|Class War protesters pose in front of Griff Rhys Jones's £7m Fitzroy Square home in London|
British Labour leader Ed Miliband has proposed introducing a wealth tax on British homes worth more than two million pounds. The so-called 'mansion tax' would mean an annual tax of approximately 3000 pounds for those who own such properties. British B-list celebrity Myleene Klass (worth approximately 11 million pounds) has attacked the proposed tax while comedian and television presenter Griff Rhys Jones claims he might leave the country because of it. But, as economist Michael Roberts points out, neither have been critical of the 'bedroom tax' which reduces the benefits of people who happen to have a 'spare bedroom' in their flats.
MYLEENE KLASS is a sort of B-list celebrity in Britain. She comes from a family of musicians, quite well-off, went to a private school, studied at the UK’s prestigious Royal Academy of Music, became a professional musician and pianist, eventually joined a successful pop band and is now a model for various food and clothing brands.
She has appeared on B-class TV programmes like I’m a Celebrity – Get Me Out of Here!, where you are parked in a jungle for several weeks with other celebrities and have to undergo various humiliating tests. She is apparently worth about £11m ($18m) in net worth and no doubt earns at least six figures a year.
She has attacked the proposed introduction of a wealth tax on British homes worth more than £2m that the current opposition Labour leader Ed Miliband wants to introduce. This so-called ‘mansion tax’ would mean around an annual payment of about £3000 a year by those who have such properties. In the UK, given the huge property boom of the last 20 years, these homes are mainly in central London. On a second rate TV show, Klass railed against Miliband, that this was attacking ‘poor grannies’ who may have big houses but no income.
Miliband was non-plussed, but could easily have answered this charge. First, most of these £2m houses are owned not by poor grannies but by very well off people, 40% don’t live in them and a sizeable number are owned by rich foreigners who have bought them in order to get a windfall from the London property boom (prices rising at 12% a year currently) and rent them out or leave them empty. Second, under the planned tax, those with £2m plus homes and low incomes would not have to pay each year, as the tax would be rolled up until that person kicked the bucket. Indeed, if a £2m house increases in value by 10% a year, that would add £200,000. A mansion tax of £3000 is just 1.5% of that boost to wealth.
Klass’s attack (and the whining of other ‘celebrities’ like Griff Rhys-Jones, who says he will leave the country – although he lives on a big ranch in Wales and only uses his huge mansion in London on visits) is not to protect ‘grannies’. Klass has not complained about another tax, the so-called ‘bedroom tax’ that is actually being applied by the government, which reduces the benefits received by ‘poor grannies’ and other single people who have a ‘spare bedroom’ in their flats. These grannies are being forced to move into smaller accommodation or be even poorer. Klass had nothing to say about them.
Of course, Klass and Rhys-Jones are really complaining about paying any tax at all. The rich see paying tax as almost immoral – it takes away what they have ‘earned’ through hard work, talent and being clever – although usually it is just luck or being born rich. Anyway, I’m not sure that a 50% increase in the value of a home has anything to do with hard work or talent. But tax is immoral – or so says British PM David Cameron when recently announcing that the ruling Conservatives will cut taxes after the next election.
Actually, if you think about it, taxes are the most moral social thing you can do – paying your contribution to the social good and to help others. The problem is that the spending by governments that kow-tow to the rich is often on military hardware, subsidies to large companies to invest and handouts to rich landowners and farmers – and of course taxes on the rich (like a mansion tax) are kept to the minimum.
And wealth may bring ‘happiness’ but it certainly does not bring morality and a ‘help thy neighbour’ philosophy. There are often well-publicised stories about rich philanthropists who set up trusts for the sick, for the arts etc. Actually, trusts are good tax havens for money that rich people don’t know what to do with. And there is way more money that goes to financing lobby organisations and politicians who aim to protect the interests or the rich and the super-rich.
In a great new book, Billionaires: Reflections on the Upper Crust, Darrel M West outlines various social surveys that show the richer a person is, the less likely they are to redistribute some of their wealth and earnings to those less lucky or ‘talented’. A University of California study found that people driving expensive cars were four times more likely to cut in front of other drivers or ignore pedestrians right of way than those in cheap cars. They considered themselves kings of the highways. In another study, the richer the person, the more likely they were to take candy from a jar left outside a laboratory, despite a sign saying that it was for children only! The New York State Psychiatric Institute surveyed 43,000 Americans and found that, by some wide margin, the rich were more likely to shoplift than the poor. Independent Sector found that people with incomes on an average of $25,000 a year gave away 4.2% of their income while those on over $150,000 a year gave away only 2.7%.
As a UCLA neuroscientist put it: “As you move up the class ladder, you are more likely to violate the rules of road, to lie, to cheat, to take candy from kids, to shoplift, and be tightfisted in giving to others”. Apparently, the richer you get the more you want and the less you want to give. Mike Norton at the Harvard Business School found that, when asked, rich people still felt that they were two or three times short of the money they needed to be really happy!
But so it goes on. There is never too much for some. For example, the world’s most famous bond trader is Bill Gross. He was head of the largest bond fund company in the world for years, PIMCO. But recently, he had been making some bad investment decisions and PIMCO started to lose money for its clients (banks, insurance companies etc). The clients started to withdraw their money and Gross was sacked for failure. But failure came nicely wrapped up in a going away present. He was paid $290m to leave! Bill Gross’ take-home pay was huge but he is not the wealthiest bond fund manager in the world. He is worth only $2bn, while the far less well known David Tepper is worth $11bn and Carl Icahn is worth over $20bn.
Indeed, there are more super-rich people in the world today than ever before. According to a new survey from Wealth-X and UBS , the number of people with more than $30m in assets jumped 6% to hit a new record of 211,275 in 2014). Among them, they hold a staggering $30trn, or nearly twice the size of the US GDP. Those 211,275 people account for just .004% of the world’s population but hold 13% of the world’s wealth. Most of these uber-rich hold their wealth in the companies and properties they own and the income they make they hoard up in cash. North America remains number one when it comes to population and wealth. 74,865 people in North America hold some $10bn between them. 69,560 of the ultra wealthy call the US home and hold $9.6bn. Europe has the second-largest concentration of ultra high net worth individuals, followed by Asia, but Asia will overtake Europe by 2027. The ultra wealthy are overwhelmingly male, 87%.
A mansion tax would not be even noticed by these people – although if it were brought to their attention, they would still complain about it being unfair.
Michael Roberts works in the City of London as an economist. He has closely observed the machinations of the global financial system from the dragon's den. He is the author of The Great Recession – A Marxist View. This article was first published by The Next Recession.