I recently read another piece from the New York Review of Books – a review by Thomas Piketty (‘Capital in the Twenty-first Century’ fame) of the new book ‘Inequality: What can be done?’ by Anthony Atkinson. He is innovative in his ideas and shows that alternatives still exist. He proposes the following:
- Universal family benefits by progressive taxation policies
- Guaranteed public sector jobs as a minimum wage for the unemployed
- Democratisation of access to property via an innovative national savings system with guaranteed returns for depositors
- Inheritance for all with a capital endowment at age18 financed by an estate tax
1908’s – UK and US income tax rate reductions
Atkinson does mention the reduction in income tax rates that were instigated by the Thatcher government. The top marginal rate was reduced to 40% – the rate was 83% when Thatcher’s conservative government first came to power in 1979. A conservative MP got quite excited by this and is reported to have said ‘he did not have enough zeroes on his calculator’ to measure the size of his tax cut that he helped to endorse. This break with a half-century of progressive tax policy in the UK was Thatcherism’s distinctive accomplishment. Across the Atlantic US President Ronald Reagan was also in a tax cutting mood and reduced the top marginal tax rate to 28%. Succeeding governments in the UK under Tony Blair (Labour) and in the US under Bill Clinton (Democrats) didn’t change the tax policy that was left by both the Conservatives and the Republicans respectively. This lowering of the top marginal income tax rates contributed to the increase in inequality since the 1980’s.
A more progressive tax rate
Atkinson proposes top rates of income tax in the UK of 55% for annual income above 100,000 and 65% for annual income above £200,000, as well as a hike in the cap on contributions to national insurance. This will allow for a significant expansion of the UK social security and income redistribution system – family benefits and unemployment benefits. According to Atkinson if these taxes were implemented the level of inequality would be reduced significantly.
New rights for those with fewest rights
Atkinson proposes include guaranteed minimum-wage public jobs for the unemployed, new rights for organized labour, public regulation of technological change, and democratisation of access to capital. Piketty alludes to two of Atkinson’s innovative suggestions:
- The establishment of a national savings program allowing each depositor to receive a guaranteed return on her capital. Given the drastic inequality of access to fair financial returns, particularly as a consequence of the scale of the investment with which one begins (a situation that has in all likelihood been aggravated by the financial deregulation of the last few decades), this proposal is particularly sound
- The establishment an “inheritance for all” program. This would take the form of a capital endowment assigned to each young citizen as he or she reached adulthood, at the age of eighteen. All such endowments would be financed by estate taxes and a more progressive tax structure. He calls for a far-reaching reform of the system of inheritance taxation, and especially for greater progressivity with regard to the larger estates. (He proposes an upper rate of 65 percent, as with the income tax.) These reforms would make it possible to finance a capital endowment on the order of £10,000 per young adult.
A Wealth Tax
He also proposes a progressive tax system on real estate and eventually on net wealth. Stamp duty, which is a tax on real estate transactions, would be implemented as follows:
- 0% tax if property worth less than 125,000
- 1% tax if property worth between £125,000 and £250,000
- 3% tax if property between £250,000 and £500,000
- 5% tax between one and two million pounds (a new rate introduced in 2011)
- 7% tax on properties worth more than two million pounds (introduced in 2012)
Many have called into question the financing of the British welfare state (especially the National Health Service) through taxes. This was seen as an unacceptable form of competition by those countries where the cost of the welfare state rested on employers. A substantial proportion of the British left at the time saw in Europe and its obsession with “pure and perfect” competition a force that was hostile to social justice and the politics of equality.