Ethan Shone 23rd May 2019
Unlike a large number of Brits, it’s not the worry of making ends meet or sending children to school hungry that’s stressing out our nation’s billionaires. That’s not to say life is without its worries when you’re minted though. It’s the fear of “Corbygeddon” that keeps the mega-rich up at night.
The latest outpouring of this worry came, appropriately, alongside the Sunday Times Rich List earlier this month. Wealth managers, luxury estate agents and other sources who might have a good read on the thoughts and movements of the mega-rich claim to have had many clients make contingency plans for a Corbyn government, or otherwise express concerns. Some even state that they’ve already worked with clients to move wealth offshore, just in case a red tide suddenly sweeps through Westminster.
These stories have become an increasingly common occurrence as the likelihood of Corbyn getting into Number 10 (and, perhaps more importantly, John McDonnell into Number 11) has increased in the last couple of years. One source, speaking to the FT in October, described the prospect of a Corbyn-led government as “a fucking terrifying possibility” while another described making plans to “Corbyn-proof their finances.”
Do they have reason to be worried? Though there were some tax rises proposed in Labour’s 2017 manifesto that would affect wealthy people and Labour have made plenty of noises about closing tax loopholes, most people agree that Labour’s policy platform isn’t all that radical and as it exists currently wouldn’t strip away vast sums of wealth from the rich.
For that reason, Robert Palmer of Tax Justice UK thinks those wealthy individuals who’ve been particularly vocal about their fear of Corbyn are less concerned about the specific proposals put forward and are acting more out of a gut fear of Corbyn and McDonnell’s supposedly Marxist leanings.
It’s less about an extra 5% tax, it’s about in whose interest is the economy set up for
It’s also likely that there’s a broader concern here about losing ground in an ideological battle and allowing the centre ground to shift away from an economic settlement between the state and the super-wealthy which has remained more or less unchallenged for several decades. New Labour tinkered around the edges of the economy, but the significant tax cuts and rebalancing of the economy carried out by Margaret Thatcher in the mid-80s has been left more or less unchallenged until now.
Increasing taxes on the wealthy is overwhelmingly popular among the public, and several polls show a more general feeling of dissatisfaction and frustration at the way society and the economy works for most people. This support, if mobilised for a political party which is similarly minded, would likely put society on a path away from the existing settlement, which would be difficult to go back on once followed. It’s this concern which is likely most at play, according to Palmer.
“Politics is saying, ‘Okay, we’re going to have to have a little bit of a rethink about what we’re prioritising, about who’s spending what and who’s paying for government services.’ And I think that’s probably making quite a lot of people scared. Because the system has been set up and designed in their interest and it’s perhaps now coming under challenge. So I think fundamentally that’s where this is coming from. It’s less about an extra 5%? tax, it’s about in whose interest is the economy set up for?”
The supposed justification for these people planning to leave is that they already pay more than their fair share. This argument is premised on the UK’s tax system as it currently exists being fit-for-purpose and already extracting a reasonable amount of wealth and income from the mega-rich.
When we talk about the tax burden on high earners, there are two distinct ways of presenting the same information — a proportion of total tax revenues and taxes paid as a proportion of individual income — and your view on whether they pay enough or not will likely depend on which figure you place more importance on.
As it stands, the mega-rich do contribute a disproportionate amount of total tax revenues. In 2017 Theresa May claimed “the top 1% of earners in this country are paying 28% of the tax burden” which sounds like an awful lot. If 1% of people are paying almost a third of all the tax, surely that’s enough? The first thing to note is that here, as is often the case when presenting the figures this way, what’s being referred to as “the tax burden” is actually just income tax which, of course, is only one of many sources of tax revenue.
Wealthy people do pay a lot of tax, but that’s because they’ve got a lot of money
“Well, what that really tells you,” says Palmer, “is that we’ve got really high income-inequality in this country.”
The other way to look at it is to work out how much of the money in people’s pockets is spent on all forms of taxation. Analysis by the Equality Trust in 2017 found that the poorest 10% of household paid an average of 42% of their income on taxes, while the wealthiest 10% handed over only 34% of their income. This figure still isn’t perfect, as it looks at income and not wealth, but Palmer sees it as a better indicator than looking at total income tax contributions.
“I think it makes much more sense to look at this as a comparison of their income and how much money people have, and how much of that are they paying over in tax.”
The bottom line, he says, is that rich Brits have it pretty good.
“Yes, wealthy people do pay a lot of tax, but that’s because they’ve got a lot of money. If you’re really rich, it’s a pretty favourable tax system here in the UK.”
You get these sorts of fear-mongering stories when you’ve got a party that promises to do something that’s a little bit more progressive
It’s one thing for people to be wondering aloud to their financial advisors about what might happen if Labour came into power, but is it likely that we’ll see a lot of wealthy people leaving if that happens? Palmer thinks probably not.
“I think you often get people saying ‘we’re going to move if this or that happens’ but, generally, I think that doesn’t turn out to be the case,” he says.
“You get these sorts of fear-mongering stories every now and again when you’ve got a party that promises to do something that’s a little bit more progressive when it comes to taxation.”
Perhaps these fears are being overplayed, or perhaps if Corbyn makes it into Number 10 we’ll see a mass exodus of the mega-rich, or at least, their assets. The question of whether the super-wealthy are right to be concerned or not, or more broadly whether they should be paying more taxes, are worth exploring more deeply elsewhere. What is interesting though is that we only ever see this type of reaction from the mega-rich in Britain at the prospect of higher taxes. For all we know, this accurately represents the feelings of the 0.01%, as we have no billionaires coming out and saying otherwise.
