When taxes aim high

Stephen Gordon questions the effects of taxing the rich.

What becomes more problematic is just who will bear the burden of those taxes – or, in the language of public finance, what is the incidence of increased income taxes on high earners? The ostensible targets of the UK bonus supertax were high-earning bank employees, and since they bore the statutory incidence of the supertax, they did indeed pay more taxes. But since they were able to obtain increases that left their after-tax incomes untouched, they weren’t left out of pocket by the measure: the economic incidence was passed on to shareholders, other employees and bank customers – in short, everyone except the original target. If the goal of the bonus supertax was to reduce the gap between high earners and the rest of the income distribution, it’s hard to see how it could be considered a success.

Greg Fingas questions Gordon’s analysis.

Even if we assume that every dime of any personal income tax increase will be passed along to shareholders and employees, that doesn’t negate the fact that more money is indeed being collected in taxes through the personal income tax system than would be gathered through other taxes applicable (whose rates have been slashed in the name of promoting business interest). And so the worst we can say about a high top-level personal income tax is that it’s not clear how much will actually be redistributed from the absolute top end into public coffers, and how much will instead come the not-quite-top end. 

Which means that even on Gordon’s account, there’s reason to think a tax targeted toward top-end income earners would indeed both reduce inequality, and provide added funds for social priorities. And if the worst-case scenario is to shine a spotlight on executive capture of wealth which leads to corporate governance being dealt with more seriously, then that’s hardly a result we should want to avoid.




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When taxes aim high

  1. So again we are told we can’t tax the people who actually have money because they won’t pay it….they’ll just pass it on ….and the average person will end up paying it all.  The ‘rich’ will get off virtually scott-free.

    Another impasse in the current financial system.

    And some people wonder why we have the ‘occupy’ movement?

    • The Occupy “movement” only exists because they’re well funded by the 1% they claim to oppose. It’s a joke that most people don’t find funny.

      • Oh now rich people are supporting the protests??  LOL

        No, the 99% don’t find it at all funny….that’s why they’re out protesting.

        • Taxpayers are definitely supporting the protests financially, whether they like it or not. It’s taxpayers who are paying the cops overtime to sit there and monitor, paying city workers to clean up the garbage they produce and watch for bylaw infractions etc. And because it’s local governments that are on the hook, that means to a great extent, it’s property owners, via property taxes.  Because property taxes form a huge chunk of municipal budgets in Canada.

          • Cops and city workers have to be paid, protests or not. In any case some are joining the protesters now.

            Goodness, you’d think this was the first time the world has ever seen protests!

          • What’s different about this one is the more or less “permanent encampment” aspect of it.  That’s what makes it an unusual burden for taxpayers — you’re not just paying cops overtime and extra time for a day or a weekend.

            It raises other issues too, such as the precedent being set.  Are we going to to allow any group with a grievance more or less unlimited access to public space?  If not, why not?  What concerns me is how our civic officials are supposed to pick and choose between which causes are “worthy” or not.  And in a free society, I’m not sure that we’re supposed to pick and choose, except in the most extreme circumstances (e.g., where violence is explicitly threatened).  I realize that a lot of people aren’t asking themselves these tough questions about public space and resources, because a lot of us are generally sympathetic to this cause.  But these questions need to be asked.

          • @OrsonBean

            Protests have lasted for weeks, months, even years before this one.

          • Emily, if you can give me another example of a more or less permanent protest encampment of this scale on the lawn of the Vancouver Art Gallery, I’m all ears.  Otherwise, I’ll assume that you’re talking through your butt.

          • @865444ea1a3aec1b5f1890dd40359673:disqus 

            You like to assume all kinds of things doncha…

            However 5 seconds on Google would have given you that info.

            http://www.google.ca/#hl=en&sugexp=kjrmc&cp=24&gs_id=3k&xhr=t&q=longest+running+protest&pq=longest+running+protest+in+the+world&pf=p&sclient=psy-ab&rlz=1W1WZPC_enCA361&source=hp&pbx=1&oq=longest+running+protest+&aq=f&aqi=&aql=&gs_sm=&gs_upl=&bav=on.2,or.r_gc.r_pw.,cf.osb&fp=b51b3275d5e14d90&biw=1280&bih=442&bs=1

          • Emily, I said “on the lawn of the Vancouver Art Gallery”.  Your link doesn’t address that at all.

            I realize that there have been semi-permanent protests/occupations before.  One famous example that comes to mind is the occupation of Alcatraz Island by the native rights protestors.

            In any event, it doesn’t matter whether we have seen semi-permanent protests before or not, the issue remains — taxpayers are footing the bill for cops, sanitation, bylaw enforcement, and in the case of Vancouver, a prime public space, one of the favourite places in the whole city where people like to congregate, socialize, eat lunch, etc., is now unavailable for use.

            Even Gregor Robertson, the oh-so-progressive lefty mayor of Vancouver, is now saying “the protest will end.  It is definitely going to come to a close.”

            Hey Emily, does that mean he’s scared of them too?

          • @865444ea1a3aec1b5f1890dd40359673:disqus 

            So you only count protests on the lawn of the Vancouver art gallery?

            You’re hilarious.

