Taxing the Rich

A year or so ago there was a possibility I’d be interviewed for a story in the Daily Telegraph. I subscribed to the paper to check out the journalist involved, and have never got round to cancelling. The paper sometimes called The Torygraph, the paper of that party in effect, might be useful to read to keep an eye on what Britain’s most establishment political party is up to. It gave, to cite a relatively trivial but instructive example, the most in-depth coverage of the Handforth Parish Council episode featuring Jackie Weaver (if your memory stretches back that far), with the most detailed background information.

This week in the paper, an article on US politics caught my eye. The report, on Biden’s budget’s progress, seems to me a good summary. Though highlighting the views of billionaires and opponents to a proposal to tax unrealised capital gains, the details provide a more balanced view.

Biden stings the rich in $2 trillion tax raid

The headline reflects a plan, outlined in Biden’s budget proposals in the spring, for tax reform as a hedge against interest rate rises, which would increase the repayment burden on US debt. Biden is paying for renovations and additions to infrastructure, and social spending, with cheap debt; the new taxes ‘pay for’ the provisions by covering the risks of the debt becoming more expensive once interest rates rise. At least that’s the theory.

These tax reforms, in my understanding, include:

  • Biden’s global push for increased corporation tax
  • improving efficiency (that old favourite)
  • increasing reporting requirements for crypto-exchanges, including offshore entities, in a reciprocal international information sharing arrangement
  • income tax changes.

The Telegraph currently lead on the latter, with the Senate “poised to vote on a 5pc tax on earnings above $10m (£7.2m) a year, with an extra 8pc for incomes above $25m”.

As well as the corporation tax increase, the Telegraph reports on a one percent surcharge on share buybacks (the repurchase of stock by the company that issued it)

The White House said the share buybacks tax was aimed at curbing a practice it claims is too often used by executives “to enrich themselves rather than investing workers and growing their businesses”.

Telegraph, ibid.

Taxing ‘paper profits’ fails, but why not think about it?

The controversial proposal to tax unrealised capital gains, mentioned at the top of this summary, it turns out has been dropped.

The idea seemed to try to get round the problem of those with vast wealth paying no income tax, because they often don’t draw much of an income, preferring instead to borrow cash against their wealth, held in shares and other assets.

Authored by Democrat Senator Ron Wyden and backed by progressive former presidential candidate Elizabeth Warren, the proposals unveiled this week would apply to taxpayers with more than $1bn in assets or over $100m in income for three years in a row.

At the end of every tax year, billionaires’ tradeable assets would be appraised. The increase in their net worth over 12 months would be taxed at the top capital gains rate of 28.3pc.

Telegraph, ibid.

Readers might feel entitled to ask: what is the issue with taxing the rich in this way? The Telegraph argues taxing unrealised assets opens “a hornets’ nest of issues.”

What issues?

The proposals, announced on October 25th by Treasury Secretary Janet Yellen, specified liquid assets; Yellen denied it should be considered a ‘wealth tax’.

A classical libertarian argument, militantly argues that taxing unrealised gains in this way is theft. I’m not so sure. But, is there something in the classical libertarian approach to consider, before dismissing it?

Venture capitalist Mike Novogratz made alternative suggestions: “maybe try eliminating step up basis first. And carried interest. That would be a start”.

Step-up basis apparently refers to a readjustment of the value of an appreciated asset for tax purposes upon inheritance. Carried interest means a share of profits that the general partners of private equity and hedge funds receive, regardless of whether they contribute any initial funds – a kind of performance fee.

Novogratz went on to argue taxing

“Unrealized gains on illiquid securities would be a unmitigated disaster” –


Something of a non-sequitur given Yellen specifies liquid assets only.

What of the ‘soft’ argument that the tax would force founder CEOs to sell shares, thus affecting the market’s valuation. We can’t know what the unintended consequences through the chaos of the markets would be. I think the proposal does raise complicated concerns around unintended risks, certainly at the highest capital gains rate; it’s a risky way to cover Biden’s debt. But what if the tax was at a much lower rate?

