internet posts to Marx, Keynes or Krugman....." No I didn't, but it is revealing to see you have now fallen back on simply making stuff up to fit your story - a true Piketty fan! I suppose it was far too much to expect you to add to the discussion once you had stopped bragging about what you considered an extensive reading list. Once again, either debunk my simple example of how a million in cash can equate to an earning of 100k - as you stated you could - or go sulk in the library.

                                  2. Tom 13

                                    Re: AC Another "stop picking on the rich" article

                                    Marx, DeSoto, Keynes, Friedman, Samuelson, Krugman, are not a waste of time, they are quite an interesting read.

                                    DeSoto and Freidman yes. Not the others. Especially not Marx, who isn't even quoted by Marxists and when it comes to bad is second only to the poetry of Paula Nancy Millstone Jennings of Sussex.

                                    1. Anonymous Coward
                                      Anonymous Coward

                                      Re: AC Another "stop picking on the rich" article

                                      Thank you very much for your critique of the economics curricculum required reading at one of the top 10 university economics departments in the US - which is where I did my undergrad. I'll make sure that the faculty is put on alert of your findings.

                                      1. Matt Bryant Silver badge
                                        FAIL

                                        Re: AC Another "stop picking on the rich" article

                                        ".... which is where I did my undergrad....." Nil point! Just because the institute had an illustrious record does not mean you have or will have one at all. For all we know, you could be George Soros's love-child and he bought your degree.

                                        "..... I'll make sure that the faculty is put on alert of your findings." Please tell them they also - very obviously - need to tighten up on their admissions policy.

                                        1. Anonymous Coward
                                          Anonymous Coward

                                          Re: AC Another "stop picking on the rich" article

                                          Matty-Boy,

                                          Since you and your buddy Tom13 both appear so thoroughly convinced of your economics and finance knowledge, time to put your math where your Internet is. Here's a small exercise for you:

                                          Bootstrap the 1-year risk-free rate from today's spot.

                                          You can write your calculations in plain English.

                                          1. Matt Bryant Silver badge
                                            FAIL

                                            Re: AC Another "stop picking on the rich" article

                                            ".....time to put your math where your Internet is...." Gosh, you're not STILL desperately avoiding providing the debunking of the simple example I made!?! AND after you insisted the only reason you couldn't was because you didn't have the time to waste, yet here you are posting more twaddle. Is someone telling porkies....?

                                            1. Anonymous Coward
                                              Anonymous Coward

                                              Re: AC Another "stop picking on the rich" article

                                              Matty-Boy,

                                              Post the risk-free rate bootstrap calculation, or STFU. Or better, yet, no, don't STFU, keep going. You're very entertaining.

                                              I'll give you a hint: boostraping 1-year risk-free is the first interview question when you want to get a finance job at a bank. If you can't answer it, or you try bullshitting your way through the answer - that's probably what you would do - your finance job search is over.

                                              You wanted real-life, practical economic and finance experience. Here you go.

                                              1. Sir Runcible Spoon Silver badge

                                                Re: AC Another "stop picking on the rich" article

                                                Whilst I have, on occasion, disagreed with Matt on the style of his communications I have to jump in and point out that the 10% he mentioned was as a result of a managed portfolio (although the use of the word interest in the same sentence might have led you astray).

                                                "then lives off the interest from investing it" would probably read better if it said "then lives off the gains from investing it", then again I might have misunderstood :)

                                                There was nothing wrong with the mathematics, although to imply that a millionaire and working person earning $100k had a similar standard of living is a bit of a stretch.

                                                I see two primary differences, mostly psychological in nature.

                                                1) The millionaire doesn't have to work for his portfolio income and doesn't have to answer to some shitty boss who didn't get his oats at the weekend and takes it out on the employees.

                                                2) The millionaire has a financial cushion should his portfolio stop delivering 10% - the worker can lose his job and won't have $1m to fall back on.

                                                As a an extra bonus, I'm pretty sure the millionaire would find it much easier to secure lending for a more grandiose business proposition than the worker.

                                                I realise Matt placed a caveat on his hypothesis "in terms of disposable income" which I would have to agree with, but that's as far as it goes.

                                                1. Anonymous Coward
                                                  Anonymous Coward

                                                  Re: AC Another "stop picking on the rich" article

                                                  > the 10% he mentioned was as a result of a managed portfolio (although the use of the word interest in the same sentence might have led you astray.

                                                  Finance and Economics have very clearly defined terms.

                                                  Interest: A fee paid for the use of another party's money. To the borrower it is the cost of renting money, to the lender the income from lending it.

                                                  Portfolio Return: The monetary return experienced by a holder of a portfolio.

                                                  As such: interest is a fee to be paid by the borrower to the lender of an X amount of money.

                                                  Portfolio return is a monetary return - which can be a positive or negative value - provided by the purchase and holding of a collection of securities over a given period of time. Portfolio returns can be expressed as percentages of the spot value of the portfolio. The spot value of an investment portfolio is marked daily. Therefore, a portfolio's return changes daily as well. However, portfolio returns are not interest rates.

                                                  Interest paid on a loan can never be negative. You do not lend a bank money with the expectation that at the end of the loan term you will recover less money than you lent out. The lower-boundary for a loan interest rate is zero. When you lend money at interest, you are guaranteed that the minimum you will get back at loan maturity is the same exact notional amount you initially lent out. If you lend money at zero interest, you are guaranteed to lose money. See Time Value of Money theory and Risk-Free Interest Rate.

                                                  Assumption: the loan does not default. If the loan defaults, the recovery rate can range anywhere between 0% and 99%.

                                                  Portfolio returns can be negative. You can buy a collection of securities, hold them in a portfolio, and these securities can lose N% of their value over time. N can range between 0 and 100. There is no guarantee that a portfolio will maintain its initial - day zero - notional value for the duration of the holding of the securities.

                                                  Unlike a loan, which guarantees a constant rate of return, an investment portfolio does not guarantee a constant rate of return. Therefore:

                                                  - the assumption that one can live on an investment portfolio paying 10% over an indeterminate length of time in the future has no basis in fact. No responsible portfolio manager will guarantee a constant rate of return in the future.

                                                  - the only way you can have a 10% constant rate of return is to lend money to a bank at 10%. Meaning: deposit the money at the bank and expect that the bank will pay 10% APR on your deposit. I know of no bank today paying 10% APR on a deposit. It would be impossible for any bank to pay that interest on deposit because of the controlling market rates I have already provided: 3-month LIBOR, Fed Funds rate and 10-year US Treasury Bond Yield.

                                                  1. Sir Runcible Spoon Silver badge

                                                    Re: AC Another "stop picking on the rich" article

                                                    There's nothing in your post that I disagree with AC, but somehow I feel that you are determined to ignore that the information that was provided was an example, and it is possible to get back 10%/annum (if not guaranteeable).

                                                    For example, I have a single trade running in my FX account that is currently running at +28% that's been running for less than a day, it has the potential (i.e. the extreme profit target, beyond which it would be practically impossible to expect price to go beyond before returning to current price) would return around +180%, but that could take a couple of weeks.

                                                    My risk on this particular trade was just around 5% (unusually high but it was a good level and I decided to push the boat out). So, in effect, I have made a 5:1 risk reward ratio (I know that looks the wrong way around but that's the term people use and the way they present the figure).

                                                    My current win/loss is around 45%. If I average a R:R of 3:1 (taking into account break-even trades etc.) and a standard risk of 2.5% and make about 10 trades a week I could possibly see an annual return well in excess of 10% I'm sure you will agree.

                                                    If I maintain my consistency over the course of a year, I would be prepared to trade other people's money and offer them a guaranteed 10%, as long as I kept the rest :)

                                                    1. Matt Bryant Silver badge
                                                      Joke

                                                      Re: Loon Re: AC Another "stop picking on the rich" article

                                                      Nudges the Piketty fans and points - "Get him, he's one of The Evil Rich!"

                                                      1. Sir Runcible Spoon Silver badge

                                                        Re: Loon AC Another "stop picking on the rich" article

                                                        "Get him, he's one of The Evil Rich!"

                                                        I wish. One day maybe when I can be consistent and not let my ADHD rule my behaviour so much :)

                                                        1. Matt Bryant Silver badge
                                                          Go

                                                          Re: Loon AC Another "stop picking on the rich" article

                                                          "....One day maybe...." Proceed!

                                                  2. Matt Bryant Silver badge
                                                    FAIL

                                                    Re: AC Another "stop picking on the rich" article

                                                    "Finance and Economics have very clearly defined terms......" Wow, you really just can't stand having to admit you were wrong! And - boy! - are you sooooo boring! I can see why you would take comfort in all the careful-constricted statements that Marx makes in Das Kapital, never once stopping to look beyond the clever prose to realise that mankind simply does not work by such rigidly imposed and uniform 'rules'. You are the typical mathematician's failure, thinking that everything can be broken down and reconstructed with set terms and precise mathematical theorems. When all else fails you try and split hairs over definitions. You really do need to get out in this place called The Real World once in a while, chum.

                                                  3. Anonymous Coward
                                                    Anonymous Coward

                                                    Re: AC Another "stop picking on the rich" article

                                                    **Interest paid on a loan can never be negative.**

                                                    Actually, this has happened before:

                                                    http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/3567585/Tens-of-thousands-of-home-owners-could-have-their-mortgage-paid-by-banks.html

                                                  4. Anonymous Coward
                                                    Anonymous Coward

                                                    Re: AC Another "stop picking on the rich" article

                                                    **the only way you can have a 10% constant rate of return is to lend money to a bank at 10%.**

                                                    Ostensibly - maybe. But in reality a long term statistical record is sufficient to void this point. Nothing is ever guaranteed (job, pension, investment returns). But unless your really suck at risk management, over the medium-to-long term the statistical average is where it's at for all intents and purposes.

                                                    1. Anonymous Coward
                                                      Anonymous Coward

                                                      Re: AC Another "stop picking on the rich" article

                                                      You are so off the mark it's funny. Not to mention that your last post makes absolutely no sense.

