Privitise the UK National Debt

[Severian]

There has recently been a proposal to pay off the UK National Debt by having a one off tax on the richest 10% of the UK population, who allegedly have £5 Trillion in personal wealth between them. A one off tax of 20% of their wealth would pay off the entire national debt and remove the need for the cuts we are facing.

 

They tested it with a youGov poll and apparently it has a 74% approval rating.

 

You can find more details in this guardian article or at http://www.glasgowmediagroup.org/

 

I am curious as to your opinions on this. In particular, if this is supported by the majority of the population, does it become automatically the correct course of action, as dictated by democratic principle?

Edited October 11, 2010 by Severian

[CaptainPanic]

The text suggests that you will actually tax the rich a single time, in a massive money redistribution system. I personally think that would be a very nice way to get rid of the debt... but economists will undoubtedly find reasons why this is impossible (reasons which most people cannot easily understand), and others will claim that some people simply are billionaires because they worked so hard, and therefore have the right to live in extreme luxury.

 

I would support this, especially if the system would be progressive (as most tax systems are) with the richest of the rich paying the most, both absolute and percentage-wise. My reason to support this idea is that I believe that some people in this world are just excessively rich. They have too much money, and haven't really earned it. They found themselves in the right place at the right time, and just got the money. I do not favor the communist idea of everyone earning exactly the same. Inequality motivates people to work harder. But our modern world has excesses which are over the top.

 

Your title seems to suggest that you move the debt to the rich people (to privatise it) - that would suggest that the general population would continue to pay, but that the people would pay tax to the rich rather than to the government. I think that would be an incredibly bad idea, since you essentially create a private (profit oriented) tax office, which is allowed to keep the tax income to itself...

Edited October 11, 2010 by CaptainPanic

[Sisyphus]

I would be wary of this for a couple of reasons. First and foremost, I am skeptical that it would really be a "one off." If it works, eventually they'll do it again. And this kind of ad hoc taxation means much less predictability than an established system, and unpredictability is bad for investment. Finally, the precedent of milking a minority (albeit a privileged one, who will remain privileged) to feed a majority just seems like angry mob behavior. All should share the burden - not equally, but at least in part, so that it isn't just "free money."

 

That said, I think a temporary tax hike to pay down the debt combined with a freeze on budget increases is a good idea.

[jackson33]

Severian; When any debt is created, whether by Government or an individual, there is a cause. Unless the wealthy gained their wealth through Government (Royalty by permission) the assumption is most did not. Then to in any way make certain people responsible for a portion of the current debt (the proposed plan), does nothing fix the original problem. In fact under this scenario, the only real benefit, is the assumption of the Federals previous debt and INTEREST. Indirectly, the wealthy in the UK or anyplace else can do much the same anyway, simply by buying Government Bonds.

 

As in the US and IMO, societies that have accepted more benefits than the society could afford, need to cut those benefits back to what's affordable. All this is no different than any person or family that spends more than earned, whether due do some habit (drugs/gambling) or that ignorantly takes advantage of credit sources (charge cards/buying a home car above their means).

 

Additionally, your wealthy and assume people in the society are not captives and could move elsewhere, if not personally, in some manner there wealth. This is very common in the US, where State Taxes rise and the wealthy simply move to another State...

[padren]

It seems dangerous to me to do this without any sort of mechanism aside from simple majority. I would say it may be reasonable under some circumstances to do so with a simple majority, but for peace of mind I'd want something like a super-majority (60%) of those who would pay the tax to approve it.

 

When you want to do something that is outside the scope of normal powers (whether a tactical 100% tax on income from TARP supported bonuses, or taxing tactical wealth instead of income) I think it is really important to address if the conventional legislative process address the gravity and implications of the practice. If you're doing to be a trailblazer, you want to be sure you start your trails in a responsible way, because they will only be more traveled over time and when it is, there will have to be checks and balances that ensure it's not abused.

 

If a super-majority of those affected would be required it would help ensure that it was only applied in very rare critical situations, and then when those paying (by public pressure or civil duty) have to approve it the danger of asset burying could be avoided. However, if the wealthy end up fearful their wealth could be seized on a whim, they'll react by locking it up overseas one way or another in ways no one currently does. Long story short there will be people who paid taxes once when they earned it, and only have the "wealth" because they want to invest it.

 

 

Besides, what kind of liquidity does the "wealth" need to be in for it to "count" as taxable?

[Pangloss]

Give us your tired, your poor, and your fabulously wealthy yearning to be free.

