Who needs billionaires?

The rich are and have always been different. I suppose that we should be grateful that they are now just stealing our money not actually eating us, evidence recently suggesting that the emergence of highly stratified societies and cannibalism were contemporaneous. Back in the day the chief used the threat of a dissident becoming supper (for the gods, of course, the prime cuts being eaten by he and his cronies purely as a ritual, you understand) ; now we have threats of FDI withdrawal, slowing economic growth and a generalized “project fear”, combined with a conflation of the mildest tinge of socialism with  the advent of a new yezhovshchina whenever anyone begins to suggest that taxing the bejazuz out of the wealthy might not be a bad idea.

So, some progress.  The the great and the good  papers revelations were less shocking for the realisation that the rich and powerful were salting away monies than they were for the realisation of how widespread it must be, this shadowy Panamanian firm founded by SS descendants (really, yes..) being but a small player. What else is out there we might well wonder.  It was notable that the USA seemed to be absent from the revelations. More to come, one imagines.

The reality is that there is an inherent greed in people. We are greedy and nobody likes paying tax. That’s a human thing but most of us, through inculcation or fear are tax compliant. This, in Ireland, was not always the case. We have decided to make our tax dodging past what Sisek has termed a Unknown Known.  As Ned Logan said “We aint bad men no more”. Morally, we suffer from a Dunning-Kruger effect of galactic proportions when it comes to tax. This was enormously evident when we had the last greek crisis but one, with commentators daily parading on the radio about how the Greeks should do it, forgetting, or suppressing, that we were hellenic in our tax affairs not too long ago. This is when they weren’t just baldly insulting our struggling neighbours.   We  had massive, endemic (amongst certain sectors of society) tax evasion.  We saw Ansbacher,  the private bank for the really well off and on foot of which not a single person was ever prosecuted. Lower down the scale we had  DIRT tax evasion and Offshore Accounts for the middle and farming classes. We didn’t have anything for the PAYE worker mind. Well, we had a massive march in 1979, but nothing else.

As part of the solution we had successive tax amnesties. While these may stick in the craw there is a role for them if, as was the case in the first two, they are combined with increased efforts in ensuring future compliance. Better to get 15% of something outstanding and capture the person for the future than 0% and not. Of course tax amnesties are not a feature of the distant past. The 1988 amnesty just reset the clock, wiping penalties but leaving the tax due, while the 1993 one wiped tax due also. Yes, Bertie was the finance minister who brought that in.  Still, the Celtic Tiger I came along and sure we all became rich. Then, we weren’t but at the same time as we were cutting welfare and wages we had another one. In 2009, while the country was on its uppers, we saw a tax amnesty for those who hadn’t bothered to pay stamp duty.  Think on that for  a moment. Think of what had gotten us into the mire in 2007-8…. There is, as there ever has been, one law for the rich or well connected and one for those who are outside.

Despite all that, Ireland is not the most unequal (nor the most equal) society.  TASC produced a massive, and underreported, report on inequality which shows that while we are,  pre taxes and transfers, quite unequal, our tax and welfare systems combine to make us if not Nordic then heading that way. This perhaps comes as a surprise to some but facts are facts.  Income and wealth inequality are of course only part of overall economic and still a smaller part of social inequality but to a great extent it is the font et origo of the others.  Evidence from the World Wealth and Income Database suggests that the top 1% of Irish society obtained 10% of income in 2009. While global inequality as measured by income distribution has fallen, consequent mainly of the growth of the lower middle classes of china, india and other large nations, as measured by the wealth and incomes of the top 1% it has perhaps grown. In essence the poor have gotten better off but the very top echelons, the types that have accounts in Panama, they have gotten immeasurably better off. Globally there is  good evidence that inequality, especially of outcomes, is linked to lower levels of economic growth. This is especially the case in more democratically orientated countries, which themselves are generally associated with longer run higher growth rates. So, reducing

There is significant evidence from opinion polling that people in Ireland care about this. While we think the ideal is that wealth should be mildly unevenly distributed, with the top x% earning a little more than x%, the reality is that it is far worse than our perceptions. What we wish for is more equal than what we believe, and what we believe is more equal than the reality. It is literally worse than we can think.   This isnt confined to Ireland – other countries face the same issue. And its perceived not actual inequality that drives concerns.

Into this gap we should see a coherent policy of wealth redistribution, but we do not.  We see the occasional proposal for wealth taxes and so on but these do not gain traction. The fractured left is unable to make a coherent bloc to get policies enforced and the right, knowingly or otherwise in thrall to the elite is unlikely to bite the hand that might fling a crumb at them. We have a cadre in the media that would rather fling opprobrium at the public sector than to expose the powerful, and a political establishment that is manifestly wholly unable to tackle the wealthy.