                                                      First of all, some pensions are guaranteed. Not all pension plans are, but many are.

                                                      Now, since you brought up "statistical average". Why don't you take a look at the inflation-adjusted S&P500 returns over the past 14 years, i.e. fom June 1st, 2000 to June 1st, 2014.

                                                      You will discover that, in inflation-adjusted terms, and for this time period, the S&P500 is down 20% when using the CPI as discount basis. If you use more accurate inflation measures - the CPI consistenly understates the true rate of inflation in the US - the S&P500 is down 30% for the same time period. The same is true for NASDAQ.

                                                      Why is inflation relevant to this? Because inflation determines how much you can save a year, assuming a constant cashflow - and constant cashflow was one of the assumptions of this hypothetical exercise.

                                                      So, yeah. You and Matty-Boy, the wunderkinds of finance. You haven't the first clue, neither of you. You keep staring at some stock index number and think: "Up - GOOD, Down - BAD".

                                                      Go buy a calculator.

                                                      1. Matt Bryant Silver badge
                                                        Happy

                                                        Re: AC Another "stop picking on the rich" article

                                                        ".....You and Matty-Boy, the wunderkinds of finance...." Is that finally your admission that you can't mathematically disprove the very simple example of how a man with a $100k income effectively lives like a millionaire? So glad you finally got round to it.

                                                        "....Go buy a calculator." What, you need a calculator to work out 10% of $1m? What 'illustrious' educational institution was it you claimed you attended?

                                                2. Matt Bryant Silver badge
                                                  Boffin

                                                  Re: Loon Re: AC Another "stop picking on the rich" article

                                                  "....There was nothing wrong with the mathematics, although to imply that a millionaire and working person earning $100k had a similar standard of living is a bit of a stretch...." Agreed, it is a stretch, but it's meant to be a discussion piece and highlights the difference between disposable income and 'wealth'.

                                                  "....The millionaire doesn't have to work for his portfolio income...." True, but then he does have to be clever with it or his wealth will be gone. The history of Europe is littered with examples of 'the rich', even whole countries, that made bad decisions with their wealth and ended up ruined. The Spanish Armada is a perfect example of such an 'investment gamble' that ended up not delivering a return and destroying wealth, effectively bankrupting the Spanish Kingdom. But Piketty bases his whole assumption on the idea that once you are rich you can only get richer, an obvious fallacy as demonstrated by the number of bankruptcies even in 'good times'. A simple example is that of SUN Systems - from a market cap of $200bn to being sold for about $4bn in only a few years, it made a big dent in the portfolio of a lot of techies I knew, and I'm sure it turned some SUN stockholders from 'paper-millionaires' into 'paper-paupers' at the time.

                                                  "....The millionaire has a financial cushion should his portfolio stop delivering 10%...." Again true, but then he is disposing of his 'wealth'. Should he not find another means of income then he will eventually burn through his cash and end up one of the 'poor'. If he has never worked and has no skills he is unlikely to find as good a paid job as the man with experience and skills from an $100k job. I can't remember who made the quote, but one British earl, when asked why he insisted his children went to uni and got real skills and jobs, said something along the lines of 'all the rich are one bad day on the Stock Exchange away from hard work'.

                                                  ".....As a an extra bonus, I'm pretty sure the millionaire would find it much easier to secure lending for a more grandiose business proposition than the worker....." Possibly, but if his investment gamble fails and he loses his fortune, the worker with the skills and experience is probably better placed to pick himself up and try again than the now ex-rich. Again, if Mr Rich isn't smart with his money it does not guarantee he will always be rich, whereas at least the $100k ex-employee has the chance to earn new income in a new job.

                                              2. Matt Bryant Silver badge

                                                Re: AC Another "stop picking on the rich" article

                                                "....Post the risk-free rate bootstrap calculation....." Puh-lease, you only posted that because you were desperate to avoid the admission your earlier statement, that you could easily debunk my simple example of a person with an income of $100k could live like a millionaire.

                                                ".....I'll give you a hint....." Seriously? Apart from the fact you could get that off Google (or Ivestopedia), you are still only avoiding the much simpler mathematical challenge you set yourself earlier. Gee, I wonder why that is - not!

                                                ".....the first interview question when you want to get a finance job at a bank...." LOL! Apart from the fact I don't work as an investment banker, I work in computing (big hint - it's a computing website!), I have designed the systems that do those calculations FOR the bankers. What, you're still using a pencil and slide rule for your yield curves? - how quaint! I'm the modern and better option the banks choose because you're obsolete.

                                                As part of my degree I had to cover economics amongst other subjects, hence the additional (and very boring) reading that promptly got forgotten, along with a shedload of other 'clever stuff' (such as the similar curve calculations for predicting decay in transistor junctions at different temperatures, voltages and currents, which I'm sure you won't have a clue how to do). Like a large chunk of those peripheral subjects I studied I simply have never had to make much use of the knowledge.

                                                The difference is I have applied and learned other knowledge in depth, whereas you seem to be stuck at the regurgitating-my-undergrad-reading-list phase. As shown by your reflexive denial of my simple example, declaring it 'bullshit' out of hand, yet then realising that you can't disprove it. First rule of any maths - don't rely on gut answers. So, do you finally want to admit you were wrong or do you want to try some more mathematical willy-waving in an attempt to avoid the fact? It's alright, the rest of the readers have probably guessed long ago that you've just been childishly trying to avoid that admission.

                          2. Anonymous Coward
                            Anonymous Coward

                            Re: AC Another "stop picking on the rich" article

                            **You take the initial hypothesis "become a millionnaire in 10 years by earning £100K/year" - which is mathematically impossible because of the economic reasons I've already outlined.**

                            Your fundamental mistake is that you seem to think that to be in the top 1% of earners one has to be a millionaire. Figures have been provided multiple times that demonstrate that not to be the case. The top 1% bar is nowhere near the millionaire mark. There are many ordinary (if clever) hard working people who are easily in the top 1% of income bracket. But your leftist views are preventing you from recognizing that.

                  3. Tom 13

                    Re: Another "stop picking on the rich" article

                    5. Karl Marx - Das Kapital, 1867, Gateway Books reprint from 1996.

                    And right there is where everybody knows you are lying through your teeth and out your butt at the same time. NOBODY reads Das Kapital. They read the Cliff Notes or another economist's abridged version because it's crap, long, crap, boring, and crap.

                    1. Matt Bryant Silver badge
                      Happy

                      Re: Tom 13 Re: Another "stop picking on the rich" article

                      "....because it's crap, long, crap, boring, and crap." Tom, you are taking the fact that it is crap and boring and assuming that the crappiness would discourage a reasonable person from reading it. Therein lies the fault in your otherwise splendid logic - peoples of one religion or another often aren't what might be considered reasonable. They often glorify those that claim to have studied their religious texts, so it really should not come as a surprise that there really are those, like our poor AC, that think reading Das Kapital is a great educational and social achievement.

                    2. Anonymous Coward
                      Anonymous Coward

                      Re: Another "stop picking on the rich" article

                      > NOBODY reads Das Kapital.

                      Translation: I was unable to make it through Das Kapital, therefore no-one else is able to make it through, either.

                      Flawless logic. You should hang out more with Matt Bryant.

                      Almost all economics books are boring. Had you ever read any Economics books, you would know that already.

                      Keynes is an exception because he writes very well. Samuelson or Friedman are just about as boring as Marx for example.

          2. Matt Bryant Silver badge
            FAIL

            Re: AC Re: Another "stop picking on the rich" article

            "....Simple arithmetic fact: earning £100K/year for 10 years does not make you a millionnaire...." Well, yes and no. Let's take the much hated 'rich kid' that the Socialists like to whine about so much. He inherits $1m but doesn't work, so he lives off the income from his $1m. If he just leaves it in the bank then inflation and tax will erode it's value and he won't be one of the 1% for long. If he gets some investment manager to play on the market for him he could average a return of 10%. So Mr Rich actually has an income of $100k (10% of $1m) which he can spend without decreasing his investment fund. Actually, if he wants to grow his fund to stay ahead of inflation, he actually needs to plough $30-50k a year of his 'profit' back into his investment fund, so his actual income is only $50-70k a year (ignoring the tax he will have to pay which reduces his actual disposable income even further). Which actually is LESS than the example given by our hard-working poster. So, in terms of disposable income, earning $100k is not really that different to being a millionaire.

            1. Anonymous Coward
              Anonymous Coward

              Re: AC Another "stop picking on the rich" article

              OP> [ ... ] earning £100K/year for 10 years does not make you a millionnaire [ ... ]

              MB> Well, yes and no.

              @Matt Bryant:

              Please make a modest investment in a calculator and in a second-year college calculus book teaching Newton's binomial, to be followed by limits, integrals, and then first-order derivative. You don't need more than this.

              I say this with love.

              1. Matt Bryant Silver badge
                FAIL

                Re: AC Another "stop picking on the rich" article

                "....I say this with love." You may say whatever you like however you like, that is your prerogative, but I note you are unable to post a counter to the quite simple post. Do you really need a calculator to handle 10% of $1m? Or were you hoping no-one would notice?

          3. Tom 13

            Re: Another "stop picking on the rich" article

            Simple arithmetic fact: earning £100K/year for 10 years does not make you a millionnaire.

            If you think that, you need to go back to elementary school and learn simple arithmetic facts. If you put away 10K at 10% interest, you will be a millionaire in 26 years. If you earn 15%, it drops to 20 years. Put away 20K/yr at 10% and it takes 19 years. If you earn 15%, only 16.

            I've been a piker most of my life. From age 22 to 40 I never put away more than $5K in my retirement account. Hell even now I'm barely putting in that much. Back about 5 years ago I was RIFfed from a job I'd held for 12 years. The value of my rollover was well north of $100K. Also, if you assume costs are rising you must also assume wages are rising. You don't get to vary one value without needing to estimate other values.

            This, to paraphrase Ronnie, is the fundamental problem of progressives: so much of what they think they know simply isn't so.