 

if this is supported by the majority of the population, does it become automatically the correct course of action, as dictated by democratic principle?

 

In my country ultimately the people do have that right. We could (in theory) have perfectly legal slavery in the United States of America tomorrow. Or murder. Or an end to the 1st Amendment. That's why "the character issue" is so important in politics. (Though there are times when, as in the 2008 presidential election, both candidates are clearly of high moral character.)

 

But the question here is really different, isn't it? Severian is asking a great question -- whether government actions should be guided/informed by popular opinion polls. I don't think they should, though I do support popular referendums. At least with a referendum you have time to put forth the full issues (as opposed to a cute girl standing in a mall with a clipboard, or a cold call at dinner time), and you can debate it and let people consider all the ramifications. They still might not get it right, but then you have various other courses of action.

 

I think California has taught us a lot about popular governance in recent years, with all those referendums and ensuing court battles. Those fights often put a realpolitik spin on an issue, revealing significant ramifications and making it difficult for an otherwise unengaged public to ignore a subject.

[Mr Skeptic]

I think taxing wealth (as opposed to income) is a poor choice because it punishes thrift and responsibility. That is, someone who spent a lot of effort throughout their lifetime accumulating their wealth even with a mediocre income, so they could have a good retirement, pay for their kids or even grandkids to go to college, or something... would be treated the same as someone with an absurdly large income that has only a fraction of one day's income in the bank and spends the rest on hookers and yachts or something. And no it won't be done just once, people know better and so everyone will be a bit scared of saving money. Really I don't see anything wrong with just increasing the tax rate on the wealthy for a brief period like everyone else does when they need money. This would be a much more gradual effect and would discriminate based on income rather than income and thrift, which to me seems more fair.

[jackson33]

First, it was a "poll" and not discounting there accuracy or potential motives, the recent elections did place the Conservatives into power, but...

 

Second; According to the UK or Parliamentary System, short of a majority vote for one or another party, a Coalition must be formed to attain that majority, or in England the Head of State (the Queen) may choose the ruling party. To achieve this the most Liberal and most Conservative, are trying to keep from another election, where likely, they felt Labor would regain power.

 

What's interesting to me and not only on this issue, is the Liberal influence being imposed on the majority (of the two) Conservatives, under there coalition, to maintain that Government.

 

But the question here is really different, isn't it? Severian is asking a great question -- whether government actions should be guided/informed by popular opinion polls. [/Quote]

 

If this is the greater question, then I'd suggest every politician in every Country and regardless of it's form for governing is going to be somewhat influenced by polling, today. However, for some of the reasons, I discussed in post #4, this thread, I really don't think either the majority of their electorate, or members of parliament would consider the polling apparent cure, ESPECIALLY the Conservative Party, even if it cost them control, quite the contrary and IMO if another election was called, they might win the outright majority of the seats.

 

Pangloss, someday I'll try a 'US Historical Slavery' thread, but at least since the 1750 favoring slavery has never been an accepted majority opinion....

[padren]

Give us your tired, your poor, and your fabulously wealthy yearning to be free.

That would be entertaining - the White House endorses this plan, as the Senate quietly passes a bill easing immigration from the UK for those that meet "certain criteria" at the same time.

 

In my country ultimately the people do have that right. We could (in theory) have perfectly legal slavery in the United States of America tomorrow. Or murder. Or an end to the 1st Amendment. That's why "the character issue" is so important in politics. (Though there are times when, as in the 2008 presidential election, both candidates are clearly of high moral character.)

 

But the question here is really different, isn't it? Severian is asking a great question -- whether government actions should be guided/informed by popular opinion polls. I don't think they should, though I do support popular referendums. At least with a referendum you have time to put forth the full issues (as opposed to a cute girl standing in a mall with a clipboard, or a cold call at dinner time), and you can debate it and let people consider all the ramifications. They still might not get it right, but then you have various other courses of action.

Technically, this is the whole point of constitutional protections - for the "mob majority" to pass a law (and expect it to stand) that impacts the rights of the few in an unconstitutional manner, a constitutional amendment has to be passed for it to be legal.

 

While it is established that taxes can be applied to a citizen's income in the US, to actually "tax" (ie, appropriate) a portion of their accumulated wealth I can only assume an amendment to create the exception under the 4th Amendment would be required. I honestly don't know all the details about property seizure in the US and while I know you can have your property seized and forfeited if it is used to transport narcotics into the country, I assume those liberties don't extend to the point of 50% majority rule to enact arbitrary seizure of property not involved in the committing of such a crime.