          • No, I don’t only count protests there.  But from the beginning of my comments on this thread, that was the protest I was using as my example, because it’s the one that affects me the most directly.  My taxes are paying for it, my public space is affected.  And you still haven’t given me an example of another permanent or semi-permanent protest on that site.

            Anyway, the fact that Gregor Robertson, of all people, is starting to admit that this sucker has to end at some point is telling.  Personally, I think that without some specific goal or list of demands, the protestors are going to be in a rather untenable position — wanting to indefinitely occupy a site “in protest”, but with no specific demand that must be met in order for them to cease that occupation.  THAT’s what’s different here.  Every other occupation protest I can think of had an actual demand or list of demands that had to be met as a condition of ending it.

          • @865444ea1a3aec1b5f1890dd40359673:disqus 

            LOL no, because nobody cares about your art gallery concerns….you’re just being silly, and we’re all aware of it.

            The mayor is being a mayor…other mayors have expressed concerns, but I don’t think any of them have gotten away with stopping it so far.

            They have no demands because politicians will fob them off with false promises the same way they have before…so not this time.

        • .0001% of the population is protesting, claiming to represent 99%. These “protesters” are the exact same people who “protest” everything. 

          • For some reason this protest seems to scare rightwingers…I don’t know why….and they keep coming up with weird versions of it….they’re all hippies, or homeless, or known activists or welfare recipients etc…..but I’m afraid in reality they are people from all walks of life and most of them have never protested anything before.

          • Emily, the fact that somebody disses somebody else doesn’t necessarily mean they’re scared of them.

          • @865444ea1a3aec1b5f1890dd40359673:disqus 

            Yeah, it does.

          • So every time you vocally disagree with someone on a political or public policy issue, it means you’re scared of them?

          • @865444ea1a3aec1b5f1890dd40359673:disqus 

            We’ve had protests for years.  Normally people ignore them, or note them briefly and then move on.

            This particular protest seems to have struck a chord though….rightwingers in particular chew at it every day, and at great length. Famous rightwingers, and chatsite ones.

          • Nice attempt to change the channel.

            I sometimes wonder whether you’re nothing but a professional internet troll.  Exchanges like this make me think the answer is yes.

          • @865444ea1a3aec1b5f1890dd40359673:disqus 

            Nobody’s changing channels….that’s just your mind wandering again.

            You asked a question, I answered it.

            You didn’t like the answer I gave, so yours is to attack me again. LOL

            Ya know….if you could just focus….

          • Oh ya, this “movement” is seriously terrifying me. I’ve never been so scared in my entire life that a bunch of idiots are going to start sleeping in my front yard.

            Also, if you’re going to make the ridiculous claim that the protesters are from “all walks of life” (hahahaha!) you might not want to start by stating that all “rightwingers” are scared of them. Because “rightwingers” apparently make up more than 1/3 of Canada’s population.

          • Another Emily specialty:  the link that actually has no logical connection to the immediate point being discussed.

          • LOL go to bed, Bean…you aren’t even making sense to yourself at this point.

      • You are thinking of the Tea Party there, dear.  Have a cookie.

  2. Well, considering it’s the shareholders at the end of the day who decide how much the CEO gets paid, I don’t think it’s even a problem if the tax is passed on to them.  If they don’t like it, they have every opportunity to adjust the arrangement.

    And they can only take it from the rest of employees for so long before they start having to deal with labour strife.  So long as the government doesn’t come in and unilaterally force unions to capitulate in negotiations it works out pretty much the same because for the company and the shareholders to thrive they have to get the money from somewhere..

  3. One would think that whining to the CEO / Board / shareholders that ”my taxes are going to increase!” wouldn’t be sufficient reason for increased compensation.  The fact that these top earners were able to justify raises on this basis (as opposed to on a performance basis) just shows that the systems corporations use for executive compensation are flawed and self-serving.

  4. Isn’t all this debate over remuneration and taxes missing the point to some degree. What is at issue here is societies right to not reward failure at the top with large bonuses, incidence or no incidence. What has revolted ordinary folks is the sight of those who largely engineered the great recession not only escaping censure but actally making out like bandits during and after the fact.
    This incidence strikes me a queer fish. Apparently the lucky recipients benefit going in – their inflated value is past on to us poor saps in cost of living increases; and they benefit if we try to recoop some that in taxation at a later stage. I guess it is all fine as long as most of us can still afford to buy cake even if someone else gets to eat all the icing.

  5. I find it hilarious that this argument would actually gain traction with the far-left. In the real world, most people don’t believe that corporate governance should be in the hands of the state. Nor do they believe that achieving “income equality” by means of slashing the incomes of top-earners is something that will benefit society as a whole.

    • Nor did they believe that GM and Chrysler would fail, or that bank CEOs would sell them junk….but it happened all the same.

    • Most of us think seven figure salaries (or higher) should come only when a company is actually in the black.  The fact that these people still get multi-million dollar bonuses in losing years is laughable, and points to some serious corruption at the executive level.

      Also:  You can’t gloss over the fact that Wall Street executives used TARP funds to pay bonuses to their top dogs rather than to invest in small, medium, or large ventures.  They took a commission off the American taxpayer after failing spectacularly.

  6. I wonder how one rises to the upper echelon’s of UK’s banking system? Class system? You’re bonkers.

    Pip,pip,cheerio.

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