Piketty tackles inequality

Thomas Piketty, the French economist ‘rock star’, has just published a new tome – Capital and Ideology – a mere 1,100 pages of it

David Smith reported in the Sunday Times that ‘it looks at inequality regimes over time’

Key points Piketty makes include: “Every human society must justify its inequalities” – but notes that the UK and USA have not done so – apparently, inequality there is  much higher than 40 years ago yet economic growth per head has halved

He has little truck with the argument that  entrepreneurs who have built businesses deserve different treatment from those who only run them – and proposes a 5% wealth tax because billionaire entrepreneurs succeed  as a result of the efforts of many, including the state – as evidence, he cites Bill Gates as not having invented the computer by himself

As for overpaid CEOs, he thinks governments that reduced top taxes helped to create the problem – when top taxes were high, there was no incentive for top execs to earn so much – now the average UK CEO earns (gets paid) some 120 times the average income

Piketty’s simple formula for higher income taxes would be:

  • People earning half the average income would pay just 10% in tax
  • This would rise to 40% for those on twice the average
  • Then up to 60%, 70% and eventually 90%


And for wealth taxes, they would be based on property values and follow a similar schedule

He recognises this could be a recipe for a tidal wave of wealth leaving the UK – a wave that he would stop by imposing an ‘exit tax’

But what of the property-rich but income-poor who might be crippled by such a wealth tax?

“The tax would have to treat them differently and making sure the gains are not just as a result of inflation”

However, he menacingly adds: “A large property holding is an indicator of a large wealth holding”

Overall, he says: “These taxes would provide a basic income for everybody and an endowment for young people entering adulthood” – a policy, Smith says, which is ‘conspicuous by its lack of success in trials to date’

The problem here is many of our leaders/ decision-makers take this guy’s views seriously


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