 

 

The whole point, imo of having most laws malleable by a simple majority and others requiring a higher standard and constitutional amendments is important to creating a sense of stability. In the US it's expected that taxes may be adjusted and this can impact your income, but it's also expected that your property isn't fair game within that framework. If a nation decides to change the framework and meets the special case majority requirements (such as a super majority in the US) then even if arguably unfair, it's at least reasonable. The consequences could be incredibly disastrous or benign, but without the staggered requirements people cannot see philisophical shifts in the framework building steam, and that leads to uncertainty.

 

Honestly, the biggest question is if a society allows a simple majority vote to pass a law that overnight allows the seizure of property from a specifically targeted minority, then what other actions can be taken against any minority by the same process? What else about the society can flip on a dime? At that point the question isn't if the specific law targeting a minority is fair, but whether it is wise to entrust a simple majority government to always be fair in targeting a minority.

 

 

A pretty fundamental principle in the US system is that it is never wise to entrust that much power to a simple majority (emergency provisions not withstanding) and personally I agree with it for the reasons mentioned above.

 

 

 

As a side note: What would happen if 50% of those who would be targeted decided to "invest" their wealth in a manner that exempted it from the tax? Would the remaining clearly honest folks have to fork over 40% or would the government just say "oh well" and settle for half?

Edited October 11, 2010 by padren

[Pangloss]

Wasn't it Margaret Thatcher who said "the big problem with socialism is that eventually you run out of other people's money"?

 

But I don't think she's very highly thought of these days. Too bad.

 

 

Pangloss, someday I'll try a 'US Historical Slavery' thread, but at least since the 1750 favoring slavery has never been an accepted majority opinion....

 

Thank god.

[CaptainPanic]

Wasn't it Margaret Thatcher who said "the big problem with socialism is that eventually you run out of other people's money"?

Which is opposed by the socialists who claim that "the big problem with capitalism is that eventually all the money is owned by a very small group of people".

 

We all know that, on the long term, it doesn't work to force rich people to pay for everything. There is nothing wrong with having a rich class.

 

But we also know that this can go over the top, where the rich own everything.

 

The goal of our society should be to find the truth in the middle. And perhaps that would mean that the (extremely) rich start paying more tax?

My personal view is that, at this moment in time (2010), the rich could do with a little less, and the poor with a little more.

[pioneer]

The problem with this approach is the same as having uncle Joe pay off his niece's maxed out credit cards. Once the pressure of the debt is removed, she may think this is a good time to go back to the store and complete her fall wardrobe. When her credit cards are maxed out, she is force to ponder her impulsive spending and think more practically. It is not so much protecting uncle Joe, as it is teaching his niece that money does not grow on trees. If uncle Joe knew his niece has learned her lesson, and will now be practical and spend within her means, then he may decide to help her out. But as long as she hasn't learned anything, it is a waste of money.

 

Since uncle is dragging his feet, the niece comes up with the idea, I will get some of my friends and have them strong arm my uncle for the money. We can tie him up and loot him. The ends justify the means. He can afford it and I will be able to pay off my cards so I can have the credit to spend again.

 

Another way might be to have uncle pay the debt, and then have control over my credit cards to prevent me from impulsive buying. If the rich were willing to pay, they could then have control over how future money is spent up to the amount they give. Fair is fair.

Edited October 12, 2010 by pioneer

[Severian]

The problem with this approach is the same as having uncle Joe pay off his niece's maxed out credit cards. Once the pressure of the debt is removed, she may think this is a good time to go back to the store and complete her fall wardrobe. When her credit cards are maxed out, she is force to ponder her impulsive spending and think more practically. It is not so much protecting uncle Joe, as it is teaching his niece that money does not grow on trees. If uncle Joe knew his niece has learned her lesson, and will now be practical and spend within her means, then he may decide to help her out. But as long as she hasn't learned anything, it is a waste of money.

 

That analogy doesn't really work though, since it isn't really the niece's debt. A better analogy would be if the aunt had borrowed the niece's credit card, maxed it out and refused to pay it off herself. The aunt even refuses to give the credit card back. Then the niece goes to the uncle and asks him to pay it off. Once it is paid off the aunt goes back out and buys more stuff, spending impulsively because she knows there are no consequences.

 

Incidentally, I wasn't advocating this "solution". I just wondered what you all thought, especially with regard to the democratic will of the majority.

