For our economic health we need a one-off tax on the one per cent

Stewart Lansley is the author of “The Cost of Inequality: Three Decades of the Super-Rich and the Economy”, published by Gibson Square.

In their report, “Divided We Stand”, the OECD has called for tougher action by governments to reverse the increasingly common trend towards greater inequality. It is a timely call. Such action may be the only hope of preventing the economy from sliding into a prolonged era of slump.

Indeed it is the strikingly unequal distribution of the national cake that is the main hurdle to recovery.

George-Osborne Economic orthodoxy holds that a stiff dose of inequality brings more efficient and faster growing economies.

In search of greater dynamism, successive British governments have allowed, indeed encouraged, the fruits of growth to be colonized by a small business, financial and corporate elite. This has left the workforce with a shrinking share of the nation’s output, not just in the UK but across most rich nations from the United States to Germany.

In the UK, the upward transfer from wages amounts to the equivalent of around seven per cent of the economy.

This means that today UK consumers have around £100 billion – roughly equivalent to the size of the nation’s health budget – less in their pockets than if the cake was shared as it was in the late 1970s. In contrast, business and super-rich bank accounts have been swollen by a roughly similar amount.

In the bigger economy of the United States - where there has been an even greater switch of national income – the sum stands at around £500 billion. The effect of this concentration of economic power is that the two most effective routes out of the crisis have been closed.

First, consumer demand - the oxygen which makes economies work – has been choked off. Rich economies have lost billions of pounds of spending power; secondly, the slump in demand might have been less damaging if the winners from the process of upward redistribution (big business and the top one per cent) played a more productive role in helping recovery - they are not.

Britain’s top 1,000 super-rich are sitting on fortunes that are collectively worth £250 billion more than in 2000. The biggest global corporations are also sitting on near-record levels of cash. In the UK, such corporate surpluses now stand at over £60 billion, around five per cent of the size of the economy. This money could be used to kickstart the economy but is mostly standing idle.

The result is paralysis. With the national cake so unevenly divided, consumers have been denied the means to help revive the economy. Those with the economic muscle to do so are waiting for an upturn that cannot come without a boost to consumer demand.

There is only one solution to this problem - to transfer some of these surpluses to consumers.

Indeed, the OECD has asked all nations to review their “tax systems to ensure that wealthier individuals contribute their fair share of the tax burden.” This is a call to action that should be heeded through a one-off emergency tax on company surpluses over a certain amount along with a wealth levy on the super-rich, say those worth over £15 million.

This could be used to finance a single payment - akin to the annual fuel allowance – to all those in receipt of benefits. Even a modest tax, say 10 per cent, would raise upwards of £30 billion. There would be an element of rough justice about such a move, and there would be squeals of outrage from those affected.

But drastic times require desperate measures and the effect would be a one-off transfer from the winners from economic change since the millennium to the losers.

There are close, if more modest, precedents - the windfall tax on utilities in 1997 and the bank levy in 1981. The effect would be an immediate injection of demand that would bring an end to austerity, stimulate recovery, stop the hemorrhaging of jobs and lower the deficit. Those paying the tax would end up getting some of it back as revenues revived.

Allowing the fruits of growth to be increasingly unevenly shared in the name of greater efficiency has got us into this mess. If the distribution of national output - across the rich world – had been maintained at its level of three decades ago, idle surpluses would now be being spent by consumers, and we would be well on our way out of it. Re-transferring some of it back is the next best solution.

See also:

• To end inequality without redistribution of wealth, we should pay a living wage - Duncan Exley, December 8th 2011

• Cable gets it on pay and inequality – unlike the greedy IoD - Larissa Hansford, September 19th 2011

• The fragmented society: How irresponsibility and inequality feed off each other - Duncan Exley, August 12th 2011

• Rising inequality is making social and political conflict more likely - Duncan Exley, June 29th 2011

• Poor and sick paying the heaviest price for Osborne’s deficit reduction - Steve Griffiths, June 28th 2011

http://twitter.com/wikimir/status/145427866262315008 Ken Rice

For our economic health we need a one-off tax on the one per cent, writes @StewartLansley: http://t.co/MBaOj5Qd #OccupyLSX
http://twitter.com/laylapup/status/145427896566153216 Cherry McCormack

For our economic health we need a one-off tax on the one per cent, writes @StewartLansley: http://t.co/MBaOj5Qd #OccupyLSX
http://twitter.com/drchristinehill/status/145428003709657089 Christine Hill

RT @leftfootfwd: For our economic health we need a one-off tax on the one per cent, writes @StewartLansley: http://t.co/ckUgjChH #OccupyLSX
http://twitter.com/davesimps0n/status/145428701687988225 dave simpson

RT @leftfootfwd: For our economic health we need a one-off tax on the one per cent http://t.co/Zn2B8Ya6
http://twitter.com/labour52rose/status/145428713453006848 Alex Braithwaite

RT @leftfootfwd: For our economic health we need a one-off tax on the one per cent http://t.co/mid8iNGL
http://twitter.com/politicalplanet/status/145431162012180480 Political Planet

