Friday, 23 February 2018

The Economy of Trickle Down

Whenever you hear that there is going to be a tax-cut, what your government is actually doing is giving you a massive middle-finger. They're telling you in no uncertain terms that they don't give a damn about you, that they exist purely to line the pockets of the powerful.

Here in the UK, and recently in the USA, we have a corporation tax so low even Mini-me would struggle to limbo beneath without risk of decapitation. Additionally, both the Tories and the Trump administration, under different guises, have put more money into the pockets of the average Joe, through personal income tax threshold raises and higher allowances. A ruse, to make it seem as though we have more money when in fact we don't. It says, we're giving these corporations a break, and you too! Everyone wins!

But here's the problem: YOU don't win. The purpose of collecting taxes is to create a monetary fund from which to finance the country; from the minutiae of farming subsidies so we can still grow our own food, to the mammoth task of protecting our country. THE GOVERNMENT IS RESPONSIBLE FOR ALL THIS.

So, when the government is handing tax breaks to corporations, it is saying one of two things: 1. Everything is fine with everything and we can be generous and let you give us less money for a while - treat yourself! Or 2. We're not very good at managing this (rail and road infrastructure etc) - either that or we don't particularly want to. We trust that if we give you this break, corporations will use the money wisely and create another company that will fix our roads for us, because that's what trickle down is, right? It's the creation of jobs.

Giving tax breaks to corporations is trusting that they will continue to do the work that the government SHOULD be doing themselves - unless, of course, the State is already a utopia, in which case, party time for everyone. Except we don't live in a utopia. Drive down a road without hitting a pothole. Go to a hospital without seeing a queue of waiting ambulances. Wait for a train to come on time for once.

All this, in theory, would be fine. It would be great if Virgin used the money they saved and reinvested it into the rail infrastructure in a meaningful way; in an amount that they wouldn't have done anyway without the corporate break. But let's be realistic. Give a rich man more money and what does he do with it? He already has more than he knows what to do with, so a little more makes no difference (if he even notices). He keeps it. Give a poor man more money (eg higher tax thresholds) and he spends it, because he has to. He sees an extra £30 in his account and what's he going to do with it? Invest in shares for a company that fixes the roads, or buy a pair of shoes? And then who does that £30 go to?

It's a double tax break for the corporations; they get their own, and ours too!

Okay, so an independent or small franchise estate agency, to take a real-world example, may, AT BEST, hire another employee with the savings they make. But, if their hiring or non-hiring of additional staff is so dependent on tax rate, if those margins are so fine, than arguably they should not be hiring anyone at all; it's unsustainable and risky. And how many small businesses would it take to do this before there was a tangible, positive effect on the infrastructure the country sits on? How many extra nurses and doctors and teachers and policemen would get hired with this model? Social workers? Support workers? How many extra hospital beds and social housing initiatives?

There's no doubt that small businesses being able to invest in their company is a good thing, but for sustainability, it should come through natural production, earned profit. To rely on a government break would put it in a precarious position, where things could change from year to year. As for the mega-businesses, would McDonald's hire more teenagers through the tax breaks? Or do they already over-hire? (Or, more likely, are they savvy enough to know the precarious nature of taxes and not rely on this? As if they even paid the full amount of tax in the first place.) Would they set up more shops, in new locations; ones that they would not have done already without the break? And what of the infrastructure into which they bed themselves? Can the roads around their new location sustain the traffic? Or are they taking advantage of a pre-existing infrastructure they contributed little to? And in twenty or thirty years, will there be a nearby hospital with a McDonald's wing?

So many variables; there is no government control in this method. No responsibility. Privatise, and they hand the reins of responsibility over our welfare to a company; one that may well have good intentions, but that ultimately looks to the bottom line. They can't afford to go into the red if it means that all trains and buses arrive on time, or to ensure that there is always a spare hospital bed or a policeman that can get to you in five minutes or under. The government CAN afford this (as shown in our growing deficit). The government SHOULD be able to afford this. WE are their only responsibility; from making sure we can get to our workplace on time, to doing our job correctly because we have been well educated; from not having to pay for superior healthcare, to not having to pay for our children to go to University. It's an all-in model. The contributions of the population and the corporations (when not avoided through havens) all going towards the greater good: investment! It doesn't matter if it's an Estate Agents or the Budget, the long-term goal should always be optimum performance, which can only be achieved through investment.

So the trickle down does not work. The rich get theirs' and the rich get ours' - which will never change, not really - but the rich get more, because the rich get handed government contracts to solve problems the government cannot solve, because they have no money to solve them. And with every contract they give out, with every utility and money-making franchise they privatise, they reduce their own income even more. So much of what we privatised in the past could and did pay for itself! But no, better to work for the individual rather than the greater mass, even when it means creating a whirlpool of growing debt and underfunding.

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