            1. Anonymous Coward
              Anonymous Coward

              Re: Another "stop picking on the rich" article

              > If you put away 10K at 10% interest, you will be a millionaire in 26 years.

              ROFLMAO. Where exactly do you "put away 10K/year at 10% interest"?

              Fed Funds target rate is 0.25%, currently (today) it is 0.08%.

              10-year treasury bond yield is somewhere between 2.4 and 2.6%.

              3-month LIBOR is 0.23%.

              Where do you get 10% interest on a deposit from all this?

              1. Anonymous Coward
                Anonymous Coward

                Re: Another "stop picking on the rich" article. to Matt Bryant

                "Fed Funds target rate is 0.25%, currently (today) it is 0.08%."

                "10-year treasury bond yield is somewhere between 2.4 and 2.6%."

                "3-month LIBOR is 0.23%."

                "Where do you get 10% interest on a deposit from all this?"

                Matt, I would like to know the answer also. I am unaware of any source of 10 percent interest or anything close.

                1. Matt Bryant Silver badge
                  FAIL

                  Re: Another "stop picking on the rich" article. to Matt Bryant

                  "...."Where do you get 10% interest on a deposit from all this?"....." I said investment, not a deposit. Friends in the City assure me it is still quite possible to see such returns on LARGE investments, not kiddie savings. Besides, I picked the 10% figure as it made the maths so simple I was hoping even the sheeple could follow it - apologies for over-estimating your capabilities again.

                  But, if you like, we can do the sums again with a figure more to your liking, they actually only strengthen my position - that someone earning an $100k income can live like a millionaire - and undermine your insistence that is 'bullshit'. If we adjust the sums and Mr Rich inherits his $1m, if he wants to maintain that amount (and ignoring tax and the long-term loss due to inflation) then he has to live off the interest as income. If you want to drop the rate to say 2.5% (again, I'm hoping that's going to be an a easy figure for you to handle, but maybe you should seek the help of a responsible adult?), then his interest before tax drops to only $25k, giving him an income that is not going to be buying yatchs or attracting supermodels. Which means the prior example of a guy earning $100k is now equivalent to someone trying to live off the income of a $4m deposit!

                  So, thanks for helping to destroy your own argument even further. Are you sure you really want to try debating this anymore, given your total lack of success so far? We can always re-do the sums with the Fed figure of 0.25% you mentioned if you really want to make yourself look even more stupid.

                  1. Anonymous Coward
                    Anonymous Coward

                    Re: Another "stop picking on the rich" article. to Matt Bryant

                    " I said investment, not a deposit. Friends in the City assure me it is still quite possible to see such returns on LARGE investments, not kiddie savings."

                    Does your 10k per year qualify as large enough to get the quoted 10%?

                    "Besides, I picked the 10% figure as it made the maths so simple" so why not use 100%. That's even simpler.

              2. Anonymous Coward
                Anonymous Coward

                Re: Another "stop picking on the rich" article

                **ROFLMAO. Where exactly do you "put away 10K/year at 10% interest"?

                Fed Funds target rate is 0.25%, currently (today) it is 0.08%.

                10-year treasury bond yield is somewhere between 2.4 and 2.6%.

                3-month LIBOR is 0.23%.

                Where do you get 10% interest on a deposit from all this?**

                You, sir, are either ignorant or an idiot (or both). FTSE100 yeid (share price + dividends) for 2013/2014 (June-June) is about 8.5%. For 2012/2013 it is nearly 27%. I'd invite you to google for stock tracker investment funds, but this may be either beyond you, or far too capitalist to fit with your ideological views.

                1. Anonymous Coward
                  Anonymous Coward

                  Re: Another "stop picking on the rich" article

                  > You, sir, are either ignorant or an idiot (or both).

                  And you, Sir, are a genius. You do not understand the difference between a stock index. a cash depost at a bank, and the interest paid by the bank on this deposit.

        2. JLV Silver badge

          Re: Another "stop picking on the rich" article

          >I only feel such responsibility toward other members of the society that have peristently worked as hard

          Well, that's a nifty argument. As only 1% of others have worked as hard, by your definition, then you really only feel any responsibility towards your fellow rich.

          Now, that is probably not what you meant, but a lack of empathy towards the less fortunate is at least as much a problem as everyone wanting only those earning more than themselves to pay taxes. To the point where the US presidential 2012 tax debate was about raising taxes on >$250K incomes in a country with 65K median income ;-) and even that coming from the Obama camp only.

          1. Anonymous Coward
            Anonymous Coward

            Re: Another "stop picking on the rich" article

            **As only 1% of others have worked as hard, by your definition, then you really only feel any responsibility towards your fellow rich.

            Now, that is probably not what you meant, but a lack of empathy towards the less fortunate is at least as much a problem as everyone wanting only those earning more than themselves to pay taxes.**

            You are entirely correct - that is not what I meant. The point of contention is not about those less fortunate, it is about those less willing. As somebody pointed out earlier in the thread, here in UK the number of long term unemployed hasn't changed much over the past couple of decades, yet millions of foreigners have come to the country in that time and found jobs, so clearly the problem isn't the lack of jobs, it is the lack of willingness to work.

            It's an ethical issue, not an economic one, and in the same way that some of those being propped up decide it's easier to do nothing and get something than to do something and get more, you can only tax those on the top end before they decide to pack it rather than spending more time working to support nameless others than to support their own family.

      2. Matt Bryant Silver badge
        FAIL

        Re: AC Re: Another "stop picking on the rich" article

        ".....Your realistic chances are that you will earn a decent living if you work hard, but not much more....." Gosh, what a terrible fate! Surely it would be so much better to trash it all and go back to good ol' Soviet breadlines, waiting six years for a crappy Lada, and having your job assigned to you by some faceless bureaucrat? Because THAT is the real result of Marxism, not the dribblings you posted. You also gloss over the fact that regardless of how few, some Americans from any generation did become millionaires, and some from very lowly origins. Trying to pretend their success is all down to luck is classic envy politics. I suggest you put down Das Kapital and try reading something a bit more modern and relevant.

    2. Tom 13

      Re: Another "stop picking on the rich" article

      This is not an option available to people at the bottom who do not have the surplus income to get in to the wealth generation business

      Bullshit. I am by no means rich. A bit above the median income for the US, but then again I live and work in the DC metropolitan area so my costs are correspondingly larger. From the time I joined the real work force I've been putting surplus income into wealth generation. Not much at first, more as I've moved up the ladder. What has screwed me over were my own stupid mistakes that were the result of my own failure at self-control when necessary. All you have to do is hold expenses less than income and you have money to invest. That's as true at $20,000 as it is at $50,000, and $5,000,000. Just look at all the music megastars who wound up in bankruptcy court because they didn't know how to do it or read a contract.

  28. Identity
    FAIL

    Speaking as an American

    (who, I must admit, has only started reading Piketty's book and has only a generalized knowledge of his argument), I can say that Mr. Worstall's take is completely beside the point. On this side of the pond, income for the masses has been stagnant since about 1974, while prices have continued to rise. Both income and wealth have risen for the top 10% and more so for the top 1%, to the extent that income for some CEOs has been clocked, in at least one instance, at 750x the income of the lowest paid worker in the same company (more commonly being a mere 250—300x). The welfare state here is not nearly so generous here as in the UK or Sweden (or France, for that matter). Medical bills are one the most common causes of bankruptcy. The current attempt to remedy this (which I call the Insurance Industry Protection Act) was a Republican idea now repudiated by said Republicans, because it was passed under a Democratic President. (Admittedly, it's a hot mess that would not have occurred had Mr. Obama lived up to his promise of a 'public option,' but that's an argument for another time.) While coverage is somewhat improved, we are now mandated to pay for it (which the Right and Mr. Worstall no doubt term a tax, and a largely regressive one at that). Of the 45 million uninsured, there are now only some 28 million... But enough of insurance and healthcare.

    Even those working today can find it hard to make ends meet. WalMart workers are infamously often on EBT (née Foodstamps) and Medicaid. True, the poor are nowhere near as poor as the poor of past centuries, and that's good, but it's not really the question. (When I lived in Holland in the 70's, they said under the Dutch system you can't soar as high, but you can't fall as far. At this point in the US, you can soar with eagles but you can still be driven into the ground.)

    There are two things, to me, that are especially germane: gross societal inequality, where 90% of the assets are in the hands of 10% of the people is a leading cause of economic catastrophe, as in the Great Depression. The other is societal and economic mobility, which except for a few, has all but ceased. This means that top percentiles stay rich, and in a land where by law money equals speech, they take control of the levers of power and warp the nation to their personal ends, which becomes a kind of economic feedback loop. One can see a future where 'wage slave' is not hyperbole.

    1. Anonymous Coward
      Anonymous Coward

      Re: Speaking as an American

      > One can see a future where 'wage slave' is not hyperbole.

      For many, that is an economic reality now.

      Debt is so high, that we now have the phrase "one pay cheque away from bankruptcy".

      Making waves at work or considering changing jobs is really not an option for many people lest they fall on dire times in the space of a single month.

    2. Tom 13

      Re: Speaking as an American

      On this side of the pond, income for the masses has been stagnant since about 1974, while prices have continued to rise.

      In 1987 when I first entered the real workforce I earned about $20K. Right now I'm north of $55K. My roomie, who works for the government started a bit above me and in now pulling down north of $80K. I use her as a rough approximation because her job is an actual engineering job, not a service one like mine. That looks pretty good to me. If you can't get your starting data correct your thesis isn't worth evaluating.

  29. TopOnePercent Silver badge

    This article is typical of those who try to draw attention away from the facts; the rich are getting richer and the poor poorer both on an income and wealth basis.

    Well, you're half right. The rich are getting richer, but so are the poor.

    Even those on minimum wage have daily access to fresh fruit and vegetables. Only the very richest had access to that 100 years ago.

    Even those on minimum wage have a centrally heated home with indoor plumbing. Only the very richest had access to that 60 years ago.