Perhaps we should consider this in context. Many factors are at play here. Tax avoidance by the wealthy, increasing the relative tax burden on the rest of us, seems ingrained in the whole structure of today’s capitalistic organisation. Are Novogratz’s alternative suggestions pointing to loopholes that could be closed before considering a straightforward tax on unrealised capital gains? On the other hand, if restricted to the 700 or so people planned, and at a lower rate to mitigate systemic risk, why not try it?

But opponents pose a challenging argument, pointing to creeping taxation: income tax, they point out, was originally ‘just for the rich’. Perhaps this is what Novogratz was hinting at by suggesting taxing illiquid assets might be a next step? Elon Musk, who reports estimate would pay $50billion over five years, took this line, suggesting that since the White House estimates this tax covers “~10% of the $3.5 trillion spending bill. Where will the other 90% come from? The answer is you.”

The Telegraph report, incisively, points out Musk

has raised few problems with government spending when it subsidised Tesla sales or funded rocket launch contracts for SpaceX – the other source of his paper wealth.

Telegraph, ibid.

Indeed, the profitability of Tesla depends in part on US Government tax credits to the company for being ‘ecological’. This allows them to increase their profits at the expense of public funds.

I don’t believe all taxes are destined to creep and encroach. Political will can override that. We may then consider, free of events, taxing unrealised capital gains on liquid assets, but a more modest tax than the October 25 proposal, so as not to risk disturbing the markets systemically. But we may also consider what would theoretically stop a covenant restricting it to liquid assets over $1bn? How do we stop any creep in such a tax towards the rest of us? Questions worth considering.

A new/old deal

In any case, Biden has announced a framework deal which excludes the Oct 25 proposal, considered too radical for the Senate’s centre to agree. The game of ambitious, even radical proposals, led to haggle and a compromise, a new deal which may or may not be what the parties were aiming at.

On the table now is a revised $1.75 trillion spending plan. It remains to be seen if simply raising income tax on the wealthiest, alongside increasing corporation tax, can cover Biden’s bet. By the end of his first term, we should be able to discern an answer, when the political games have been won and lost, and the consequences play out.

Addendum – breaking news

As I write, further developments related to this story and issue have unfolded. The headline here is that “Elon Musk is ready to spend $6 billion to end world hunger, asks the United Nations to provide a plan”.

Billionaires are occasionally criticised for, as in the recent case of Jeff Bezos, spending their wealth created by their companies, on pleasure jaunts into space instead of, for example, ending world hunger. Of course it’s not necessarily that simple; world hunger and poverty are properties that emerge from the system as we know it – throwing $6bn at it would not necessarily solve the underlying problem. But it could be a start.

According to Business Insider India, this was prompted by David Beasley, director of the UN’s World Food Programme (WFP), who tweeted commenting that one-sixth of the recent increase in Musk’s net worth, $6bn, could help save 42 million people who are suffering from famine. Musk responded, asking ‘exactly how’ the $6 billion will help solve world hunger. He pledged to immediately sell Tesla stock and fund the $6 billion, under the condition of “open source accounting, so the public sees precisely how the money is spent”.

So to be fair to Musk, he seems to recognise the complications. To be cynical, we could read this as a PR effort from Musk to avoid being taxed, by suggesting he could liquidate some of his net worth to directly tackle world issues through international organisation, sidestepping left-wing efforts to raise the tax burden on his ilk. This is a developing story and may well be a PR flash in the pan, but worth keeping an eye on to see how this unfolds, as Dr Beasly indicated a willingness for the WFP to work with Musk to see if anything can be put together. Full story from Business Insider India here.

Watching the Detectives

Tremendously interesting article in today’s NYT on the power of police unions.

When Steve Fletcher, a Minneapolis city councilman and frequent Police Department critic, sought to divert money away from hiring officers and toward a newly created office of violence prevention, he said, the police stopped responding as quickly to 911 calls placed by his constituents. ‘It operates a little bit like a protection racket,’ Mr. Fletcher said of the union.

Two days ago this happened:

Full 40 second WBFO news video, including aftermath. Contains blood and violence, and the suppression of the press.

When the officers were suspended, the entire Buffalo Police Department’s Emergency Response Team resigned (from the team, not from regular duties), in ‘solidarity’ with the officers responsible, who have now been charged. The NYT article includes this extraordinary invocation of the Nuremberg defence:

The president of a police union in Buffalo said the union stood “100 percent” behind two officers who were suspended on Thursday after appearing to push an older man who fell and suffered head injuries. The union president said the officers ‘were simply following orders.’

