Tax wars and inequality

Sunday 23 October, 16.00 - 17.15 , Pit Theatre Battle for the Economy

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Video and audio of this debate are available at the bottom of this page.

Erstwhile Democratic Party presidential candidate Bernie Sanders declared: ‘The issue of wealth and income inequality is the great moral issue of our time, it is the great economic issue of our time, and it is the great political issue of our time.’ The World Economic Forum argues ‘A growing body of research suggests that rising income inequality is the cause of economic and social ills, ranging from low consumption to social and political unrest, and is damaging to our future economic well-being.’ And in 2014, Capital in the Twenty-First Century by Thomas Piketty, become an unlikely international best-seller by suggesting that inequality was likely to continue to grow. From radicals and NGOs to world leaders and billionaires, inequality has become a touchstone issue. Oxfam has caused a stir with the claim that the 85 richest people globally have as much wealth as the poorest half of the world’s population. James Bloodworth, author of The Myth of Meritocracy, points out that people from the poorest backgrounds are very unlikely to get to university – a crucial stepping stone to lifelong prosperity. In turn, he notes: ‘An astonishing 91 per cent of the 2010 intake of MPs were university graduates and 35 per cent were privately-educated. Is inequality not just damaging life chances but distorting politics, too? More troubling for the rich is the potential for a political backlash prompted by the unfairness of a mega-rich ‘1%’. The furore around the Panama Papers, which revealed the tax-avoiding strategies of many wealthy people, recalled Leona Helmsley’s infamous quote ‘We don’t pay taxes. Only the little people pay taxes.’

Critics of the discussion around inequality argue that poverty, not inequality, is the real problem. Even on this question, there is controversy. A common measure is relative poverty, which looks at the number of people whose income is below 60 per cent of a country’s median income. But is relative poverty really an appropriate measure? Someone who is relatively poor by UK standards could be rich by global standards. Someone doing a full-time job in the UK, even on minimum wage, is likely to be in the top 10 per cent of earners, globally. Others criticise the demand for equality of outcome. If we all end up the same, regardless of our personal efforts, why would anyone study hard or take risks in order to create wealth? As Don Watkins and Yaron Brook argue in another recent book, Equal is Unfair, what if the real threat to the American Dream isn’t rising inequality but an all-out war on success?

Should we be worried about inequality as well as poverty? Does inequality have effects on society that go beyond material disadvantage? Why have politicians become so keen on talking up inequality today? Is inequality inevitable – or even beneficial?

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