    Even those on minimum wage have access to home computers. Only the very richest had access to that 30 years ago.

    Even those on minimum wage have access to low cost foreign holiday flights. Nobody had access to that 20 years ago.

    The poor have benefitted from advances in transportation, healthcare, diet, the internet.... the list is all but endless. The uber rich of 200 years ago would outright envy the lifestyles of the poor in Britain today.

    1. Anonymous Coward
      Anonymous Coward

      dietary habits of the 1900's 1%-ers

      > Even those on minimum wage have daily access to fresh fruit and vegetables. Only the very richest had access to that 100 years ago.

      A person earning minimum wage today lives and eats today, not 100 years ago.

      > Only the very richest had access to that 100 years ago.

      Really?

      Here is a photograph if Chinatown, New York City - Mulberry Street, dated early 1900's, and showing an open market where fresh fruit and vegetables are being sold and bought:

      http://www.nychinatown.org/history/photos/mulb1900.html

      I take it that the people shown in this photo buying fresh fruit and vegetables were the very richest New York City had to offer at the time.

      1. TopOnePercent Silver badge
        FAIL

        Re: dietary habits of the 1900's 1%-ers

        I take it that the people shown in this photo buying fresh fruit and vegetables were the very richest New York City had to offer at the time.

        You've managed to go wrong three times in the same post.

        Firstly you erroneously assume that the people buying the fresh fruit and veg do so every day rather than as an occasional treat.

        Secondly, you've posted a photo of New York, when we're clearly duiscussing the UK. Got one for London? No, neither do I.

        Thridly, the people in your photo are self evidently not "the poor".

        1. Anonymous Coward
          Anonymous Coward

          Re: dietary habits of the 1900's 1%-ers

          > Thridly, the people in your photo are self evidently not "the poor".

          Ah, yes, you were talking about "someplace else, where there are no photographs disproving your bullshit".

          Facts are stubborn things.

          Chinatown, New York City, has never been a rich enclave. It has always been a working-class neighborhood. It was so at the turn of the 20th Century, it is so now, and it's been so in-between.

          At the turn of the 20th Century, working-class meant poor. As working-class you did not own a home or an apartment, your living conditions were most likely terrible, and you barely made enough money to make ends meet between paydays.

          The problem with you 1%-er sycophants and wannabes is that you can't deal with facts.

  30. I ain't Spartacus Gold badge

    I've not read Mr Piketty's book. I do rather like his name though. Ignoring the whiff of scandal from racy French politics, Thomas Piketty et Aurelie Filippetti. Piketty Filippetti, Filippetti, Piketty...

    Anyway the question I wanted to ask of those who have, is how much has our french friend accounted for emerging markets in his global inequality? For example how many Russian and Chinese billionaires are there, who've got their cash out of the weird and unsustainable way the countries are run. There have been a few billionaire dictators over the years, shoving all the cash into Swiss banks and hideously kitsch palaces (I'm looking at you Saddam Hussein, Yanukovych and Ghadaffi).

    But have we ever had the emergence of such a huge class of klepto-billionaires before? Everyone knows about the Russian lot, and to a lesser extent in Ukraine, Azerbaijan etc. But some of the figures for what the top echelons of the Chinese communist party are stealing (not to mention the rumours about Putin) - are truly mind-boggling! Also the wealth built up by a very small group of people in a few oil-rich countries (often with tiny populations) is a relatively recent thing. That together is from multiple hundreds of billions to trillions of dollars of moolah, suddenly in a very few hands - but is also quite unusual. And is enough to have major material effects on any analysis of global wealth inequality.

    It's not capitalism that allows single individuals to get rich in these particular ways - that requires government.

    1. Tom 13

      Re: who've got their cash out of the weird and unsustainable way

      Well, if you believe the Progs, they are little different than the Robber Barons of the Gilded Age.

      In terms of absolute numbers, those are probably going up. In terms of per capita, I'm not so sure. Certainly as you trace back through history the kleptocrats and mass murders made similarly large (possibly larger on a relative basis) amounts of money.

      None of which invalidates your concluding sentence. Rather I would say it enforces it. I think we made decent progress these last 250 years. It would be a pity to throw away not only them but the 400 which preceded them on the ludicrous theories of a Marxists from France.

  31. Paul Hampson 1

    Not sure I agree

    Your argument about including these things is a fallacy. For example we have not access to pensions until we can recieve them and only if we use them to subsist. Therefore, since we cannot sell, or transfer them they have not monetary value and cannot be wealth, any more than out existance has value. Furthermore, if what you are arguing is that these should not be taken into account for the wealthy either, and they are not unless they can be converted to monetary gain (such as cashing in a pension).

    Overall this is a fallacy, this is similar to believing that the child of a millionaire is wealthy, they are not until they have control of something to the extent that it can be turned into monetary gain. Furthermore wealth is not projected into the future, it in a snapshot; so pensions which are only usable as pensions(can't be cashed) are not wealth since they are not presently held.

    1. I ain't Spartacus Gold badge

      Re: Not sure I agree

      The argument is totally valid. Because the argument here isn't "there's no problem of wealth inequality". At least he's not making that in this article.

      The point is that we're already dealing with the problem of wealth inequality with the following measures: NHS, education, benefits, pensions. Thefore you can't write a big old book talking about how awful wealth inequality is, and call for more measures to solve it, if you ignore the measures that have already been enacted.

      Basically you can't take some subset of data in isolation and draw conclusions about how society should be run from it.

    2. Tom 13

      Re: Not sure I agree

      For example we have not access to pensions until we can recieve them and only if we use them to subsist.

      Just last month I used my 401(k) retirement account to take out a loan against the principal to pay off around $20K of high interest credit card debt. The loan will be less than half what I was paying and I'll be paying half of it to myself. That sounds like wealth to me. It certainly is helping my financial condition. By the end of the year I'll have cleared the last of my high interest cards and will be saving for the down payment on my next car.

      Furthermore, if I die in a train crash on my way home from work, that retirement account would be divided amongst my heirs exactly as would a bank account.

      Not having control over something doesn't exclude it from being wealth. For example, if I were a venture capitalist putting money into a start up, one of the likely clauses in the investment is that I wouldn't be able to sell my shares for 5, 10, or maybe even 15 years. Even then, if I am a significant stockholder, there might be rules that I cannot sell a significant portion of my shares without the approval of the Officers of the corporation and the Board of Directors. That doesn't make it any less wealth than if I had publicly traded shares. But I certainly wouldn't have control over them in the sense you are demanding for pensions.

      Excluding these forms of wealth for the so called poor only for the purpose of making them look poorer than they are in unethical. In fact it reveals the truly authoritarian intent of the Progs who engage in it.

      1. Al Jones

        Re: Not sure I agree

        Congratulations - you have just undermined the very point that the author is trying to make - that State Pensions (Social Security in USAian) should be treated as wealth.

        Your example of using your own private 401K as collateral against a loan disproves Worstalls argument - try taking a loan out against your future Social Security income, and see how it works out. You wouldn't be able to do it on the same terms that you can with your 401K, so even if (for example) your 401k ended up providing exactly the same income as you will eventually get from Social Security, it would be wrong to count your Social Security as part of your current "wealth", though the author says that it should be.

  32. Marketing Hack Silver badge

    I'm fine with the wealthy paying a bit more (in the U.S.) than they do now...

    Personally, I think that the taxman taking about 40% or 50% of someone's marginal top income is about the limit I am comfortable with. Beyond that, it starts getting expropriative.

    In the U.S. though, there are complications because of state-level taxation. In some states (New York, New Jersey, California being good examples) the state taxes are very high. In others like Texas and many mountain or southern states, they are lower. But wherever you live the state take still adds at least 8%-9% on top of the federal take if you are in higher income brackets. I'm assuming that local taxes are roughly the same between the U.S. and UK, but that may not be the case either.

    One thing is certain, the U.S. income tax (and state income tax) codes need to be dramatically simplified. However, there are so many goodies in them for various interests that these interests squawk loudly when their exemptions are removed.

    Plus I am very concerned that our spending on federal entitlements and state and local pensions is going to be so expensive that even bumping up "rich people's" taxes to 50% of their marginal income is not going to pay the bill. So I expect that over the next 10-25 years we are going to see painful cuts in the U.S. welfare state to keep the programs solvent in the future

    1. Tom 13

      Re: I'm fine with the wealthy paying a bit more (in the U.S.) than they do now...

      Excluding your title and first paragraph the rest of your points are fine.

      The problem is your title and first paragraph. What's worse is, even though you won't see it, they are the reasons for the rest of your observations.

    2. Anonymous Coward
      Anonymous Coward

      Re: I'm fine with the wealthy paying a bit more (in the U.S.) than they do now...

      There are no local income taxes in the UK. And the local property taxes in the UK come nowhere near the level that they do in the US.

      Property taxes of $400 PER MONTH on middle class homes are not unusual in the US (at least in the North Eastern states that I'm familiar with). 80% of that goes to the local school district, whereas in the UK, most education funding comes from the national coffers.

      1. Anonymous Coward
        Anonymous Coward

        Re: I'm fine with the wealthy paying a bit more (in the U.S.) than they do now...

        "Property taxes of $400 PER MONTH on middle class homes are not unusual in the US"

        The equivalent is called "Council Tax" in the UK.

  33. unscarred

    data source

    Tim, can you point me towards your preferred data sources? I've been using the OECD's Gini (at disposable income, post taxes and transfers) in combination with their data on relative poverty and median incomes from here: http://stats.oecd.org/index.aspx?queryid=46189#

    1. Tim Worstal

      Re: data source

      OECD's probably the right place. Certainly it is for income inequality. They do much better with the US for example than the World Bank (or, amusingly, the CIA Handbook) does.

      On wealth inequality one of our problems in this entire debate is that there's no agreed to be correct data set. That's half of what the argument over Piketty is all about.

