Growing wealth inequality
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I see the figures in these stats. I find them hard to reconcile with what I see though. I see people living at a level that seems at odds with their income. Mostly at the low and middle earners. Anyone I know at the top end of earners, is relatively, frugal, in context of that they earn. Its not just that people are living beyond their means, or its all on credit, or very good at making the most of their money.
I would see AAM reflects some of these. You have people on low incomes struggling. You have people on high incomes mainly future planning, or investing. Well off people being frugal. That makes sense. You don't really get the people living way beyond their means or a credit bubble.
I would see AAM reflects some of these. You have people on low incomes struggling. You have people on high incomes mainly future planning, or investing. Well off people being frugal. That makes sense. You don't really get the people living way beyond their means or a credit bubble.
The main difference is that in this country we tax the bejasus out of income but leave wealth alone, thereby making it harder to turn income into wealth.Note that income and wealth are different, although related.
Wealth data here:
From an income point of view we are amongst the most unequal in the EU before State redistribution but amongst the most equal after State redistribution. When people claim that the country is run for the benefit of the rich I point out that if that is so then they are doing a terrible job of looking after themselves.
If I can pay all the bills, run a nice car, pay the mortgage and socialise but still have a surplus then it's easy for me to do a bit of future planning with the surplus. It's also more attractive as my capital assets appreciate far faster than my income increases.
New data on transfers of wealth:
Howth Head
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A few excerpts from a strange interview on the subject with someone who clearly doesn't like to be questioned or challenged - unless he's been asked to impart his own particular worldview on the issue. In fairness to the journalist she persevered, despite being close to being cut-off several times.
(It's curious that he started down this road by observing "inequality" in his own family - though it's not clear whether he thinks wealth should be redistributed within families. Perish the thought!)
www.irishtimes.com
Was there a particular experience that inspired him to start working on inequality? He starts to answer, and then breaks off.
“The Global Justice Report – I’m really sorry, but this is really what I want to talk about. So if you’re not interested in the Global Justice Report, maybe we should stop,” he says.
I reassure the professor that I do have questions about it.
“I think we should stop,” he repeats. “It’s clear, I can see you are not really interested.”
He apologises for “the misunderstanding”, saying he thought the plan was to write a story about the Global Justice Report – and answers some follow-up questions.
His interest in studying inequality came from observing “very different levels of wealth and social status in my family”, he writes. “Some very poor, some quite rich.”
Piketty is a long-term critic of Ireland’s economic model, and some of his proposals sound almost like a caricature of the kind of continental thinking abhorred in Merrion Street.
“The extra income that Ireland is generating by trying to be business-friendly, in practice means a lot of fake accounting of international corporations booking their profits in Ireland with economic activity which, in fact, is not happening in Ireland
“For one euro of extra wellbeing that you bring to Ireland by playing that kind of game, you are imposing 10 or 20 or 30 euros of damages to other countries, to the rest of the world, and to the planet,” he says.
He intended his 2014 bestseller to be a contribution to democratic debates “about the best way to organise society and the most appropriate institutions and policies to achieve a just social order” under the rule of law.
Its success led to a financial windfall that, he has told interviewers, the French state taxed at a rate of 60-70 per cent.
“A 90 per cent tax rate would not bother me,” he told the Financial Times the following year. “There would still be a lot left, since we’re talking about several millions.”
(It's curious that he started down this road by observing "inequality" in his own family - though it's not clear whether he thinks wealth should be redistributed within families. Perish the thought!)
Thomas Piketty: Ireland’s economic model is damaging to other countries
French economist is co-director of World Inequality Lab, which is proposing an average monthly income of €5,000 per person by 2100
Was there a particular experience that inspired him to start working on inequality? He starts to answer, and then breaks off.
“The Global Justice Report – I’m really sorry, but this is really what I want to talk about. So if you’re not interested in the Global Justice Report, maybe we should stop,” he says.
I reassure the professor that I do have questions about it.
“I think we should stop,” he repeats. “It’s clear, I can see you are not really interested.”
He apologises for “the misunderstanding”, saying he thought the plan was to write a story about the Global Justice Report – and answers some follow-up questions.
His interest in studying inequality came from observing “very different levels of wealth and social status in my family”, he writes. “Some very poor, some quite rich.”
Piketty is a long-term critic of Ireland’s economic model, and some of his proposals sound almost like a caricature of the kind of continental thinking abhorred in Merrion Street.
“The extra income that Ireland is generating by trying to be business-friendly, in practice means a lot of fake accounting of international corporations booking their profits in Ireland with economic activity which, in fact, is not happening in Ireland
“For one euro of extra wellbeing that you bring to Ireland by playing that kind of game, you are imposing 10 or 20 or 30 euros of damages to other countries, to the rest of the world, and to the planet,” he says.
He intended his 2014 bestseller to be a contribution to democratic debates “about the best way to organise society and the most appropriate institutions and policies to achieve a just social order” under the rule of law.
Its success led to a financial windfall that, he has told interviewers, the French state taxed at a rate of 60-70 per cent.
“A 90 per cent tax rate would not bother me,” he told the Financial Times the following year. “There would still be a lot left, since we’re talking about several millions.”
The really annoying thing about that comment is that he’s not wrong.
Only around 3% of the population ever pay inheritance tax. Increasing the threshold is a tax break for the rich.