Edited October 12, 2010 by Severian

[swansont]

I think taxing wealth (as opposed to income) is a poor choice because it punishes thrift and responsibility. That is, someone who spent a lot of effort throughout their lifetime accumulating their wealth even with a mediocre income, so they could have a good retirement, pay for their kids or even grandkids to go to college, or something... would be treated the same as someone with an absurdly large income that has only a fraction of one day's income in the bank and spends the rest on hookers and yachts or something. And no it won't be done just once, people know better and so everyone will be a bit scared of saving money. Really I don't see anything wrong with just increasing the tax rate on the wealthy for a brief period like everyone else does when they need money. This would be a much more gradual effect and would discriminate based on income rather than income and thrift, which to me seems more fair.

 

Temporarily adjusting the tax on income has the problem that income can be adjusted and deferred, especially for the rich. If you decided to do this for e.g. two years, there will be a whole lot of wealthy people who not-so-mysteriously have relatively little income for those two years.

 

——

 

As for the original question, I think it doesn't address the long-term issue that got you there. It's liposuction without an adjustment in the diet/exercise program.

[CaptainPanic]

The problem with this approach is the same as having uncle Joe pay off his niece's maxed out credit cards. Once the pressure of the debt is removed, she may think this is a good time to go back to the store and complete her fall wardrobe. When her credit cards are maxed out, she is force to ponder her impulsive spending and think more practically. It is not so much protecting uncle Joe, as it is teaching his niece that money does not grow on trees. If uncle Joe knew his niece has learned her lesson, and will now be practical and spend within her means, then he may decide to help her out. But as long as she hasn't learned anything, it is a waste of money.

 

Since uncle is dragging his feet, the niece comes up with the idea, I will get some of my friends and have them strong arm my uncle for the money. We can tie him up and loot him. The ends justify the means. He can afford it and I will be able to pay off my cards so I can have the credit to spend again.

 

Another way might be to have uncle pay the debt, and then have control over my credit cards to prevent me from impulsive buying. If the rich were willing to pay, they could then have control over how future money is spent up to the amount they give. Fair is fair.

Your argument suggests that the niece just has to work harder to be able to buy more clothes. You also suggest that the niece cannot handle money. Both things are not proven by the simple fact that the niece has less money than the uncle...

 

You also suggest that democracy works like an angry mob: the majority will rob those rich people blind. Again, this is not true. Democracy in combination with capitalism has allowed the greatest accumulation of wealth in history.

 

My point has been, and still is, that the rich are in a position to enrich themselves even more - which they constantly do. And it's perhaps not a bad thing to limit this. No problem with differences in wealth, it is probably a good motivation for people to work hard.

But as far as I'm concerned the problem in this world is that some people are literally a BILLION times as rich as other people... And even in Western countries, the billionaires earn 10,000 - 100,000 times as much as the average working people.

 

Don't you all think that's a little excessive?

 

Once again, I do not suggest we loot the uncle. I do not suggest violence, or revolution. Just a higher tax for the very rich will do...

[Dak]

Just a higher tax for the very rich will do...

 

http://www.politics.co.uk/news/business-and-industry/tuc-wants-tax-loophole-changes-$485086.htm

 

If they payed the tax that they should in the first place...

[padren]

The problem with this approach is the same as having uncle Joe pay off his niece's maxed out credit cards. Once the pressure of the debt is removed, she may think this is a good time to go back to the store and complete her fall wardrobe. When her credit cards are maxed out, she is force to ponder her impulsive spending and think more practically. It is not so much protecting uncle Joe, as it is teaching his niece that money does not grow on trees. If uncle Joe knew his niece has learned her lesson, and will now be practical and spend within her means, then he may decide to help her out. But as long as she hasn't learned anything, it is a waste of money.

 

Since uncle is dragging his feet, the niece comes up with the idea, I will get some of my friends and have them strong arm my uncle for the money. We can tie him up and loot him. The ends justify the means. He can afford it and I will be able to pay off my cards so I can have the credit to spend again.

 

Another way might be to have uncle pay the debt, and then have control over my credit cards to prevent me from impulsive buying. If the rich were willing to pay, they could then have control over how future money is spent up to the amount they give. Fair is fair.

 

Another way to look at it is the niece and the uncle work together, and while the uncle does all the work that can grow the business the niece does a most of the physical labor. They work out wages and she rents a house from him and everyone is happy with a very equitable arrangement until the economy gets tight and she has to keep loading up credit cards to make ends meet. It's viewed as a temporary solution but when it appears sales won't pick up in time, she has to go to the uncle and say "Look, this is crazy, I can't keep loading up credit cards, I already can't afford to fix my car so all our errands take 3 times as long and I have no idea how to even make rent next month, let alone pay for food."