  34. sampo

    Interesting Analysis Applied to the Wrong Subject

    I think Piketty's book was meant to address a capitalistic economy like we have in the US rather than the more socialistic economy of Europe. We have none of the benefits that Tim, rightfully in my opinion, considers important in measuring wealth. Child care, education, health care all have enormous value, but we get none of them. Tim's conclusions are reasonable, just not everywhere.

    1. Matt Bryant Silver badge
      WTF?

      Re: sampo Re: Interesting Analysis Applied to the Wrong Subject

      "....Child care, education, health care all have enormous value, but we get none of them...." So, just for starters, all the State schools and colleges are imaginary then? IIRC, public and free elementary schools have been available in all States since 1870. One little-known fact is that, during the 1800s, the Yanks had higher levels of literacy than the established States of Old Europe, which kinda debunks the oft-repeated myth of 'dumb Americans'.

      As for healthcare, isn't 60+% publically-funded? Childcare was covered in the Child Care and Development Block Grant (CCDBG) and the At-Risk Child Care Program, enacted as part of the Omnibus Budget Reconciliation Act of 1990 (Public Law 101-508). These programs were preceded by enactment of a major welfare reform initiative, the Family Support Act of 1988 (Public Law 100-485). Are you sure you're posting from the States?

      1. sampo

        Re: sampo Interesting Analysis Applied to the Wrong Subject

        My apologies being unclear, I was referring to higher education which once had stronger government support here but no longer does. I was also referring to healthcare for the majority of the population outside of at-risk children and persons eligible for Medicare. My point is that we don't have the level of public benefits that offset income inequality to the degree that is found in Europe and the UK. And therefore I don't find that the point of this article makes sense when you consider the US.

        1. Matt Bryant Silver badge

          Re: sampo Interesting Analysis Applied to the Wrong Subject

          ".....My point is that we don't have the level of public benefits that offset income inequality to the degree that is found in Europe and the UK...." Many benefits in the UK are means-tested, which means if you have any form of income, savings or property then you don't get the benefit, no matter how many years you have been paying taxes into the system.

  35. sisk Silver badge

    Why? We have a welfare state, whose aim and purpose is to make us all richer. And, despite the sort of calumnies that people like me occasionally heap upon it, it does just this.

    Um....no it doesn't. If the welfare state was making us all richer then the percentile at which the poverty line sits would be reducing. Instead the poverty line rests at a higher percentile every year as more and more people live in poverty.

    Not that I'm saying that he's right about taxing the snot out of the top 1%, but you've got this point wrong.

    1. Matt Bryant Silver badge
      Stop

      Re: sisk

      ".....the percentile at which the poverty line sits would be reducing....." So you missed the whole bit where the 'poverty line' moves up to 'reflect' the rising level of living? For some, continually moving the line upwards allows them to carry on moaning about the 'equity gap', for others it is a way to remind us we should be looking to improve the lot of all citizens. But what we blithely refer to in the West as 'on the poverty line' today would have been considered the good life a mere hundred years ago, and better than the lot of many in less fortunate parts of the World.

      1. sisk Silver badge

        Re: sisk

        That's a load of bull Matt. That line moves because it is the measure of where you can be income wise and have a decent life. It doesn't move to reflect a rising level of living. It moves to reflect the rising COST of living. There's a big difference. The level of living is always the same at the poverty line, no matter where it's at. If you don't believe me I suggest you go talk to someone who's had the line move from below their feet to over their head in the last decade. There are plenty of them to be found.

        As the poverty line moves up the percentile there are more people living in poverty. That's a product of the cost of living increasing faster than people's incomes. 'On the poverty line' today is on the freaking poverty line. Until you go hungry for a few days so that you can feed your kids (a pretty common situation for families living on the poverty line) don't go telling me how great it is to be there.

        Sure, someone making $10,000 a year would have been pretty well off 100 years ago. But that was when you could easily feed a family of 4 with $20 a month. Sure, $5000 a year puts you in the top 5% of income earners in the world, but in most of the world you can STILL feed a family of 4 for $20 a month. When you quote those sorts of numbers you leave out the fact that it costs, bare minimum, $6000 a year just to keep a roof over your head and another $4000 a year to feed your family if you eat the cheapest foods you can get. Add in gas, electric, and water bills and it's dang near impossible to live in the first world at the poverty line. And those things aren't optional. 100 years ago you could cook on your fireplace and have an outhouse. Today fireplaces cost extra, and even if you have one you have to pay for the wood for it because they won't let you just go chop down trees in most of the country (even if you live somewhere where there ARE trees) and environmental regulations mean you're liable to run afoul of the EPA if you're using an outhouse. And yes, there are parts of the world that have it worse, where whole populations live in, you guessed it, poverty. That doesn't make you 'lucky' to be living in poverty here.

        The bottom line is that poverty is poverty.

        1. Matt Bryant Silver badge
          FAIL

          Re: sisk

          "....Until you go hungry for a few days so that you can feed your kids (a pretty common situation for families living on the poverty line) don't go telling me how great it is to be there....." Thanks, but I have actually been to many Third World countries and seen real poverty, and there is nothing like it in the West. When you meet kids that happily tell you they ate yesterday so they won't be eating today and they accept that as not just normal but good, then you can come and talk to me about poverty. Until you do you're talking out of your rectum.

          Major denial - ".....100 years ago you could cook on your fireplace and have an outhouse...." There is nothing to stop you doing so today, and many families in the developing World still only have that option, but we in the West CHOOSE to insist on a higher standard of living as the baseline we consider acceptable. If you took a starving family out of somewhere like Ethiopia and gave them a council house with heating, running water that is safe to drink, cooking facilities and an indoor loo, plus free education and healthcare, but tell them the benefits system and cost of living means they can only shop for food and clothes at Asda, please do pretend they'd refuse.

          "......The bottom line is that poverty is poverty." The constant steam of illegal immigrants desperate to get to Europe or the US just to get that 'poverty line' living you insist is unacceptable just goes to show you don't have a clue about the realities of the World or real poverty. Kindly do yourself a favour and go get some real World perspective.

          1. JLV Silver badge
            Facepalm

            Re: sisk

            >Major denial - ".....100 years ago you could cook on your fireplace and have an outhouse...." There is nothing to stop you doing so today, and many families in the developing World still only have that option, but we in the West CHOOSE to insist on a higher standard of living

            Matt, I assume your local building codes allow fireplaces and outhouses. Nice place you live in.

            And, assuming they did let that happen, 'cuz you know, like rah-rah Libertarianism, those kinda living conditions would not impact the rest of us with their health effect. Cuz like, smog and cholera magically only impact the poor.

            Apparently you wish to compare living conditions in say, Haiti, where there is general corruption, massive environmental degradation and pretty much no one can pay, or pays, taxes. Compare to say, the UK, the US or Canada where we have accountable governments, where most people are somewhat well off and where the country's wealth is sufficient to try to address at least some social problems.*

            Of course, those brilliant and incisive comparisons of yours are going to win over all those poor deluded jackasses who think that not everything is A-OK with things as they are. Hey, I think excessive taxation causes more problems than it solves myself. I am soooo glad you are on my side, as you obviously have a way with convincing people who might think otherwise 8-). I can see everyone is gonna be lining up at the poll booths to vote for whomever you think worthy come next election.

            * I'll even go further: where addressing some types of problems makes sense on a purely economic basis because it will make the country as a whole richer. This certainly applies to public education and health care.

            1. Matt Bryant Silver badge
              Happy

              Re: JLV Re: sisk

              ".....Matt, I assume your local building codes allow fireplaces and outhouses...." So there are no BBQs in your neighbourhood? And the UK Building Regs simply state there has to be a toilet connected to a sewage tank or to the main sewer with a new build home, not that it has to be indoors one. But I do laugh at your attempt to avoid the issue that what we consider essentials would be considered outright luxuries in a lot of countries.

              "....Apparently you wish to compare living conditions in say, Haiti....." It was sisk that insisted "poverty is poverty" because he had no real World experience to gauge the realities of poverty with, not me. I suggest you point out the example of Haiti to him, but before you do you may want to consider the number of Haitians that seem desperate to avail themselves of 'poverty-line' living in the States.

              ".....I am soooo glad you are on my side, as you obviously have a way with convincing people who might think otherwise....." Sorry to disappoint (not), but shortly I will be swanning off into the sunset to laze out my days on my cache of filthy lucre, so I really couldn't give a fudge which numpty you vote for as it will have zero impact on me. But you go, girl, and don't forget to remind the scroungers to vote or they may lose the cushie free ride you will be paying for. Enjoy!

              1. JLV Silver badge

                Re: JLV sisk

                Hey, Matt, assuming you're gonna be an American retiree, you will, of course, forswear all that nasty socialist Medicare money, right?

                Maybe you can go live in Haiti while you are at it. There's a definite appeal to me about you having limited access to broadband :) And sh***ing in an outhouse too ;-)

                > toilet connected to a sewage tank or to the main sewer with a new build home, not that it has to be indoors one

                Why the heck would you want to build an outdoor outhouse and then connect to the main sewage? That makes no $ sense whatsoever. Same plumbing, extra building. Even a sewage tank is expensive - I grew up in a house with one, albeit connected to an indoor toilet.

                Another Matt-ism, perhaps?

                1. Matt Bryant Silver badge
                  FAIL

                  Re: JLV sisk

                  Yeah, whenever you finally get round to admitting you were wrong just remember to wake the readers up, they will have fallen asleep trying to read your lumbering evasion from the simple fact the majority of the World's human beings don't have indoor toilets connected to a proper sewage system.

                  1. JLV Silver badge
                    Happy

                    Re: JLV sisk

                    Matty dearest, I really doubt you care how the majority of the world's people live.

                    Judging by the amount of downvotes you tend to collect, I think most people who have at times followed your rants hereabouts would agree with me. You read like a member of the subspecies of American right wingers who thinks social conservatism and dogmatic laissez-faire automatically results in effective economic policies.

