SUNDERLAND ON SATURDAY: Why the rich should not be different when it comes to tax

SUNDERLAND ON SATURDAY: Why the rich should not be different By Ruth Sunderland Last updated at 9:55 AM on 20th August 2011 Banks, billionaires and assorted financial operators take the Leona Helmsley line on tax – it’s for the little people.That assumption came to the fore in the row over the proposed financial transactions tax at the summit meeting between Angela Merkel and Nicolas Sarkozy.It was egregious for the Franco-German couple to moot the idea of an EU-wide tax that would hit the UK far harder than either of their countries without so much as running it by us first. For one region or country to enact such a tax unilaterally would be madness, as it would merely drive deals elsewhere. But the idea of a financial transactions levy, or a Tobin tax, named after the economist James Tobin who first came up with the concept, is not inherently bad. Its biggest selling point is that it would put some sand in the wheels of speculation, and deter from making socially useless transactions. Although many would like to see the proceeds <a href="http://www.trading666.com/brand-bags-t1-8.html"><strong>wholesale juicy handbags online</strong></a> going to worthy causes, they would be better used to provide a cushion for bank losses. That could go some way to addressing the problem of insulating taxpayers from the consequences of bank failures. As for those who say it would be unworkable, the City already has a Tobin tax in the form of stamp duty on shares – and things have not yet ground to a halt. The debate has become fogged by politics. The Left takes a punitive stance on taxing banks and wealthy individuals; the Right asserts that higher taxes would distort free markets. The problem with the latter argument is that no-one really believes in totally free markets. Financiers rely heavily on rules and regulations to govern the conduct of the people on the other side of their deals and protect their own rights. &nbsp; Tax is just one variable contributing to their prosperity, and it is doubtful whether it is the most important. Factors such as the quality of goods and services, expertise, innovation, and – even in the case of the Square Mile – language and time-zones matter as much or more. Seeking revenge on the rich through the tax system, as the Left would like, would not solve our economic problems. There are some genuine issues around the taxation of the super-wealthy. Warren Buffett, the veteran US investor, declared this week that he and his wealthy friends had been coddled for too long by ‘billionaire-friendly’ politicians. He pointed out that while most Americans struggle to make ends meet, ‘we megarich’ continue to receive extraordinary tax breaks. To the folksy Sage of Omaha, that doesn’t seem right, and most would agree with him. Jeremy Grantham, another highly respected US money manager, makes the same point, attacking the received wisdom that tax increases for the wealthy impede growth. He says that skewing <a href="http://www.trading666.com/T-shirt-polo-men-t-shirt-f2-61-c3-89.html"><strong>wholesale fashion polo men t-shirt online from china </strong></a> towards corporations and the wealthy is harming the recovery, as many citizens lack the capacity to consume. Grantham&nbsp; points out that most employees have seen very little growth in incomes and have only been able to increase their spending by speculating on house prices and taking on debt. The most direct way of changing this situation, he argues, is to take income inequality back down to the level of the Fifties and Sixties, the heydays of sustained US economic gains. Neither Buffett nor Grantham could be described as socialists. When even they start arguing <a href="http://www.trading666.com/jeans-Levis-men-jeans-f2-64-c3-103.html"><strong>fashion levis jeans for sale </strong></a> for higher taxes on the rich, we should take notice. On both sides of the Atlantic, tax breaks have encouraged undesirable financial behaviour and outcomes. One example is private equity, where gains made by multi-millionaires were treated as capital, not income, and so were taxed at a much lower rate. This made deals such as Blackstone’s takeover of nursing home group Southern Cross – on which it made hundreds of millions in profit in double-quick time – all the more tempting. Blackstone’s founder, Stephen Schwarzman, likened plans by the US government to raise taxes on private equity to ‘when Hitler invaded Poland in 1939.’ He later apologised – but what an insight into the thought-processes that surround tax issues! Paying a fair sum in tax is a duty to society. It should not be seen as an outrage, or as optional. The UK and other countries should aim for systems that are as equitable, simple and straightforward as possible, and that incentivise socially and economically useful activity, such as research and development. The squeezed middle on PAYE should not be unfairly milked. It is a shame that our tycoons do not share some of Buffett’s candour.