Should the super-rich be super-taxed?

No says Rosie Carr deputy editor of Investors Chronicle and contributes to a range of other financial publications.
There is nothing wrong with talented people and hard workers earning huge sums of money. Why shouldn't they, if they've put the effort in? But for most people, the sight of someone else's vast wealth tends to provoke an outbreak of envy and jealousy. We express unease at such "greed" even though, for all we know, they might be channelling half their wealth to charitable causes. We allow ourselves to believe that somehow it is wrong, even though one person's wealth rarely has anything to do with another person's poverty.

Bill Gates is one of the world's richest men, but there is no link between his billions and a single mother living on benefits. Yet when politicians declare that rich people should pay a super tax so that their wealth can be used to relieve the plight of the poor, we nod in approval.

Futile and wrong

But what's fair about taxing some people more than others? We should all pay the same rate. Punishing successful businessmen, entertainers and entrepreneurs is futile and wrong. The signal it sends out to the most creative, talented and hard working members of society is simple: be a success and we will cripple you with tax. Why would we want to discourage the creation of wealth? Millionaires and billionaires are a minority group in the EU but they are growing in number as more people take advantage of the opportunities open to them.

Make no mistake—no one will be prepared to work their socks off if their reward is to see the tax man helping himself to a huge chunk of their earnings. The last time wealthy people in Britain were forced to pay a "super tax" of 90% of the top slice of their income, they left the country in droves. Hundreds of thousands of wealthy Frenchmen have also removed themselves and their money from France because of its tax regime.

It's never a good idea to kill the goose that lays the golden egg and if you ask for too much tax, the chances are you'll end up getting none as the people being taxed flee. Even worse, the jobs that these successful businessmen and women would have created and the money they would have poured into the local economy will also disappear.

One politician in the UK has called for huge 'City' bonuses to be handed over to the state for redistribution to poorer people. Why should someone who has never made an effort be entitled to someone else's rewards? Instead of applauding the genius and ability of successful businessmen and women to create wealth, we mutter darkly that it's unfair or that they don't deserve it. Instead of wishing every gifted footballer and musician the best of luck, we argue that they should hand their money back to be spent on "worthy causes". Who deserves the money more than the man or woman who earned it through sheer effort in the first place?

Politics and false morality

The wealthy already pay taxes, and they contribute the most to the EU's tax bill with 40%-50% of their earnings disappearing in taxes. They are also the biggest donors to charity and it seems only fair that having earned it, they—not some vote-fishing politician—should decide how to spend it.

But still we package up the idea of a super tax in the wrapping paper of morality: it is immoral that the rich have loads of money and it is only fair they should give it to people who are less fortunate. Dragging the poor into the argument does not strengthen the argument in favour of a super tax. Yes, there is a powerful case for helping people who cannot help themselves. But that's why we all pay taxes—to create a fairer society with equal opportunities. It's not a reason to make the hardest working or the luckiest people pay even more taxes. If it's unfair that a high flying stressed-out lawyer working seven days a week and taking minimal holiday, earns a seven figure salary, is it really any fairer that a man who's too lazy to work should be entitled to a share of his money?

A super tax would not only be unjust, it would fail to tackle the root causes of poverty. The money that would be raised through an extra levy on the richest people would be too small to make any real difference to the lives of the poor: but politicians, always eager to spend someone else's money, would find some way to squander it uselessly. Millions of people who live in poverty are poor because they do not work. Capping the earnings potential of everyone else will not solve this problem.

And click here for the opposite view...

Mis à jour le 25/10/2016 pratclif.com