                    I find Piketty's findings, as reported in the press, intriguing, but I also notice he's a French economist hailed as a hero there for his book. I am trying to keep an open mind, because I agree that inequality seems to be on the rise. But Piketty's background does worry me. Hollande's 75% tax bracket on French high incomes (straight out of Pikkety's playbook apparently), is, as previous French "rich taxes", not even guaranteed to bring in more money than it costs to administrate. This is in line with the French doctrine, inherited from Colbert, that the State always knows better how to manage & make money than individuals.

                    I am pretty sure we are both in agreement that Hollande is a looney. Where we disagree is that I think you are also a looney, but of the opposite kind. His policies are not clever and unlikely to make his country better off. Your "ideas" have about the same dogmatism and absence of rationality behind them, just in the opposite direction. Outhouses indeed!

                    Fortunately, your rants are less likely to make a mess than Francois's :-) Partially because it is easier to correct low taxes and low spending than it is to fix high taxes and high spending and erring on the low side is less pernicious economically. Also because few people really take you seriously (your approval ratings may still beat Francois' tho).

                    BTW, I never claimed third world isn't dirt poor and more so than anything hereabouts. I only called you an idiot for using it as a justification that makes it OK to disregard homegrown poverty. The difference is admittedly quite subtle and apparently lost on you. Let's just stick to the main point then: I called you an idiot and am happily restating that position.

                    1. Matt Bryant Silver badge
                      FAIL

                      Re: JLV sisk

                      ".... I really doubt you care how the majority of the world's people live...." Apart from the fact you seem to have me confused with someone that would actually consider your opinion of any worth, you know that you in fact know SFA about what I do or have done, either here or abroad, so your baaaah-lieve as to my charitable activities are not based on fact but sulking spite. If you wish to prove otherwise then please do supply details on my past. In essence, all you are doing is dressing up your lack of counter to my point with something you like to think is insulting, based on a fallacy you want to baaaah-lieve, but actually makes no impression whilst exposing to all your desperation. Please do fail more, it's quite amusing watching you wriggle and bleat.

                      ".....Judging by the amount of downvotes you tend to collect...." So your analytical capabilities stop at following the opinion of the flock? Wouldn't it be novel if you tried actually thinking rather than simply following the lowest common denominator.

                      ".....You read like a member of the subspecies of American right wingers who thinks social conservatism and dogmatic laissez-faire automatically results in effective economic policies....." Wandering much from the thread? Could it be because you can't argue the points raised? Gee, the sheeple have never used that tactic before! Seriously, we need new sheeple, these ones are getting boringly predictable.

                      "....I am pretty sure we are both in agreement that Hollande is a looney...." That should be 'loony'. And Hollande is just a typical popularist politician trying to garner support by sticking it to the rich. That doesn't make him a loon, it just makes him smart as he has managed to pull off such an obviously daft ploy and get away with it with the voters. As Depardieu showed, if you annoy the rich too much then the global market makes it vey easy for them to take their toys and cash elsewhere. It would be interesting to see if the change did lead to a noticeable drop or increase in tax revenues, but what Hollande really cared about was keeping his base happy in tough political times.

                      ".....Your "ideas" have about the same dogmatism and absence of rationality behind them....." It is a simple fact that the majority of the World's population do not have clean drinking water, electricity or even regularly assured sources of food, let alone indoor loos or many of the other creature comforts we would consider normal at the 'poverty line' in the West. If you wish to pretend that my 'idea' is not true, that the statement has an 'absence of rationality', then please do provide some figures to prove if only so the readers can laugh at you more. You may wish to gain some insight here (http://www.unwater.org/water-cooperation-2013/water-cooperation/facts-and-figures/en/ and http://www.wfp.org/hunger/who-are and http://www.unesco.org/new/en/education/themes/leading-the-international-agenda/efareport/ and http://unstats.un.org/unsd/demographic/products/socind/Dec.%202012/4e.xls).

                      ".....Also because few people really take you seriously...." Once again all you are exposing is your desperate desire to be part of the flock, to be accepted, to 'adjust' your views so that they are applauded by the sheeple around you. Individual thought is obviously not just unappealing to you, you actually think someone should be ashamed of it! Unlike Hollande, I am not in the business of popularity so I can speak my mind as much as I like, especially as I also have no great concerns about not fitting in with the flock. Please try not to assume everyone succumbs to the same character failures as you commit with zeal.

                      "..... I never claimed third world isn't dirt poor and more so than anything hereabouts. I only called you an idiot for using it as a justification that makes it OK to disregard homegrown poverty....." So, finally, after paragraphs of your vacuous venom, we finally get to your grudging admission that you can't actually disagree with what I stated, but then you try to diminish your surrender with a lie. I never said I was justifying homegrown poverty, I actually said some of us would use the raising of the poverty line as a way of hopefully advancing the lot of ALL in our society. What I objected to was your fellow-sheeple sisk's stupid claim that 'poverty is poverty'.

                      ".....Let's just stick to the main point then: I called you an idiot and am happily restating that position." Which is the sum of your contribution - no facts, no figures, no independent thought, just bleated attempts at insults to dress up the fact you have lost again. This is my surprised face, honest! TBH, your efforts are quite yawn-inducing.

  36. JLV Silver badge

    Here's a thought experiment

    Small island nation-state with 1000 inhabitants.

    999 citizens make $50K a year each.

    1 person (rich _internationally_ selling author) has $5M income a year. This is NOT a realistic scenario, but I would strongly question why his income was 100x his fellow citizens if he made it on-island. I oppose very large income variations myself under most conditions, for example CEO pay levels are totally unfair. This is only about taxation redistribution. Nor is it about increasing wealth going to fewer people which we know is happening right now.

    Total GDP is thus $55M. Everybody can vote. The state consumes 30% of the small earner's 50M GDP in services (public sector payroll, education, defense, welfare), which works out to $15M or 15K/person in tax (i.e. 30% income tax). The state can't run a deficit.

    Mr. Big Shot can't bankroll everything, but if he is taxed at 80% he can cover 4M, thus lowering everyone else's tax bill to $11K or 22%.

    Equally obviously, assuming a fair democracy (no lobbying), everyone else might vote for just that.

    But it is still quite possible for everyone to be taxed at 30% income and balance the budget. Even if Mr. Big Shot pulled a Google and had his income declared in a Bermuda tax haven.

    Questions:

    If Mr. Big Shot's wealth is not due to exploiting everyone else, what are his ethical obligations? Pay 15K$, because he ain't costing the state more than anyone else? Pay 1.5M, because that's 30%, like everyone else? Pay 4M @ 80%, because that still leaves him with 1M, which is 20x everyone else's income?

    Is it wise for the majority to vote budgets and taxes based on exceptional incomes? What happens if Mr. Big Shot is taxed heavily but then dies or decides to leave the country? But shouldn't Mr Big Shot's exceptional position be recognized and put to service? How not to kill the golden goose then?

    Assuming the 999 citizens are willing to shoulder the general burden of the services provided by their government to themselves, how can Mr. Big Shot be more helpful to his countrymen? Charity? Good, but that is totally voluntary, so it might not happen.

    Let's add 100 people who need welfare, due to no fault of their own, and can't pay taxes. What about using Mr. Big Shot's 30% (1.5M) to cover them, but leave the middle class $50K folks to cover their own benefits? I.e. what about the average citizen fending for her own taxes, but the rich supporting the poor?

    Again, this is isn't about the ethics of income. It is about the practicalities, and ethics, of taxation levels assuming no differentiation between employment income and investment income.

    In real life, Mr Big Shot's tax accountant would probably get him way under the 30%, which I think is totally unethical, as Warren Buffett pointed out before the 2012 elections (http://money.cnn.com/2013/03/04/news/economy/buffett-secretary-taxes/).

    Let me be clear: I support neither the French model of high taxation for the few. Nor the US model of not caring for the poor. And I most certainly dislike the fact that you pay less taxes on financial/investment income than on employment income, even in France. I rather like the Swedish model, though I am not sure what works in a country of <10M inhabitant scales up and I am even less sure that public sector rent seekers would not guzzle up the bulk of the benefits like they do in France and in the US. Welfare and public spending is important to me.

    1. DocJames

      Re: Here's a thought experiment

      I don't think this thought experiment is particularly useful, except to show why thought experiments don't work. It's too simple - avoids considering consumption and pollution for example. No variation in ~1000 people? Mr Big Shot behaves identically to the others? (I'd suggest he doesn't deserve his earnings on that alone, boring fool)

      I suppose I've just contradicted myself by showing various extensions of the experiment. Essentially most thought experiments (like this one) need to consider more context, and if that is done the beautiful simplicity of the experiment is lost.

  37. Anonymous Coward
    Anonymous Coward

    1) There is vastly more debt than money because of the way debt is created by banks. Without reforming this the idea that 'austerity' and cuts in welfare spending will balance the books is just nonsense. The neo classical model of economics is just plain wrong with regard to debt. See Prof Steve Keen's shredding of that myth.

    2) One bus load of the top earners in the world earn the same amount as the bottom 3.5 billion. Is this trend in inequality sustainable ? Not unless they buy themselves a private army and live in a concrete bunker... Having individuals earn more than entire states, when millions are malnourished is morally wrong.

    3) Welfare is highly selective in who is supported. If you are male and single, forget welfare helping you out.

    4) Work does not pay. Half the people who turn up to food banks ARE in work - but high rents, and rises in the cost of living are causing significant poverty. (I've been volunteering in a food bank and I've seen it first hand. I get fed up with the airmchair know alls, who haven't. Either get out there and see what's happening or shut up).

    5) The rise in right wing parties should be a concern. If the gap in inequality isn't addressed we are heading back to the 1930's.

  38. johnwerneken

    Pinketty understands nothing

    Part of political economy is who is in charge and/or well off and who is not. There is no good reason to much care about those.

    The guts of it are three simple things: (1) Does the system often intentionally do horrid stuff to people and there is no remedy? Any State-centered regime tends in that direction...(2) Is the system internationally secure and competitive? (3) Do all sorts of folks and the majority of families see (a) opportunity and (b) on the whole increasing prosperity - more ability to choose and obtain desired goods, services, and circumstances?

