So, who votes for a government that improves the lives of Bankers, and ensures the excessive profits of energy companies, but needs all the "levelling up" money to pay for the holes in Brexit?

The concluding comments taken from a paper produced by the LSE on the subject of reducing taxes for the rich :

The paper, published by LSE’s International Inequalities Institute, uses data from 18 OECD countries, including the UK and the US, over the last five decades. The Economic Consequences of Major Tax Cuts for the Rich, by David Hope and Julian Limberg, shows that the last 50 years were a period of falling taxes on the rich in the advanced economies. Major tax cuts were spread across countries and throughout the observation period but were particularly clustered in the late 1980s.

"It states: “Our results show that…major tax cuts for the rich increase the top 1% share of pre-tax national income in the years following the reform. The magnitude of the effect is sizeable; on average, each major reform leads to a rise in top 1% share of pre-tax national income of 0.8 percentage points. The results also show that economic performance, as measured by real GDP per capita and the unemployment rate, is not significantly affected by major tax cuts for the rich. The estimated effects for these variables are statistically indistinguishable from zero.”

It continues: “Our findings on the effects of growth and unemployment provide evidence against supply side theories that suggest lower taxes on the rich will induce labour supply responses from high-income individuals (more hours of work, more effort etc.) that boost economic activity. They are, in fact, more in line with recent empirical research showing that income tax holidays and windfall gains do not lead individuals to significantly alter the amount they work.”

The authors conclude: “Our results have important implications for current debates around the economic consequences of taxing the rich, as they provide causal evidence that supports the growing pool of evidence from correlational studies that cutting taxes on the rich increases top income shares, but has little effect on economic performance.”

Dr Hope, Visiting Fellow at LSE’s International Inequalities Institute and Lecturer in Political Economy at King’s College London, said: “Our research shows that the economic case for keeping taxes on the rich low is weak. Major tax cuts for the rich since the 1980s have increased income inequality, with all the problems that brings, without any offsetting gains in economic performance.”

Dr Limberg, Lecturer in Public Policy at King’s College London, said: “Our results might be welcome news for governments as they seek to repair the public finances after the COVID-19 crisis, as they imply that they should not be unduly concerned about the economic consequences of higher taxes on the rich.”

The countries studied in the paper are Australia, Austria, Belgium, Canada, Germany, Denmark, Finland, France, Ireland, Italy, Japan, the Netherlands, Norway, New Zealand, Sweden, Switzerland, the United Kingdom, and the United States. "

Thank you for this Dinahmo.

From The National

' THE Tories have been accused of trying to fill the pockets of "friends and donors" over prioritising the cost-of-living crisis after it emerged that they are considering scrapping the cap on bankers' bonuses.

Kwasi Kwarteng, the new Chancellor, is reportedly mulling plans to scrap the cap on bankers’ bonuses introduced by the EU in 2014 in what is thought to be a bid to attract more financial supremos to London.

But critics of the rumoured plan – which was first reported in Thursday’s Financial Times – have said it amounts to gifting cash to the super-wealthy while ignoring families “burdened with unmanageable levels of debt due to rocketing bills and food prices”.

Alison Thewliss, the SNP’s Treasury spokesperson, said: “If true, these shameful plans show once again that the Tories are more interested in putting more money into the pockets of their friends and donors in the City while turning their backs on ordinary households struggling across the UK.”

obviously not as there is a massive shortage of carers/support workers

made worse by brexit

Oh dear I missed a few pages that was in answer to we can't all be care workers

MaizieD

^How much of that profit finds its way into the pockets of the man or woman in the street?^

A more pertinent question, growstuff and one that I was trying to tease out the answer to, is:

'How much of that profit came out of the pocket of the man in the street?'

Profits of investment banks don’t come out of the pocket of the man in the street. Some - not all - profits of retail banks come from interest paid on loans, which has been at historically low rates for years, and payment of fees. I pay fees for my banking, for the service I get.

I seem to recall, Maizie, that I asked you where all the tax the bankers pay goes to - perhaps you would reply.

The problem is that the rich do not necessarily pay the same amount of tax. The system is not equal or based on income as some imagine.
From the LSE article I linked to earlier.
Using anonymised data from personal tax returns, we show that in 2015-16 the average rate of tax paid by people who received one million pounds in taxable income and gains was just 35 per cent: the same as someone earning £100,000. But one in four of these paid 45 per cent – close to the top rate – whilst another quarter paid less than 30 per cent overall. One in ten paid just 11 per cent—the same as someone earning £15,000. The rich, it seems, are not all in it together
Does anyone really think that's acceptable.

I seem to recall, Maizie, that I asked you where all the tax the bankers pay goes to - perhaps you would reply.

I told you a page or two back.

All that anyone's tax does is to reduce the Treasury's debit balance at the BoE. Which means that the BoE has to pay out less in new money to keep the economy going.

Profits of investment banks come from the interest charged on loans and fees charged for their services. As these are paid by the commercial enterprises that use the loans they obtain from them where does the money they use to pay the interest and fees come from? It doesn't materialise out of thin air.

?