Well worth a read.

Covid-19 in the UK

One week into the UK’s so-called ‘lockdown’, and I thought it would be good to look at the UK response to the virus, and round up some political and social developments within this benighted territory over the past few weeks. Coming so soon after last year’s late general election, which confirmed the Johnson administration in power, it’s difficult not to see the Covid-19 crisis as a test of this government’s mettle and fibre, and it’s an interesting political story. But much more broadly, I’m solidly of the opinion that this crisis presents an opportunity to consider, and reconsider, where we are as a society and as a culture, and specifically to refresh our political vision and ambition. Personally I find the idea of ‘going back to normal life’ horrifying; to even consider that option I’d call tragic, and a wasted opportunity. Going back to the interminable boom of traffic; the illegally filthy urban air, a killer in itself; to go back to how we were: now that’s what I call a zombie apocalypse. This crisis, it seems to me, exposes very clearly where the unacceptable has been normalised. To expect to go back to accepting the unacceptable is to lower ones expectations so far one might as well have no expectations at all.

The gathering storm

Think back to another age: mid-March, just about half a lunar cycle ago, when pubs were open and I could go see XOM play Pink Floyd at the Dark Horse. I do some work with the NHS, chairing a monthly networking meeting for service users and professionals, and it was around this time all ‘non-essential’ meetings and training within the Birmingham and Solihul Mental Health NHS Foundation Trust (try saying that after six jam sandwiches) were cancelled. Precautionary measures were being taken as the scale of the epidemic on the continent became apparent.

As an excellent round-up of the story of UK politics in the time of Covid-19, found of all places in the New England Journal of Medicine, reminds us, it was only around this time, March 12th, that Johnson held his first major press conference on the issue, but, despite increasingly concerned communiques since January from the UK’s public health community:

there was no appetite for banning mass gatherings, since we were told […] that doing so would have minimal impact […] there was no recommendation, far less any instruction, to shut down one of the busier weekends on the sporting calendar. Such inaction continued despite the prime minister’s warning that “many more families will lose loved ones before their time.”


In the absence of a government policy, the football authorities (both rugby and soccer) acted with admirable responsibility: they postponed the matches despite the financial losses…

Hunter, D. Covid-19 and the Stiff Upper Lip, 2020

Indeed, it now looks like civil society was way ahead of the government; but so were other governments.

Herd it through the grapevine

Sir Patrick Vallance, who going by the surname is affiliated with the followers of William the Conqueror, used to preside over R&D at big pharma company GlaxoSmithKline. These days however he slums it as the UK government’s Chief Scientific Adviser, and it was Sir Patrick who used the term ‘herd immunity’ to describe an aspect of the government’s strategy. Quoted in the Guardian, Sir Patrick argued:

“Our aim is to try and reduce the peak, broaden the peak, not suppress it completely; […] to build up some kind of herd immunity so more people are immune to this disease and we reduce the transmission […] “

He added: “This is quite likely, I think, to become an annual virus, an annual seasonal infection.”

The Guardian, 13 March 2020

Regardless of the wisdom or otherwise of this approach, I think the term ‘herd immunity’ got people’s backs up: people don’t on the whole like being regarded as cattle. The public quickly got the impression the national plan was accepting “a large number of deaths soon, to ultimately get the population to a Covid-19–resistant state”. Some, including the Guardian, implied the Behavioural Insights Team (BIT), the so-called ‘nudge unit’ which has been a feature of British politics since the ascendance of the Cameron/Osborne double-act, were partly responsible for fashioning a response based on behavioural psychology.

Regardless, the policy did seem out of step with other governments, as Eire and France had already by this point closed schools, universities, and moved to ban mass gatherings. The Guardian ran an Op-ed titled I’m an epidemiologist. When I heard about Britain’s ‘herd immunity’ coronavirus plan, I thought it was satire. Jeremy Hunt, former Health Secretary and the candidate Johnson had beaten in the final round for the leadership of the Conservative Party, and therefore the Premiership, registered his concern that more serious measures were not being taken, and government strategy at this point became politically untenable.