For our economic health we need a one-off tax on the one per cent: Stewart Lansley argues that the crisis we are… http://t.co/HnfO0TK2
http://twitter.com/creativecrip/status/145436251535843329 TheCreativeCrip

For our economic health we need a one-off tax on the one per cent, writes @StewartLansley: http://t.co/MBaOj5Qd #OccupyLSX
http://twitter.com/amanda_j_w/status/145446889049956352 Amanda Wilkinson

For our economic health we need a one-off tax on the one per cent, writes @StewartLansley: http://t.co/MBaOj5Qd #OccupyLSX
http://twitter.com/jintyg51/status/145449739628986368 Janet Graham

For our economic health we need a one-off tax on the one per cent, writes @StewartLansley: http://t.co/MBaOj5Qd #OccupyLSX
http://twitter.com/turbohat/status/145450958833455104 Darryl Ellson

For our economic health we need a one-off tax on the one per cent http://t.co/WoHUf8Ed via @zite
Anonymous

More tax. The universal panacea to all problems, including scrofula, crabs, and general malaises of the humour.
http://twitter.com/altgovuk/status/145457651638206466 AltGovUK

RT @leftfootfwd: For our economic health we need a one-off tax on the one per cent, writes @StewartLansley: http://t.co/Kptwo3Q3 #OccupyLSX
http://twitter.com/robertcp/status/145465582375022592 Robert CP

For our economic health we need a one-off tax on the one per cent, writes @StewartLansley: http://t.co/MBaOj5Qd #OccupyLSX
http://twitter.com/risaala/status/145466533706088448 Risaala

For our economic health we need a one-off tax on the 1% http://t.co/sehpD3db 99% of the wealth they've grabbed over the last 25yrs! #Occupy
http://twitter.com/ukoccupy/status/145466531998990336 #OccupyUK

For our economic health we need a one-off tax on the 1% http://t.co/1tfnxM9Q 99% of the wealth they've grabbed over the last 25yrs! #Occupy
http://twitter.com/gildasapcaw/status/145466535752900608 Gildas ApCaw Sapiens

For our economic health we need a one-off tax on the 1% http://t.co/MR5fG4mD 99% of the wealth they've grabbed over the last 25yrs! #Occupy
http://twitter.com/oppressorsorg/status/145466537535488000 Oppressors.org

For our economic health we need a one-off tax on the 1% http://t.co/xpbEzpFX 99% of the wealth they've grabbed over the last 25yrs! #Occupy
http://twitter.com/gildassapiens/status/145466540257574912 Gildas Sapiens

For our economic health we need a one-off tax on the 1% http://t.co/GDshfKfJ 99% of the wealth they've grabbed over the last 25yrs! #Occupy
http://twitter.com/captaincrikey/status/145468201856282624 Sean PdeC

For our economic health we need a one-off tax on the one per cent, writes @StewartLansley: http://t.co/MBaOj5Qd #OccupyLSX
http://twitter.com/therightarticle/status/145472132204347392 Michael

For our economic health we need a one-off tax on the one per cent – http://t.co/jZ6VyQ5G
http://twitter.com/JakeAWatson Jake Watson

Surely the
http://twitter.com/xraypat/status/145474458302423040 Patricia Farrington

For our economic health we need a one-off tax on the one per cent – http://t.co/jZ6VyQ5G
http://twitter.com/yrotitna/status/145522523155611648 Juan Voet

Frm earlier 2day: @StewartLansley makes the case for a one-off tax on the one per cent: http://t.co/MBaOj5Qd #OccupyLSX
Richard

The problem is that the Left doesn’t stop with the super rich, they increase taxes for everybody.

For example, Inheritance Tax. This was always designed to tax idiot sons of rock stars and Little Lord Fauntleroys living in country mansions, it was never supposed to apply to working people who had chosen to save rather than spend.

An example. Both my parents were teachers. They weren’t millionaire business people. But whilst our neighbours were having foreign holidays every year, and changing their car every two years, we holidayed in the UK. In 30 years, my father owned only two cars. At the time, it was difficult for me to understand but it was my father’s choice to save and invest in the stock market and pass that money onto his children. When he died he left an estate of about £800K, a result of his diligence and sacrifice. A tax bill of £140K arrived because, as Gordon Brown, loved to keep repeating, inheritance tax applied to “only the richest 3000 estates in Britain”.

It is legalised theft. Tax was paid when the money was earned (income tax), saved (investment income tax), shares sold and reinvested (capital gains tax) and then taxed again when my father died.

I wouldn’t even mind that much paying it, if I knew the money was not being wasted.

But I can’t say that. When you list the catalogue of shocking public spending disasters under Labour, it really makes you feel sick. They just cannot keep their hands out of the public purse, and they can’t stop taxing. It’s part and parcel of Socialism. They despise anybody who creates wealth because it goes against their whole ethos.
Mike Thomas

Mmmm, that’s never been done before has it?

Do you know what happened last time? They left the country.