    When the answers are "NO", "YES", and "YES", one has found an exemplary system. Constitutional republican capitalism IS such a system, and so far anyway, the ONLY such system.

    Wealth can not concentrate indefinitely...from whom would profits be obtained? Also, for the most part, unusual fortunes may proliferate but they do not tend to stay intact over time. Firms and family fortunes go up and down the relative ladder. Indeed, that is the key to why the constitutional republican capitalist regime is relatively fee, secure, competitive, and prosperous: what currently is valued tends to attract attention and investment, displacing that which has been surpassed in utility.

  39. airbrush

    More class war from the register?

    Yes because everyone on benefits gets a mansion in Mayfair while honest working people struggle to buy a shoebox. Read the daily mail by any chance?

  40. Johan Bastiaansen

    "We have a welfare state, whose aim and purpose is to make us all richer."

    WRONG ! ! !

    The aim of the welfare state is to NOT have ordinary people confronted with beggars and people dying from hunger in the streets.

  41. Anonymous Coward
    Anonymous Coward

    The welfare state does not solve the underlying problem stated by Pickett

    When capital is in the hands of few, then they can make capital a limiting factor in production. As a result, they can increase the return on capital and they hold immense political power (they are "system relevant" and can't go down without pulling the whole system along).

    My grandfather came from a German family of serial company founders (pre-3rd Reich). He was of the opinion that every generation required it's own war to re-balance society: the destruction and chaos of war creates opportunities for everybody. Arguably, the US missed their wars in the ate 19th and early 20th century and thereby created the big depression.

    The last half century of peace was different: due to the rules introduced after the depression, the capital owners did not manage to dominate the western societies. Many of those rules in the US were removed in the last decades and how the rules will work in China is not clear. It'll be very interesting to see where we are heading now. The welfare state may become the equivalent to the bread and games in Rome, something bankrolled by the rich to maintain the status quo. But Rome definitely relied on wars to create opportunities for their citizens.

  42. Anonymous Coward
    Anonymous Coward

    An alternate view.

    Piketty's theories are based on some fairly fundamental errors in his research that challenge his underlying basis for cause and effect.

    http://consultingbyrpm.com/blog/2014/06/full-review-of-pikettys-capital-in-the-21st-century.html

  43. Bernard

    National vs international

    I, like lots of westerners, have a lot of sympathy for the moderate left ideal of a system of constrained capitalism with relatively modest wealth imbalances that Pinketty appears to stand for.

    There are several practical problems though:

    1) All but the widest-eyed idealists acknowledge that there aren't enough resources globally to give everyone a decent standard of living even if we could somehow come to a consensus that we should. Successful lefty economies (of which Scandinavia offers the last unequivocal examples standing) have small, homogenous and highly educated populations and ample natural resources and are very picky about who they let in. To my mind creating small pockets of utopia is no more moral in the wider scheme than the US attitude of letting lots of people in but not giving them much except the knowledge that others before them have carved out a good living eventually.

    2) Economic power always follows real power. When wealth gets too concentrated in the hands of people without the real power to protect it either revolution or punitive taxation always changes things. Similarly, and less fortunately, when the value of labour that poor people have to offer diminishes in real terms it becomes politically untenable to have too generous a welfare state without seeing a long run economic decline that makes everyone worse off.

    At the moment we're seeing the consequences of a change in the real value of labour (which, sadly, I think is permanent) and a disruption to national politics from internationalisation which is benefitting the rich and well advised and weighing upon the poor and ill-equipped in a way that isn't sustainable. That's pushing the equation so far against the poor (and pushing so many of the middle class into 'poor' territory) that radical nationalism is starting to look attractive to them again.

    1. strum Silver badge

      Re: National vs international

      >Economic power always follows real power.

      I think you've got that the wrong way round.

      1. Bernard

        Re: National vs international

        Are you sure? Turning wealth into power is harder than you think. Look at the oligarchs who have crossed Putin, for instance.

        Granted wealth gives you a very comfortable life, but I see a history in which wealth follows power more than vice Versa, and being too rich while out of political favour is rarely comfortable.

  44. Anonymous Coward
    Anonymous Coward

    If I had his and he had more, we'd both be tickled.

    The only people worried about differences in wealth are jealouse fools. I really don't care how much anyone else makes. I am focused on what I am making. The trouble I have is that I pay at least half my income in taxes of one form or another. Were it not for the governments and their tax codes, I would be doing far better than I am now.

    Here is how I see it. Taxin incomes is both immoral and ineffective. Taxing consumption encourages thrift and is vastly more moral than taxing incomes. Most governments have this backwards, starting with France.

    1. Anonymous Coward
      Anonymous Coward

      Re: If I had his and he had more, we'd both be tickled.

      Morality is subjective, so we can either discuss the bases of your moral code and find out where we differ or just agree that we disagree.

      Effectiveness isn't subjective, but the measurement of it is. Income tax is by far the biggest source for most modern governments because it gives a more reliable and measurable take than other forms of tax (important for meeting spending commitments) and because one's ability to earn is generally agreed to depend in large part on the social, economic and political stability that those spending commitments help to provide.

      There's a lot of economic debate over the optimum level and tiering of income tax and the extent to which it should flex in line with the economic cycle. There's very little serious debate on the question of whether there should be an income tax at all, and that debate is largely confined to libertarians (who want a flat and low income tax) arguing explosively with radical libertarians (who want no income tax at all).

      1. TopOnePercent Silver badge

        Re: If I had his and he had more, we'd both be tickled.

        There's very little serious debate on the question of whether there should be an income tax at all

        Income tax in England was implemented to fund war with France. So it seems only right that we either:

        A) Declare war on France

        B) Abolish it, or at the very least prune it back to a morally acceptable level - say 20%.

        Due to the widepsread misuse of income taxes, I currently spend 20 hours a week working just to pay tax to fund others. How much of their time do they spend each week making my life better?

        1. This post has been deleted by its author

        2. Anonymous Coward
          Anonymous Coward

          Re: If I had his and he had more, we'd both be tickled.

          A) as I said, very little serious debate.

          B and onward) debating the right level and usage of income tax is absolutely valid, ongoing and fierce. The 'what are they doing for me' argument, however, doesn't constitute serious debate. The question is, rather, at what level of income tax are incentives to achieve balanced most effectively against the tax base required to sustain a stable economy in which the value of specialist skills can be maximised.

          If 0% or even 20% were the correct answer then I contend that more advanced economies would successfully have used it (the same goes for 80% or even 50% which make no sense to me either).

          1. TopOnePercent Silver badge

            Re: If I had his and he had more, we'd both be tickled.

            The question is, rather, at what level of income tax are incentives to achieve balanced most effectively against the tax base required to sustain a stable economy in which the value of specialist skills can be maximised.

            If 0% or even 20% were the correct answer then I contend that more advanced economies would successfully have used it (the same goes for 80% or even 50% which make no sense to me either).

            To run as we do now? 45% of GDP.

            To run efficiently, doing only what the state should be doing? 20% should be fine. It should be more than enough. There's also the moral component of demanding with menaces (threats of imprisonment and sequestration) half of the produce of someones labour to hand to those that do very little or do nothing at all.

            The state has no business with diversity co-ordination, managing street football, etc etc. There's far too many non-jobs and administrators moving at a snails pace who should rightly be offshored, automated, or replaced by staff with a little get up and go.

            A great example of this is Hector Sants. Rises to the very top of the public sector, but lasts 5 minutes in the private sector before going off with stress and exhaustion.

            Last time I visited an A&E department the receptionist was literally doing 5 minutes work every hour. Then just sitting around waiting. In the private sector, she'd have been given other administrative duties to fill the void between booking in arrivals, and the clerk who used to do the role would be let go. Efficiency, you see.

            1. This post has been deleted by its author

            2. Anonymous Coward
              Anonymous Coward

              Re: If I had his and he had more, we'd both be tickled.

              Now we're getting into territory I can agree with.

              Others won't, and I suspect that inefficiency in the public sector isn't so simply solved (or it would have been) but my thinking isn't far off, and you'll find a lot of serious discussion on the matter.

              At the '0% income tax and let's raise it all through consumption' level? Not so much.

            3. strum Silver badge

              Re: If I had his and he had more, we'd both be tickled.

              >To run efficiently, doing only what the state should be doing

              Who decides what the state should be doing? You? Me? Or a vote amongst all of us?

              1. TopOnePercent Silver badge

                Re: If I had his and he had more, we'd both be tickled.

                Who decides what the state should be doing? You? Me? Or a vote amongst all of us?

                The state should, self evidently, only be doing things that people could not organise for themselves at a higher quality or lower price. National defence being a good example of what the state should be doing, the NHS being a great example of what it should be doing differently - most of the staff don't do doctoring or nursing, they do management, admin, and co-ordination all of which should be kept to a minimum. I'm a massive fan of universal healthcare, but the model we use for its provision is end of life.

                We can't all vote for what the state does in an efficient system, because state workers will always vote to do less and earn more - hence a 3 term labour government has bankrupted the country again.

                Clearly we should restrict voting to those that contribute (private sector workers because public sector workers don't pay tax - they only think they do), and then limit that to the most intelligent 50% as you'll get better informed decisions being made rather than emotive claptrap.

                One man one vote just results in the country being governed for the benefit of the feckless and the dumb - because they breed faster than the rest of us.

            4. strum Silver badge

              Re: If I had his and he had more, we'd both be tickled.

              >Last time I visited an A&E department the receptionist was literally doing 5 minutes work every hour.

              If that were true, you must have been watching her, continuously, for several hours. I doubt it.

              And you'd have to have been watching very closely, to be absolutely sure she was doing no work, behind that desk. I doubt it.

              There is waste in the NHS, just as there is waste in any human system. It has to be geared up for a major disaster, or a major epidemic (or both, at the same time). When the disaster or epidemic fails to materialise - what a waste!

              1. TopOnePercent Silver badge

                Re: If I had his and he had more, we'd both be tickled.