Brendan Burgess
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So, the headline is correct. Ireland's economic model is damaging to other countries. If we have a lower tax rate here on corporate profits, then multinationals will tend to locate here. But what is worse, they will pretend to locate here.
We are getting huge tax windfalls which, in fairness, should be received by other countries.
I don't understand this "multiplier". If we take in €20 billion in tax from Apple which should really be taken in by the USA, how come they are sustaining €400 billion worth of damage?
Howth Head
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The irony here is that it proves the case that if you lower taxes you get more benefit. Other countries are completely free to do the same.
Picketty wants much higher taxes - he's even happy with 90% on his own wealth!
My answer to that would be - "so what?" Surely a country's economic policy and fiscal approach should prioritize its own citizens? We have plenty of disadvantages, including our peripheral location, relatively low population density, lower economies of scale etc. We have to compensate somehow and play to our strengths. (If only we weren't blowing that windfall like drunken sailors.)
*I haven't read the Global Justice Report -mainly because life's too short. But glossing through it, the key theme seems to be the creation of some kind of New World Order where everyone benefits equally - whatever their talents, skills and efforts - all paid for by "billionaires."
The Global Justice Report describes desirable future scenarios combining two key goals: socioeconomic equality (including full equality between countries, full gender equality in labour hours and pay, sharp compression of within country income and wealth scales, combined with fair access to education, health and political voice), and planetary habitability (aligning global resource use within ecological boundaries, including a limitation of global temperature rise below 2°C).
The Global Justice Platform is based on forward-looking universalist principles, with equal per-capita country dividends for all countries and identical tax schedules everywhere: all billionaires pay the same, whether they come from the North or the South.
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It suggests that incomes could be up to 5:1 and wealth 10:1 and would be paid for by everybody not already with-in those ratios plus a World Sovereign Wealth fund. So no issues for you to be paid €300k while I’m on the average €60k and no issue for you to have €2.5m wealth while I have the average €250k.
Brendan Burgess
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I don't agree. We are part of a world community.
If all countries adopt this strategy and reduce profits on multinationals to zero, we would be in big trouble.
Think of the 26 counties. If we decided to let each county set its own Income Tax, it would cause havoc.
I agree. I never really understood the issue with our FDI tax regime to be honest and I've never understood the criticism of it other than the fact that depending on large amounts of tax receipts from a relatively small number of large multinationals is an obvious risk. So what if IP and the revenues arising get located here? Aren't the corporation tax receipts that accrue real as far as our national budget goes? Wasn't the Apple €14Bn real money?
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Ireland was a peripheral and poor nation without the economic specialisations other EU countries had, so we were allowed to keep low corporation tax rates to help level us up in Europe. So I think people calling for the removal of our low tax rate need to explain how nations like Ireland who do not manufacture the cars for Europe, provide the sun holidays etc can get a share of the economic prosperity the Union creates.
I do understand the criticism of our low rate though. If for example Latvia reduced their rate to 2% in the morning and got everything in-place so that Apple etc moved there, I think we’d quickly be arguing that it would be better for the EU to be collecting 12.5% and sharing it around rather than just 2% - which is the argument other EU countries are making at the moment about our low rate.
I do understand the criticism of our low rate though. If for example Latvia reduced their rate to 2% in the morning and got everything in-place so that Apple etc moved there, I think we’d quickly be arguing that it would be better for the EU to be collecting 12.5% and sharing it around rather than just 2% - which is the argument other EU countries are making at the moment about our low rate.
Well, it's worth remembering that we didn't actually want the €14bn. What we reallly wanted was to tax Apple profits in the years concerned at an effective rate of 0.005%; we fought tooth and nail against the EU's attempt to make us assess them to the larger amount. It's only because we lost that fight that we got the €14bn.
I didn't hear the Picketty interview, but my guess is this is what he was driving at. We encouraged multinationals to book profits in Ireland so as to (as near as dammit) avoid paying any tax at all. The tax revenue to us from this strategy would, obviously, be tiny; token amounts. But the cost to other countries is not the amount of tax paid to us; it's the amount of tax that would have been paid to those other countries if the profits had been booked there, given their tax rates, not ours.
It seems to me that you can justify Ireland (or any other country) imposing tax at whatever rate it wants on profits genuinely generated from activities carried on in Ireland - low tax rates to attract investment and/or promote domestic economic activity, basically. That's fine. But that's not the same thing as low tax rates for profits which are moved to Ireland (or any other country) without any associated economic activity being moved along with them.
The latter promotes competition among countries in which, effectively, they all lose out — no country gets more than nominal tax revenue from the shifted profits — and the big winners are multinational corporations and their shareholders. And we might reasonably ask whether this is a good outcome and, if so, why?
Brendan Burgess
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Very well put. This is the point I was trying to make.
Perhaps it would because of the small scale. But look at the competition between states in the US. Would it be a terrible thing if Cavan or Leitrim could set their own attractive tax rates or business friendly policies to attract inward investment?
I'm not sure why Cavan cutting expenditure to reduce local taxes so as attract investment that might otherwise go to Leitrim, or vice versa, would be good thing for Ireland as a whole. (Or even, quite honestly, for Cavan or Leitrim, as the case may be.)
Your question implies that you think this works out well for the US. Is there evidence that it does?