I earned a lot as a City lawyer but didn’t find that unconscionable. I don’t use the word ‘earned’ lightly. I took nothing away from anyone but contributed, and continue to contribute, plenty in both taxes and charitable donations. Yes, workers in some, primarily public, sectors should be paid more but how is being an ‘unconscionably’ high earner in the private sector detrimental to them?
In itself, it isn't. But that wasn't my point, which was that bankers' bonuses are often not performance-related, and can be more than, say, a care worker can earn in years. Not only that, but as NI contributions are capped, bankers don't pay as much towards things like pensions, care homes and so on as a percentage of their incomes. It is access to things like this that are far more important than whether someone drives a Lamborghini or a Robin Reliant - they are literally life changing.

If bonuses were taxed fairly, NI contributions charged with no cap and everyone paid in (with employers funding those whose wages are too low, and the state funding those who are unable to work) then there would be more money to spend on pensions, sick pay etc, as well as general social spending, and everyone would benefit.

It is not the bonuses themselves that I find objectionable, although I don't agree that the system is meritocratic, but the fact that the tax system is heavily skewed against PAYE workers who have no-one to manage their taxation and who are more likely to rely exclusively on state provision of things like education, pensions and health and social care. IMO these should be funded from progressive taxation, which should be much higher for high earners and paid back at point of need to everyone who has contributed - from the lowest paid to the highest. After everyone is provided for, I think that high earners should keep what they earn with clear conscience.

I suppose lots of people who run small businesses are quite confused as to why these people manage to get such high bonuses tax free aswell

or maybe they are not tax free...if not, how much are these bonuses taxed and where does that tax go

Well, well ...

“The Bank of England has backed Kwasi Kwarteng's plan to scrap the cap on bankers’ bonuses in a rare public intervention, as ministers plot a bonfire of red tape dubbed “Big Bang 2.0”.

Threadneedle Street said it had never supported the cap, which was imposed before Brexit, and added that there are more effective measures to stop excessive risk-taking by bankers.

Kwasi Kwarteng, the Chancellor, is mulling a move to scrap the banker bonus cap introduced by EU legislation in 2014 despite the political difficulties of unchaining City pay at a time of soaring living costs.”

(Source: Telegraph just now).

- not just the nasty Tories & their mates then??

From the same article:

“Andrew Bailey, Governor of the Bank of England, said last year that the cap is not “the best way to address remuneration” while his predecessor Mark Carney also criticised the policy.

Professor Len Shackleton, research fellow at the Institute of Economic Affairs, said the cap is “typical EU overstretch”

They are no longer tuned in to the zeitgeist.

Probably not. But then again, Threadneedle Street ought to be separate from populist idealism one would think?

Urmstongran

Well, well ...

“The Bank of England has backed Kwasi Kwarteng's plan to scrap the cap on bankers’ bonuses in a rare public intervention, as ministers plot a bonfire of red tape dubbed “Big Bang 2.0”.

Threadneedle Street said it had never supported the cap, which was imposed before Brexit, and added that there are more effective measures to stop excessive risk-taking by bankers.

Kwasi Kwarteng, the Chancellor, is mulling a move to scrap the banker bonus cap introduced by EU legislation in 2014 despite the political difficulties of unchaining City pay at a time of soaring living costs.”

(Source: Telegraph just now).

- not just the nasty Tories & their mates then??

I've missed something, I think. UG. Who, in that article, is unlikely to agree with the new ERG government?

The issue is that this bonus for bankers will not grow the economy.

We need to export, and we need to provide for ourselves, so we have fewer imports. We are doing neither. This is just making a small number of people even wealthier. They will then, no doubt, fund the "Conservative" party.

We will find the supply of home-grown foods becoming shorter next year as more farmers are affected by the lack of workers. Will there be enough Turkeys for Christmas after the mess of last year?

Exporting is a joke. One cheese company cannot export its Chedder because the health certificate they need costs more than they get for the cheese. All the trade agreements we made with countries the EU had agreements with have been worse than the ones we had through them.

Those in this newly formed government are no different from those who went before them. It is likely they will actually manage to be worse for most of us.

It's not new is it? The Conservative Party has always supported those that make huge donations to it - bankers, large corporations, etc. While other countries are levying a windfall tax on the energy industry, our government borrows money so that they can continue paying large dividends to their shareholders at the expense of ordinary people and businesses. And then, by whom does that money have to be repaid? Take a wild guess.

Ditto the water companies. Truss is talking tough with them - a good vote catcher - but I wonder if the talk will be followed up with action.

JaneJudge

I suppose lots of people who run small businesses are quite confused as to why these people manage to get such high bonuses tax free aswell

If the bonuses are performance related this SME owner has not got a problem.

JaneJudge

or maybe they are not tax free...if not, how much are these bonuses taxed and where does that tax go

I think you will find that tax is payable on bonuses.

GrannyGravy13

JaneJudge

I suppose lots of people who run small businesses are quite confused as to why these people manage to get such high bonuses tax free aswell

If the bonuses are performance related this SME owner has not got a problem.

But your employees will not take illegal risks resulting in a devastating crash, in order to achieve an even bigger bonus will they?

There seems to be a perception that bankers don’t pay tax on their bonuses. They do, and they are subject to the PAYE system as they are employees, not self-employed.

I have already said, WWM, that regulations affecting the financial sector have been considerably tightened up since the crash.

Why can't people just go outside and clap for them, if they perform well?

Tax is of course payable on bonuses, what I’m not sure about is wether political donations are tax deductable, or to what extent.
I can’t believe that lifting the cap on a few dozen (several hundred?) bankers bonuses is going to make a big difference to the economy. It may however make a big difference to Tory Party donations for the next election.