                If that were true, you must have been watching her, continuously, for several hours. I doubt it.

                A little over 3 hours to be precise - so close to half her shift.

                And you'd have to have been watching very closely, to be absolutely sure she was doing no work, behind that desk. I doubt it.

                Due to the seating configuration she was sat less than a meter away from me, with her arms folded just staring into space.

                There is waste in the NHS, just as there is waste in any human system. It has to be geared up for a major disaster, or a major epidemic (or both, at the same time). When the disaster or epidemic fails to materialise - what a waste!

                She could always stop writing clerical reports and just do the booking in procedure in the event of a major disaster. Its unionised waste, pure and simple. The receptionist can't do the department clerks work, because that would put the clerk out of a job. Well, yeah... it should.

                Same reason one of the countries main fire services deleted Word from its Office install. Dept. managers writing their own memos would put the office clerk out of a job (I shit you not).

    2. Tom 13

      Re: Taxin incomes is both immoral and ineffective.

      Not quite. Progressively taxing incomes is both immoral and ineffective. It deters generation of more working opportunities which are the real destroyers of poverty.

      While I like the idea of taxing consumption because of it's economic efficiency, I've given up on it as a good from a societal standpoint. Do that and you allow the politicians to segment society and set those segments against one another. The only way to keep the politicians from doing that is to ensure that everyone is equally at risk for the politicians bad decisions. That means a flat tax on income. What we do need is a new set of laws that enable one to tax people who use otherwise properly excluded money streams to support their lives. Something along the lines of, if you don't have a taxed income, that business reimbursement counts as income. Also the values paid to healthcare and retirement plans needs to count as income.

      1. Dr. Mouse Silver badge

        Re: Taxin incomes is both immoral and ineffective.

        The only way to keep the politicians from doing that is to ensure that everyone is equally at risk for the politicians bad decisions. That means a flat tax on income.

        A true flat rate of income tax does not equate to an equal risk. 20% of a bottom-end earner's salary is much more important to him than 20% of a high earner's salary. It is likely that 20% of someone at the bottom end of societies income would tip him over the edge into (real) poverty, forcing him to sacrifice essentials. 20% of a high earner's salary may force him to take no holiday (or a less expensive holiday) this year, buy a cheaper car, or have less meals out. This is inconvenient, but not important in the grand scheme of things.

        Progressive taxation of income is the fairest means of taxation we have come up with. Flat rate hits the low earners hardest. Taxation of consumption hits the lowest earners hardest. Taxation of wealth may not, but it can unfairly hit those unable to pay (take someone on a low income who owns a house whose value has increased, they may be forced out of their home just to pay a tax bill, as that home is wealth).

        1. TopOnePercent Silver badge

          Re: Taxin incomes is both immoral and ineffective.

          Progressive taxation of income is the fairest means of taxation we have come up with.

          Not it isn't. The fairest system is everyone pays £X where X is the same number for everyone. Its simple and fair. The more you earn, the more you keep.

          We make no attempt to equalise beauty, intelligence, number of sexual partners, leisure time etc etc, so why the fuss over equalising incomes and wealth?

          1. Dr. Mouse Silver badge

            Re: Taxin incomes is both immoral and ineffective.

            The fairest system is everyone pays £X where X is the same number for everyone. Its simple and fair. The more you earn, the more you keep.

            FYI, based on 2008/9 data, replacing govt income from income tax and national insurance with a per-person flat tax for working age people only, this figure would be around £6500/year. It would be a great system for the rich, but a minimum wage earner would come away with less than £600/month.

            1. Anonymous Coward
              Anonymous Coward

              Re: Taxin incomes is both immoral and ineffective.

              **FYI, based on 2008/9 data, replacing govt income from income tax and national insurance with a per-person flat tax for working age people only, this figure would be around £6500/year. It would be a great system for the rich, but a minimum wage earner would come away with less than £600/month.**

              I understand what you are saying, but "fair" is a very relative and nebulous term. Personally I'm in favour of one of the following:

              1) Scrap IT/NI and just have VAT, with the obvious exemptions for necessities (e.g. food).

              or

              2) Merging NI and IT and replacing it with a single, non-progressive rate, both for personal and corporation tax, with a threshold set at the minimum wage below which none is payable.

              It would lead to less resentment of the tax system, lower avoidance and higher overall tax take. It is also not going to happen because lefties would rather collect less overall tax than be seen to be doing something that doesn't involve a big headline raid on those who are already making the biggest controbution.

          2. Tom 13

            Re: The fairest system

            The only 100% defensible system is one where you pay for those services you use. So I wouldn't even say everyone paying X is fair, because some will use more and others will use less. You'd also get a fair bit of argument over whether certain services that function like a societal level insurance policy are "used" by people. I think the closest approximation we'll get of that is a flat income tax, where everything that is effectively income is taxed. Theoretically you'd do better with a consumption tax, but I see the consumption tax ultimately being distorted in the same way the progressive income tax is.

        2. Tom 13

          Re: Taxin incomes is both immoral and ineffective.

          20% of a bottom-end earner's salary is much more important to him than 20% of a high earner's salary.

          So you deny the meaning of "marginal income" and therefore a key tenet of economics. No wonder you reason so badly.

          1. Dr. Mouse Silver badge

            Re: Taxin incomes is both immoral and ineffective.

            So you deny the meaning of "marginal income"

            I cannot deny the meaning of a term I have never heard before, let alone know the meaning of. I am no expert in economics.

            But if a person earns just enough to afford the essentials of survival, 20% of his income will taken away will result in him not being able to survive. This is much more important to him than 20% of someone earning £1m/year loosing £200k of that. The rich man can still survive without that £200k.

            1. Tom 13

              Re: Taxin incomes is both immoral and ineffective.

              You're welcome to try to take away 20% of Bear Grylls' income, but he'll still survive and probably thrive. Take away 20% from the rich kid who inherited the money and he'll probably jump out a window.

              The problem is you think "essentials" is a fixed term. It isn't. What I consider essential is vastly different than what you do. TVs are not essential. Computers are not essential. The food I typically eat is not essential (For my roommate and myself I typically spend $150/week on groceries although we could survive on less). Even shelter is not necessarily essential depending on where you live. But someone arbitrarily assigns values to these things and claims there is a poverty line.

              If you don't know what the phrase means, perhaps you could try a search engine to look it up? Particularly as you seem to think computer access is essential, you ought to know what the term means. In this context, it is essential.

              1. Dr. Mouse Silver badge

                Re: Taxin incomes is both immoral and ineffective.

                If you don't know what the phrase means, perhaps you could try a search engine to look it up? Particularly as you seem to think computer access is essential, you ought to know what the term means. In this context, it is essential.

                I did have a look, the first page of Google results shows it in terms of a business (very close to, if not identical to, gross profit). This helps me not one bit in this discussion.

                I like the way you assume that I consider computer access to be essential. In terms of what I was talking about (essential for survival) it is not. For me, in my line of work, it is, but that's a different kettle of fish.

                You seem to be working under the false assumption that I am on benefits, or on a low wage, or generally in the bracket which benefits from progressive taxation. I would actually benefit from a flat tax rate, but I am not a selfish asshat looking only at my own bottom line. I see people working hard on low paid jobs and realise that they should not be expected to fork over as much as me, even though they use more government services than I do. They should not even be expected to pay as large a proportion of their income as I do.

                Of course it irks me how much of my pay is going to the government. Someone on a higher income than me would likely be even more irritated. But that doesn't make it unfair.

  45. strum Silver badge

    WHat wealth buys

    We need to consider what (extreme) wealth can buy, that no mere mortal can save up for. It can buy politicians, governments, better/easier treatment from courts, a 'portfolio' of passports. Above all, it can buy legislation, to reduce tax on wealth and income (at their level), and to legalise any behaviour the wealthy wish to engage in.

  46. simon_brooke

    It all depends on whether you'd prefer to pay 80% tax or be hung from a lamppost

    It's worth remembering what happened to the European country which allowed the inequalities of the nineteenth century to go furthest. Lenin happened, and then Stalin. The same story happened at the end of the eighteenth century in France. Too much inequality leads to bloody revolutions in which very large numbers of people (including many or most of the formerly-very-rich, and their families and children) die.

    If that's a future you look forward to, I suggest that's your problem. I don't look forward to it at all, and think 80% income tax and 100% death duty is a vastly preferable solution.

    1. Anonymous Coward
      Anonymous Coward

      Re: It all depends on whether you'd prefer to pay 80% tax or be hung from a lamppost

      **Lenin happened, and then Stalin.**

      If you are selling this as the template for improving the economic prosperity of a nation, you are going to have to try a lot harder.

    2. Gordan

      Re: It all depends on whether you'd prefer to pay 80% tax or be hung from a lamppost

      I guess it hasn't occurred to you that emigrating is a very real and viable option for most of those that would be required to pay the 80% tax rate.

  47. Matt Bryant Silver badge
    Angel

    In the words of Big John.....

    "......when I was a sophomore at USC, I was a socialist myself—but not when I left. The average college kid idealistically wishes everybody could have ice cream and cake for every meal. But as he gets older and gives more thought to his and his fellow man's responsibilities, he finds that it can't work out that way—that some people just won't carry their load ... I believe in welfare—a welfare work program. I don't think a fella should be able to sit on his backside and receive welfare. I'd like to know why well-educated idiots keep apologizing for lazy and complaining people who think the world owes them a living....." John Wayne.

  48. This post has been deleted by its author

  49. Levente Szileszky

    I don't know where do you live...

    ...but after this:

    "We have a welfare state"

    I'm sure as hell you don't live in the US.

    1. Matt Bryant Silver badge
      FAIL

      Re: Levente Zillyboy Re: I don't know where do you live...

      "....I'm sure as hell you don't live in the US." Whilst it may be fair to argue that the USA does not have an extensive welfare state as many European countries, to pretend the USA has not had a significant welfare system since the 1930s and Roosevelt's New Deal is simply stupid.

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