Rich people are not over-taxed - they just have all the money

The tax burden on high-earning individuals has gone up not because politicians have been taking them for all that they’ve got, but because they’re the ones earning all the money in the first place.

I think I've identified a new logical fallacy. It's quite a specific fallacy, admittedly, so best I can tell no one’s bothered to give it a name – but it's popping up with infuriating frequency nonetheless.

You can spot this fallacy in action whenever the thorny topic of rich people and their taxes rears its head. This piece of obvious trolling, for example, comes from the beloved mayor of London who is, as ever, concerned for the welfare of the forgotten and disenfranchised:

The top 1% of earners now pay 29.8% of all the income tax and National Insurance received by the Treasury. In 1979 – when Labour had a top marginal rate of 83% tax after Denis Healey had earlier vowed to squeeze the rich until the pips squeaked – the top 1% paid only 11% of income tax. Now, the top 0.1% – about 29,000 people – pay an amazing 14.1% of all taxes.

In other words, even though tax rates have fallen, the tax burden borne by the rich has grown. Ergo, we should stop being so beastly to the poor lambs.

Can you spot the hole in the logic there? I don't think it's particularly subtle, but it seems to have evaded Boris "he was an Eton scholar, you know" Johnson.

Tell you what, here's another example of Elledge's Fallacy at work. (Hmmm. The name needs some work.) This time it's from the Mail's This Is Money website, and dates from February 2012, but the quote concerns a similar set of numbers to those outlined by Boris:

Michael Spencer, chief executive of the City broker Icap and former treasurer of the Conservative party, said: “The debate about tax in this country has sadly become more and more about politics and less and less about what is good for the economy and for growth. All we hear about is ‘the rich must pay more; soak the rich’. Well the facts are clear; the rich are paying much more."

Actually, the facts are not clear. The facts are very, very unclear.

That’s because there are two numbers that could explain the rise in the share of income tax paid by the ultra-rich. One is the tax rate they pay; the other is their taxable income. Their share of the tax burden has gone up not because those latter day sans-culottes Gordon Brown or George Osborne have been taking them for all that they’ve got, but because they’re the ones earning all the money in the first place.

All those figures quoted by Johnson and Spencer show is that inequality has gone through the roof. According to the Resolution Foundation, the share of national income going to the top 1 per cent of earners has, over the last 30 years, risen by a half (from 2 per cent in the late 1970s to around 3.1 per cent in 2010). Over the same time period, the share going to the bottom 50 per cent shrank by a quarter, from 16 per cent down to 12 per cent. Include bonus payments, which are mostly earned by those at the top, and the share of income going to the bottom half of the UK workforce stood at just 10 per cent.

Let me say that again: half of British workers, put together, take home just one pound in every ten earned in Britain.

Now there are all sorts of reasons for this (lower top tax rates, the rise of the City, globalisation, spiraling executive pay). Some of these are down to government action; some of them aren’t.

But the ultimate result is the same. Britain could have been paying flat taxes for the last 30 years, and the share of tax paid by the rich would still appear to have soared. That's because – I can't believe it's even necessary to spell this out, but there it is – they're the ones with all the money.

The upshot of all this is that figures showing the total share of income tax paid by the rich tell us nothing about whether they’re over-taxed or not. There may be good reasons to lower taxes on the rich – to stop the City decamping en masse to Zurich, say, or to prop up Britain's all-important luxury yacht business. (I doubt it, but what do I know.) But there is nothing in the figures quoted by Boris and his ilk to back up this point.

All those figures tell us is that the biggest earners are taking home the biggest chunk of the money. That, oddly enough, we already knew.

 

The City of London. Photo: Getty

Jonn Elledge edits the New Statesman's sister site CityMetric, and writes for the NS about subjects including politics, history and Daniel Hannan. You can find him on Twitter or Facebook.

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Lord Empey: Northern Ireland likely to be without government for a year

The former UUP leader says Gerry Adams is now in "complete control" of Sinn Fein and no longer wants to be "trapped" by the Good Friday Agreement

The death of Martin McGuinness has made a devolution settlement in Northern Ireland even more unlikely and has left Gerry Adams in "complete control" of Sinn Fein, the former Ulster Unionist leader Reg Empey has said.

In a wide-ranging interview with the New Statesman on the day of McGuinness’ death, the UUP peer claimed his absence would leave a vacuum that would allow Adams, the Sinn Fein president, to consolidate his hold over the party and dictate the trajectory of the crucial negotiations to come. Sinn Fein have since pulled out of power-sharing talks, leaving Northern Ireland facing the prospect of direct rule from Westminster or a third election in the space of a year. 

