In case this week's Fun Online Poll seems a little cryptic, it's not.
For avoidance of doubt, I would never recommend policies that make it both more difficult to become wealthy AND to stay wealthy, that's not the choice here . So taxes like capital gains tax, Inheritance Tax or Stamp Duty Land Tax, that make it more difficult for some people to stay wealthy without making it easier for others to become wealthy in the first place are beyond the pale. Similarly, our savagely means-tested welfare system makes it far less likely that the five million adults claiming benefits will ever work their way out of poverty and hence become wealthy ('wealthy' in this context meaning 'wealthier than they otherwise would be' on an individual level), while at the same time those welfare payments are paid for out of the taxes on other people's labour and investments (thus making it more difficult for those others to become or to stay wealthy), which is what I'd call a 'lose-lose' situation.
What I am thinking about very specifically are the marginal situations where a choice has to be struck. To repeat my simple example from the comments to the poll, we are stuck (for the time being) with high taxes on employment income (a Bad Thing) and a savings culture that has been eroded (also a Bad Thing), but as I said "... politicians love to waffle on about tax breaks for saving. My view is that rather than reducing taxes on savings income, they should reduce taxes on employment income so that people have higher net incomes out of which to save something in the first place.
An even more extreme example of this are tax breaks for pensions saving. It is only those people who earn more than enough to live on who can afford to put money aside, so superficially, the tax breaks benefit them (making it easier for the already wealthy to stay wealthy) and are funded out of a higher tax burden on those who live from hand to mouth (making it more difficult for them to become wealthy).
That would be bad enough, but the irony is of course, the bulk of pensions tax breaks (which ought to accrue to those higher earners) is swallowed up by the pensions 'industry', and what is left in each indivudual's pensions pot has been lost thrice over through malinvestment in the stock exchange over the past few years*.
So switching from the specific to the general, what pensions tax breaks do is transfer income from lower earners (making it more difficult for them to become wealthy) to people who sold overvalued shares to gullible or negligent pension fund trustees (making it easier for them to remain wealthy) and to the pensions industry itself, which does not really create wealth or enable society as a whole to become wealthier.
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I've got plenty of other examples, I'll explain a few more as I go along.
* Yes, yes, I know that people like to rail about The Goblin King's £5 billion a year tax raid on private pensions - but let's not forget that the UK's various final salary schemes now have a £219 billion deficit, having been in a broadly break even situation two years ago. Or that the TV licence fee costs UK households about £3 billion a year - if your pension is that important to you, then you could halve the loss by going without a telly, for example.
So What Will Be Done About The Officer?
1 hour ago
8 comments:
In theory pensions are A Good Thing. Pensions are, or should be, deferred pay. You give up pay today and we'll not tax you on it but when you take the 'pay' we will tax you on it. Seems fair. Then it all starts to fall apart. Class 1 pension savers - let's call them smug state employees - get all this at zero cost to themselves in schemes run by their mates, from whom Bernard Madoff learned his trade. Class 2 pensioners are those as described by MW whose deferred pay is raped by costs and charges.
If we are going to have pensions at all everyone must have the same type, money purchase schemes. This puts smug civil servants on the same ground as the rest of us and encourages them to help create wealth rather than destroy it.
Then there's ISA etc. All these do is redistribute any gains back to the scheme operators and the regulators i.e. bureaucrats. Scrap them all along with EIS ete etc
Why call them a pension (a reward for not working) why not have a citizens dividend for ALL.
L, agreed, but here's the big IF: "If we are going to have pensions at all..." My personal view is, either universal, taxpayer-funded flat rate Citizen's Pensions (at whatever level of £ per week) or nothing at all.
But that's possibly a bit radical, and faced with a marginal choice of more tax breaks for savings/pensions or tax cuts generally, I'd go for the latter. It's the marginal decisions I am talking about here.
AC1 - I'll do means-tested welfare vs CBI in a later post, I'm trying to split things up into simple examples.
Yes, but going without a telly means that I will miss the historic dying days of this Labour government in full visual glory before we rid this country of socialism in 2010!
LFAT,
So you're saying "Dave" isn't going to win and neither are Labour?
So you're saying "Dave" isn't going to win and neither are Labour?
Hopefully YES you can add the Libdims to that.
Anyway it's all too late
"The quiet revolution has started".
LFAT said before we rid this country of socialism in 2010!
Well, yes, I suppose in name we might. But unfortunately the "wet" Conservatives of these times under Cameron aren't radically different in philosophy, thought or action from the drivellers of NuLabour or the dribblers of OldLabour. Or if they are, they sure as hell aren't brave enough to say so. Mind you I despair of the other alternatives, too.
Sorry, a bit off topic. Bring on the Citizens' Pension, tax defined benefit pension schemes into extinction, release employers from having to operate pensions schemes, and let people save if they want to supplement the CP. In an ideal world it wouldn't be necessary to enforce saving or to protect the saved funds in any particular way but maybe there should be one or two restrictions on access (like not pledging it against a debt, that sort of thing).
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