And Nothing is so much better than 50% of £1,000,000 isn’t it?
http://twitter.com/hitchinengland/status/145543118626885632 Hitchin England

RT @leftfootfwd: Frm earlier 2day: @StewartLansley makes the case for a one-off tax on the one per cent: http://t.co/7nlwjDar #OccupyLSX
http://twitter.com/daddymojorisin/status/145543336617459712 Pete Hutcheon

RT @leftfootfwd: Frm earlier 2day: @StewartLansley makes the case for a one-off tax on the one per cent: http://t.co/7nlwjDar #OccupyLSX
http://twitter.com/JakeAWatson Jake Watson

Maybe so, I certainly wasn’t suggesting it was the definitive answer. Merely that if the government started randomly imposing a one off ‘tax’ whenever they needed a fast buck, people would be even MORE likely to leave. The devil you know is better than the devil you don’t, and a predictable (but slightly higher) tax seems more attractive than the phantom of potentially limitless and unpredictable taxation whenever we need some money.

Also, I’m not entirely sure it is true that the super rich and big business would leave if they were faced with a slightly higher tax liability. I would imagine that for companies a favorable regulatory regime and strong and efficient courts would counteract a couple of percent increase in tax. I really have no evidence whatsoever to support this, just wondering out loud (and see statements like Warren Buffet’s a few months ago).

Anywho, just speculating that unregulated and random tax would have the exact same effect that you are worried about.
http://twitter.com/Newsbot9 Newsbot9

So he managed with his “diligence” not to write a proper will? And whine whine multiple tax… 75% should be the default over a very modest amount. Including all trust funds and other means of evasion.

And of course people having money spend on improving their lives makes you feel sick, it’s money wasted on the 99%!
http://twitter.com/Newsbot9 Newsbot9

Who left? Names!
http://twitter.com/michaelshapcott/status/145665573639036928 Michael Shapcott

Super rich and big corporations sitting on tons in idle cash that could be used to boost economy, reduce #inequality http://t.co/s0io29Ru
http://twitter.com/colette2820/status/145817582958678016 colette

Frm earlier 2day: @StewartLansley makes the case for a one-off tax on the one per cent: http://t.co/MBaOj5Qd #OccupyLSX
http://twitter.com/havantacluotmp/status/145833482936004608 Jeni Parsons

RT @leftfootfwd: For our economic health we need a one-off tax on the one per cent http://t.co/ji4PdV6j #otmp #occupylondon
Mr. Sensible

Well we’re not really in this together just at the moment…
http://twitter.com/dphodgson/status/146006874523836416 David Hodgson

my last #delicious link: For our economic health we need a one-off tax on the one per cent | Left Foot Forward http://t.co/TI61UhsJ econo…
http://twitter.com/Newsbot9 Newsbot9

Huh? The Tories are in it together (for themselves), and always have been.

The “We’re” is the bit to parse!
http://twitter.com/occupiedwsj/status/146334602678632448 OccupiedWSJ

It's an Economic Health Thing http://t.co/o9OiYJO3 #ows #occupywallstreet #occupywallst #occupytogether #occupyeverywhere #occupy #tax
http://twitter.com/miketreen/status/146432097979084800 Mike Treen

RT @leftfootfwd: For our economic health we need a one-off tax on the one per cent http://t.co/A0NOUfkI
http://twitter.com/wearethe99prcnt/status/147077780499206144 We The 99 Percent

The costs of inequality. Great article. http://t.co/lGXmP5hl #ows #99percent #p2
http://twitter.com/brettr4763/status/147078037287079936 Brett

RT @WeAreThe99Prcnt: The costs of inequality. Great article. http://t.co/P9dnGJnn #ows #99percent #p2
http://twitter.com/walterrhett/status/147079782352420865 Walter Rhett, Writer

The costs of inequality. Great article. http://t.co/lGXmP5hl #ows #99percent #p2
http://twitter.com/3jaked/status/147080192060432384 jake d

RT @WeAreThe99Prcnt The costs of inequality. Great article. http://t.co/BONAyKKN #ows #99percent #p2
http://twitter.com/drjwmarquis/status/147083575718723584 Dr. Justin Marquis

The costs of inequality. Great article. http://t.co/lGXmP5hl #ows #99percent #p2
http://twitter.com/mikeschaeff/status/147097529631252481 Michael Schaeffer

The costs of inequality. Great article. http://t.co/lGXmP5hl #ows #99percent #p2
http://twitter.com/sawb3/status/147101123646459905 V. H. Hammontree

The costs of inequality. Great article. http://t.co/lGXmP5hl #ows #99percent #p2
http://twitter.com/dutchessofdork/status/147103975894818816 Lynn Banks

For our economic health we need a one-off tax on the one per cent | http://t.co/BWCEe4aX (Assuming the #GOP wants our economy to recover.)
http://twitter.com/keyonms/status/147111609775554560 Keyon Smith

The costs of inequality. Great article. http://t.co/lGXmP5hl #ows #99percent #p2