Empey, who led the UUP between and 2005 and 2010 and was briefly acting first minister in 2001, went on to suggest that, “as things stand”, Northern Ireland is unlikely to see a return to fully devolved government before the inquiry into the Renewable Heat Incentive scheme is complete -  a process which could take up to a year to complete.

“Adams is now in complete control of Sinn Fein,” he said, adding that it remained unclear whether McGuinness’ successor Michelle O’Neill would be “allowed to plough an independent furrow”. “He has no equal within the organisation. He is in total command of Sinn Fein, and that is the way it is. I think he’s even more powerful today than he was before Martin died – by virtue of there just being nobody there.”

Asked what impact the passing of McGuinness, the former deputy first minister and leader of Sinn Fein in the north, would have on the chances of a devolution settlement, Empey, a member of the UUP’s Good Friday Agreement negotiating delegation, said: “I don’t think it’ll be positive – because, for all his faults, Martin was committed to making the institutions work. I don’t think Gerry Adams is as committed.

Empey added that he believed Adams did not want to work within the constitutional framework of the Good Friday Agreement. In a rebuke to nationalist claims that neither Northern Ireland secretary James Brokenshire nor Theresa May can act as honest or neutral brokers in power-sharing negotiations given their reliance on the DUP’s eight MPs, he said: “They’re not neutral. And they’re not supposed to be neutral.

“I don’t expect a prime minister or a secretary of state to be neutral. Brokenshire isn’t sitting wearing a hat with ostrich feathers – he’s not a governor, he’s a party politician who believes in the union. The language Sinn Fein uses makes it sound like they’re running a UN mandate... Gerry can go and shout at the British government all he likes. He doesn’t want to be trapped in the constitutional framework of the Belfast Agreement. He wants to move the debate outside those parameters, and he sees Brexit as a chance to mobilise opinion in the republic, and to be seen standing up for Irish interests.”

Empey went on to suggest that Adams, who he suggested exerted a “disruptive” influence on power-sharing talks, “might very well say” Sinn Fein were “’[taking a hard line] for Martin’s memory’” and added that he had been “hypocritical” in his approach.

“He’ll use all of that,” he said. “Republicans have always used people’s deaths to move the cause forward. The hunger strikers are the obvious example. They were effectively sacrificed to build up the base and energise people. But he still has to come to terms with the rest of us.”

Empey’s frank assessment of Sinn Fein’s likely approach to negotiations will cast yet more doubt on the prospect that devolved government might be salvaged before Monday’s deadline. Though he admitted Adams had demanded nothing unionists “should die in a ditch for”, he suggested neither party was likely to cede ground. “If Sinn Fein were to back down they would get hammered,” he said. “If Foster backs down the DUP would get hammered. So I think we’ve got ourselves a catch 22: they’ve both painted themselves into their respective corners.”

In addition, Empey accused DUP leader Arlene Foster of squandering the “dream scenario” unionist parties won at last year’s assembly election with a “disastrous” campaign, but added he did not believe she would resign despite repeated Sinn Fein demands for her to do so.

 “It’s very difficult to see how she’s turned that from being at the top of Mount Everest to being under five miles of water – because that’s where she is,” he said. “She no longer controls the institutions. Martin McGuinness effectively wrote her resignation letter for her. And it’s very difficult to see a way forward. The idea that she could stand down as first minister candidate and stay on as party leader is one option. But she could’ve done that for a few weeks before Christmas and we wouldn’t be here! She’s basically taken unionism from the top to the bottom – in less than a year”.

Though Foster has expressed regret over the tone of the DUP’s much-criticised election campaign and has been widely praised for her decision to attend Martin McGuinness’ funeral yesterday, she remains unlikely to step down, despite coded invitations for her to do so from several members of her own party.

The historically poor result for unionism she oversaw has led to calls from leading loyalists for the DUP and UUP – who lost 10 and eight seats respectively – to pursue a merger or electoral alliance, which Empey dismissed outright.

“The idea that you can weld all unionists together into a solid mass under a single leadership – I would struggle to see how that would actually work in practice. Can you cooperate at a certain level? I don’t doubt that that’s possible, especially with seats here. Trying to amalgamate everybody? I remain to be convinced that that should be the case.”

Accusing the DUP of having “led unionism into a valley”, and of “lashing out”, he added: “They’ll never absorb all of our votes. They can try as hard as they like, but they’d end up with fewer than they have now.”

Patrick Maguire writes about politics and is the 2016 winner of the Anthony Howard Award.