We are as a people it seems ambivalent.  We fear tax reform on a global scale, such as would be needed to tackle the hyper wealthy, electing governments that defend to the death our corporate tax rate. While we are not the proximate cause of global corporate tax shell games we are an integral part of it. We fear to peer too closely at what we and our relatives are doing in tax , accounting and legal houses, where generations of Irish professionals have played a part in the creation of blind trusts, the advising of the wealthy as to the benefits of Bearer Shares and the wonders of tax planning. Its all legal we mutter, with nary a thought, and those that do come extinguished by drink, as to the morality of what it is we do.  We fear, without reason but on account of a drumbeat of ill-informed media parroting special interests that a proper tax regime will kill the IFSC, will drive out FDI, will impoverish us, will result in nobody starting a business. The reality is quite different.   Entrepreneurs are motivated by more than hyperwealth which most don’t get ; tax is one of only a number of reasons we attract FDI,  international finance isn’t, or shouldn’t be , about tax evasion and avoidance.

We have nothing as a society to fear from taking a lead and asking – how much is enough? Is €1b enough to live on ? €500m? Lets think radical and lead. Lets start a global campaign for a basic income for all and for an acceptance that gross discrepancies in wealth breeds resentment and danger.   Lets clamp down on the financial sector as a source of massive wealth and make it more like what it should be, a utility.

Lets think what has been unthinkable (recently) and have aggressive, 90% plus, taxes on inherited wealth, and on large capital gains. These are not unusual in the USA, the bastion of capitalism. If they were ok for the USA in the 1950s why would they of necessity be bad now?  We have got into the idea that tax rates are always and ever to be low.  Well, they needn’t.  Low taxes generally serve the wealthy, not the lower and middle incomes. Lets think radical.

Ireland has no actual need of billionaires. Indeed, no state has no need of them. If we were to tomorrow put a 100% wealth tax on all wealth above €1b it would raise very little.  Levy the tax on the basis of passport. We have few enough of them and they are all smart and tuned in enough to be able to move wealth out of the Revenues reach, legally and swiftly. Nor however would we suffer any illeffects. The real economy would chug along just as it was. If the billionaires were to hand in their Irish passports, so be it. Whats needed is that every country do this, or at least every country of which one would wish to claim citizenship. Eventually the 0.1% brigade would find their national horizons shrinking. Combine this with a law that levies at the day of passing and which holds that due, and they cannot return without paying their due. Again, they may choose never to set foot in the place again, and fair enough.

This isn’t about greed – I dont want their money. It isnt about jealousy – the lifestyles of the rich are so far from my wildest dreams that I literally wouldn’t know what to do with €1b. Nor is it begrudgery – they worked hard for it (well, some of them anyhow…) and good luck . It is to suggest that for most people €1b is a sum so vast as to be incomprehensible and on which a person and their family unto the n-th generation could live lives of luxury. And the surplus? Well the surplus is distributable to eliminate tropical diseases, to give decent education to all, to generally make the world a better place. Forbes estimates the world’s 1800 billionaires are worth an aggregate €6500b. Giving each a billion we have €3700b left over, enough to do a lot. To put it into perspective, one estimate for the elimination of malaria is €8.5b. The cost of elimination of world hunger? €30b per annum.

Offshore, in 2012 but based on figures from a few years before, one widely credited estimate is that there is some €20,000b in tax havens. Some of this is legally avoided, much is illegally evaded.  Even a 1% tax on that would transform the world while still leaving the purveyors of diamond encrusted yachts with a reason to get up in the morning. That we dont is not just an economic but a moral scandal. Finance and economics doesnt nowadays have much to say about morals, nor does a moral sense inform much economic thought. This is a pity – the founding father of modern economics , Adam Smith, was best known in his time for his work on moral philosophy. You will search long and fruitlessly for a discussion of the ethical and moral implications of most finance actions in particular. Where such exists it is couched as moral hazard, which we in ireland have most recently met in its guise of “if we help those who have negative equity and unpayable mortgages sure where will it end”. Meanwhile we notice developers taken into NAMA who FORGOT , mar dhia, they owned a casino. We have AIB which has had more bailouts and escapes than Houdini. But no, lets worry about the poor saps in the semighost estate travelling 90m each day to work and glad to have it. Finance theory needs to develop and finance practitioners implement an ethical and moral stance. This extends from the pedagog teaching investments, through the accountant advising on tax issues, to the treasurer looking for safe yield, to the portfolio and wealth manager advising on how to save it. We will be waiting.

An extended version of an Irish Examiner Column of 9 April 2016