The uncle is unhappy because he's had to cut back a lot himself even though he's not as badly off, but even he has to admit that what was an equitable arrangement is no longer viable and his own wealth and income are threatened by the situation if his niece can't pay rent, eat and therefore keep working.

 

The niece probably made mistakes and bought a few things that depreciated she shouldn't have considering how the economy was. The uncle probably made mistakes thinking there would be enough sales to keep his niece financially secure, and that sales would pick up before it got too bad.

 

 

All in all, neither of them can make money without the other, both of their assets are in jeopardy and they are both in a bind. The "one time debt clearance" may be all that is needed and she'll be able to get through on her credit cards until the economy picks up. Maybe they'll have to work out something more equitable so they both survive the recession instead of a compensation agreement that only works under economic conditions that don't currently exist.

 

All contracts, all wages, all benefits exist tentatively on the understanding that a healthy deal has been struck that allows a healthy financial system. If these agreements fail by the numbers in given a current state of economy no amount of bellyaching or contractual enforcement is going to make it work. Something has to be addressed or everyone looses.

 

 

The sad thing is we do have the odd radical socialists (on street corners of course, at least not in US politics) that will always try to convince everyone that only equal shares of wealth can work. We also have odd radical capitalists (many a little too involved in US politics, imho) who believe that if they can convince their nieces to take a bad deal, every penny they keep is theirs and they alone earned it with Galt-scale delusions.

IMHO both sorts of radical ideologues need to grow the hell up and try to solve the real problems with real solutions by working out fair agreements that actually work or shut up/be ignored while those that can, do.

 

This UK debt plan could work, but it's an ugly solution to an ugly problem and I really hope it is not necessary. At the very least it is a good thing that the idea is being floated, as it underlines that something equitable has to be done and no one can afford to isolate themselves from the problem.

[JohnB]

What an intensely stupid idea. It panders to the mindless masses and envy.

 

The concept is fatally flawed by the supposition that the "mega rich" or whatever you want to call them actually have cash to hand over for this tax. They don't. It's all in businesses and investments. So which chunks of Virgin should Richard Branston sell off? Which companies would the British public like to see go to overseas ownership? I've known many a millionaire over the years and the vasy majority couldn't write a cheque for $5,000 without it bouncing. One guy (who owned a trucking company) was worth around $15 million on paper, but his annual income was less than his receptionists. Applied to him, all he could do would be to sell off a number of his trucks to raise the money, reducing the sixe of his company and putting people out of work. The only difference between him and the mega rich is a matter of scale, nothing more.

 

I add that since the business world would know that the mega rich have to sell and raise cash to 20% of their worth, the business world would hold off buying, forcing the price down and down. Rather than liquidating 20% of their assets, the figure would be closer to 30-35%.

 

A stupid idea based on fantasy, put forward as workable. Gee, do you think that sort of economic idiocy might be the cause of the problem?

 

And Dak, please. A TUC article? We've got some of those twits down here and they still call each other "comrade". It's amazing how many of the most vocal and insane unionists in Australia have bloody pommy accents. Besides, they don't want fiscal responsibility, they want more money for more public servants at higher wages.

 

It might be worth looking at this Guardian article to see where the British problem comes from. Middlesborough has 43% on the government roll and the money to pay them has to come from somewhere. How Britain could possibly need 6 million Civil Servants in a pissant little country that fits between Brisbane and Sydney is beyond me.

Edited October 16, 2010 by JohnB

[lemur]

If you really want to demonstrate faith that capitalism will replace the wealth taken in taxes, this is the way to go with government spending and taxation. First the government takes the liberty of spending how it wants to. Then it taxes the wealthy to show that it is confident that social class stability is stable enough that no one will ultimately suffer due to the taxation. This really cements the class relations of an economy because it basically shows that the working and middle classes are happy with the way the government spent money and the wealthy are happy to have benefited from the economy in which that money was spent. It's basically a way of saying, "good job, keep up the good work," to the government. After all, wealth is not so much about avoiding taxation as it is about maintaining the top of the feeding chain position in the economy. The wealthy thus make back what they are taxed as the rest go on spending as they are accustomed to.

 

For everyone who is more interest in change, progress, or something other than reinforcing the status quo, this economic strategy of spending followed by taxation of the wealthy is crap.