Their finest hour

In civil society, consciousness of what was before us became crystallised, focused. At the pub that weekend, there was talk of little else, and of making the most of a last opportunity to socialise. One colleague from another NHS Trust suggested that the usual tensions within the service had abated:

all parts of the service are now pulling together and coming into line in an unprecedented manner – co-operation and flexibility amongst front line staff has been extraordinary

Silver linings, unexpected consequences.

The Monday evening following I walked past the same pub, guitar in hand, and I caught sight of an MC of my acquaintance, so I went to over say hello. He was predicting the forthcoming lock-down, in characteristically Biblical tones. Noticing the guitar, he asked me if I had been practising. “No,” I replied, “I’ve just played an open mic in Kings Heath”. “We do what we do, don’t we” he observed stoically.

Johnson announced more stringent advice that Monday; the NEJM argues these vague announcements only added to the confusion. By Wednesday, March 18th, the government announced school closures for the end of the week. On March 20th, at the spring equinox, the NEJM could write:

Throughout the past few weeks, the U.K. mantra has been “we will act at the appropriate time according to the science.” Many clinicians and scientists have been pushing the panic button, but the alarm, if heard, was not acted on publicly until the third week of March. Everyone is hoping that their gut instincts, the experience of other countries, and now the models are wrong. What is not in doubt is that barring a miracle, a treatment, and ultimately a vaccine, the NHS in the United Kingdom is about to experience a challenge unlike any other in its 70 years of existence.

Hunter, D. ibid.

Four days later, the government announced the UK ‘lockdown’, to last a minimum of three weeks, with emergency legislation planned for later that week to enforce it. As has been pointed out though, these measures are less draconian than in other countries – there’s no actual curfew or travel ban as such, and the Civil Contingencies Act has not been triggered. The new regulations are however fairly strict, and and enforceable by new police powers:

The Health Protection (Coronavirus, Restrictions) (England)
Regulations 2020

Meanwhile, outside our island, news of riots and breakouts across prisons in South and Latin America reached me, as people began to take matters into their own hands.

Join me soon, when I’ll be looking at life since the ‘lockdown’ began. I’ll look at further political, social and cultural developments, as we begin week two, and try to ascertain what might happen next.

Remote Control?

Many of us, in the current conditions, will be home working if not for the first time, then more often than usual. Automattic, the company that owns, WooCommerce and Tumblr, has distinguished itself by hiring many remote workers – indeed, much of its workforce is globally distributed.

Not one to let this wealth of experience or, it may be said, let a clickbait opportunity like this go to waste, the blog leads on Working Remotely: An Automattic Reader

The post seems like a useful collection of resources on this subject though, with tips and tricks to help everyone, whether it be the humble worker or the team manager. So I pass it on. Happy home working!

During the pandemic, the online tools so assiduously created by third parties can come into their own, and not just for work. Two yoga teachers of my acquaintance, not as far as I know known to each other, are independently using the video conferencing application Zoom to run online classes.

Indeed, on Thursday the Electronic Frontier Foundation noted Zoom “has quickly become a popular option to work and keep in touch with others in the midst of social distancing and shelter-in-place protocols”, in a great piece entitled What You Should Know About Online Tools During the COVID-19 Crisis. The piece also reproaches Slack for it’s data retention policies, points out the growth of surveillance in schools, and most pertinently in the current crisis, points out a potentially dangerous regulatory change.

The US department of health is “allowing health care providers to use applications such as FaceTime, Facebook Messenger, Hangouts, Skype, Zoom, etc so they are able to provide care to patients remotely”.

The EFF suggests that if our healthcare is conducted remotely in this way, we should check what safeguards they have in place to ensure patient privacy.

In other COVID-19 surveillance-related news, the EFF also report a tweet sent by the Deputy Executive Assistant Commissioner of the US customs and border agency, who co-incidentally shares a name with one of the co-creators of Judge Dredd:

The EFF repeat their call for a ban on facial recognition technology, under the headline Face Surveillance Is Not the Solution to the COVID-19 Crisis

the accidental anarchists

Just a “grain glitch” in the matrix, nothing to see here.