The Equality Trust wants to change that and so it’s started its #TalkTax campaign, aiming to start a conversation about wealth tax in the UK. As part of this, they’ve called on the 1,000 people featured in the Sunday Times Rich List to pledge their support for higher taxes.
Wanda Wyporska is the executive director of the Equality Trust, a charity which campaigns to reduce social and economic inequality in the UK. She says its #TalkTax campaign takes inspiration from other places where the mega-rich have spoken out. “We think it’s time we had the conversation in the UK,” she says.
Should we hold out any hope for billionaires to back tax rises for the wealthy? Well, turkeys don’t vote for Christmas. Or not in Britain, at least. Though as Wyporska says, there’s plenty of inspiration to be taken from around the world.
Perhaps surprisingly for a place so ideologically averse to big government and taxation, the US is leading on this. In Britain we get Alan Sugar demonstrating his solid understanding of marginal tax rates, whereas the US get Bill Gates and Warren Buffett. They might be the most prestigious examples to come forward in recent years, but there’s been an organised movement of multi-millionaires and billionaires campaigning for top-end tax reform for almost a decade.
The Patriotic Millionaires, now chaired by former Blackrock Executive Morris Pearl, began as a protest against a proposal by then US President George Bush for a millionaire’s tax cut in 2010. They now count among their number such magnates as filmmaker Abigail Disney, technologist Steve Silberstein, lawyer Roberta Kaplan, billionaire medical device heiress Pat Stryker and investor Lawrence Benenson of Benenson Capital Partner.
Over the last nine years, they’ve generated “hundreds of millions of dollars worth of media attention” appearing on popular TV shows, the front page of major newspapers and all sorts of other media in the US and further afield, as Kelsey-Marie Pym, executive director of Patriotic Millionaires, explains.
“The President of the Czech Republic referenced the group in an address to the Czech Parliament. And the largest television station in Japan and a major Swedish magazine both did feature stories on the group.”
As their name suggests, the Patriotic Millionaires have sought to make a connection between the abstract idea of loving your country and actually doing as much as you can to contribute to that country’s wellbeing and prosperity. Even if that means paying more taxes. Pym outlines the group’s thinking around this.
“Frankly, members of our group think that millionaires and the wealthy who advocate for lower taxes should be embarrassed. Millionaires in America are not the cause of a robust economy, they are the product of a robust economy. The same economy that gave my members an opportunity to flourish and a consumer base to thrive, must be reinvested in for the future of all.”
It makes sense, and it also goes some way toward wrestling back the idea of patriotism from conservatives, with whom it is more naturally associated.
“We cannot let the other side co-opt the idea of patriotism,” says Pym. “Patriotism is not letting this country fall apart just to line your personal coffers.”
I’ve paid $10bn income tax and I should be paying more
We’ve had something of a fixation with patriotism in the last few years, politicians like Nigel Farage are held up as paragons of it, because they want to see us outside the European Union and, as they see it, in charge of our own destiny. This striving for independence certainly fits in with how we typically think of patriotism, but it doesn’t take much, or any, personal sacrifice to just say you love your country. But how much do you really love your country if you’re not prepared to give up a little bit more of your vast, vast personal wealth to see it thrive?
So there’s broad popular support for the idea, and we’ve got a party which poses a decent chance of getting into power that will implement it if they do. Why do we need the support of billionaires? It’s probably fair to say we don’t need it, exactly, but it would certainly have its benefits.
Progressives politicians who advocate for the mega-rich to shoulder a fairer share of the burden are given an invaluable boost when some of those super-wealthy shoulders have heads atop them that say things like “I’ve paid $10bn income tax and I should be paying more”.
Arguments for higher taxes can be too easily written off when they come only from below. It’s not right, but that’s the reality. To be able to hold up examples of people who’ve succeeded in business and who support these ideas is to be able to cut off at the knees old-fashioned arguments about the politics of envy. Too often we conflate financial success with hard work or sacrifice. We assume that for people to have reached the top of the capitalist dogpile they must be extremely clever and know what’s best generally, and we place value and worth on their opinions as a result. Sometimes this is justified: many of them are, after all, undoubtedly very clever, while others, maybe not so much. The point remains though that in the eyes of most people, being a billionaire gives you — and any ideas you might support — credibility.
We’ve also got a real-world example of the impact that the mega-rich can have when they get involved on this side of the debate. The Patriotic Millionaires have made countless appearances on news media across the political spectrum in the US. Their appearances on Fox News have been particularly effective, because their very existence contradicts the assumption that calls for higher taxes on the wealthy come only from the lazy and the poor (one and the same in the mind of the average Fox News host) and can, therefore, be ignored.
Patriotic Millionaires have met privately with hundreds of elected leaders from both parties
Pym could talk for a long time about what the Patriotic Millionaires have done and continue to do, but ultimately, their purpose is to further and broaden the dialogue around taxation.
“The Patriotic Millionaires have met privately with hundreds of elected leaders from both parties. We have testified in front of lawmakers at the local, state, and federal levels on issues from minimum wage to campaign finance to tax policy.
“We help to push the public narrative far enough towards higher taxes that it validates the calls from the grassroots and gives space for our elected officials to pass smart legislation.”
It shouldn’t take a few billionaires saying it for us, as a society, to get behind higher taxation in the pursuit of better social services and a more equal society. But it wouldn’t hurt.
And hey, if any of the mega-wealthy feel like switching sides now, we might spare them from the guillotine post-uprising.
Ethan Shone 23rd May 2019