In order to spend money, the Labour Party in government will need to raise it and the best way to do that is to lift the tax burden off labour and onto capital, off work and onto wealth.. These reforms would raise £28 bn a year, enough to fund the £28 bn green energy promise, or cut the basic income tax. By taxing capital, Labour, the party of labour, could actually reward work. Britain’s Great Tax Con. Harry Lambert. The New Statesman.
The problem is as old as employment itself: how can employees keep a fair share of the value they add to the economy? Taxes and transfers, while helpful, are ad hoc and inefficient. We have more of them than ever yet American incomes are the most unequally distributed in modern history.
The Final Solution?
There’s a simple, practical way to close the ‘alligator jaws’ in the chart above: allocate a fixed percentage of GDP to wages. In China, as the economy grows, it pulls wages up with it whereas, in the US, they are disconnected.
Two goals
In 1983, when wages were becoming a thing in China, Beijing gave Five Year Planners two long term goals: “We want to be the richest and the most equitable country in the world by 2049, our first centenary. Please figure out how to double everyone’s real incomes every ten years until 2049. And when we reach 2049, make sure we have the world’s best Gini coefficient”.
This involved some fancy modeling of course but, eventually, the planners came up with a simple formula.
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