According to one journalist, they say of the Washington Post: ‘it’s a great paper; you never know which page will have the lead story’. True to form, the current lead headline might appear predictably anodyne: “Democrats balk as Republicans try to use must-pass spending bill to fix tax law“. On examination, the story proves more interesting, even amusing.fact

Seems the current crop of Republican legislators accidentally passed a tax break which encourages farmers to deal with co-operatives over traditional agri-business, seemingly due to the law being unable to distinguish between gross sales and net income on this occasion. Once agri-business pointed it out, Republicans immediately promised to fix it, but there are signs of resistance from Democrats who are kicking up a stink. That’s the gist of the story. What interests me is the irony, the inept element of it, and the way it’s written. The discourse, perhaps alien to an English reader, is very much of the minutia of House Democrats seizing on an issue purely as part of the game. Pelosi’s words notwithstanding, theres certainly no sense of Democrats seizing the possibility for a national debate about the general benefits of co-ops for organising trade, which i suppose inheres in their self-organising capacity.
And finally the story descends into remarking that the apparently numerous typos and omissions in the new law are par for the course.
So that’s alright then. We can, at least for today, confirm the lead headline in the Post will always leave us with ennui and disappointment after all.
What probably should be the lead story covers leading Republican opposition to Trump, in the form of the perfectly-named Arizona senator Jeff Flake, passionately defending the judiciary, the First Amendment, and describing the Trump administration as “chaos for its own sake, projected onto the world”. Stirring stuff but, as the reporter points out

The question remains: Where do Flake and like-minded Republicans go — to a new party? To permanent political exile? Much depends on whether the Democrats make a foolish choice in 2020, opening up space for a third party. In any event, Flake implicitly (and I think, unintentionally) makes a powerful argument that the first step is the complete demolition of a reckless, soulless party.

Zbigniew Brzezinski

Always been fascinated by Brzezinski, who has just died; a sort of liberal version of Kissenger. Reading his obit here in the Post, I discover that as well as a shared Polish heritage we share a birthday! Explains a lot…
Anyway, it’s an informative piece but rather glosses over Brzezinski’s role in the Afghan conflict o the 1980s. His power games there, as well as Poland, Iran, China etc, for good or for ill, helped birth the world we live in today. Key figure.

Medicine without frontiers

The Crow word ‘bacheitche’ apparently means ‘good man’. President Obama used it to characterise Joe Medicine Crow, last warrior chief of the Plains Indians, hero of WW2, the ‘first person from his tribe to earn a’ masters degree, anthropologist & historian, and recipient of the Presidential Medal of Freedom.

Mr Crow died yesterday aged 102, according to this fascinating obit from the Washington Post.

A bad day for religious patriarchy

Last night’s The Ascent of Woman (BBC2) did a fine job of demonstrating how the recent trend for monotheistic religions (Judaism, Christianity, Islam being the main ones) merely inherit a somewhat older tradition of patriarchy.

The systematic oppression of women for which they have become famous, a system of male domination, of our very discourse, imagination, as well as politics and ethics and law, in short of society ‘itself’ in fact seems to have emerged with the transition to settled, agricultural civilisation, itself a fairly recent innovation in human affairs. Continue reading “A bad day for religious patriarchy”

Root and Branch

In this wittily written piece in the Washington Post, by its Pakistan bureau chief Tim Craig, a diplomatic controversy concerning trees in Islamabad shades, as trees tend to, the presumably undisclosed reason why the US embassy there is expanding. This expansion is cleverly hidden like a nugget in the article, halfway down at least, after a charming picture is painted of the city as one of the greenest, where landowners must get state permission to remove trees, all set in a palace of alternating parkland.

The description of ecological regulations in the city didn’t surprise me but did seem slightly at odds with what I’d heard about some unchecked urban development and so on in, I guess, the rest of the country. Indeed, careful to avoid the impression of being a PR job for Pakistan’s ecological reputation the article concludes by drawing attention to Pakistan’s ecological problems; deforestation and the possible relationship with flooding.

Nevertheless this due journalistic diligence does seem a little like a segue away from the key question, only briefly considered in Mr Craig’s piece: what drives the US embassy to expansion, and is it really that secret?…/pakistan-suspects-u-s-ill…/