Saturday, September 6, 2008

Progressive taxation: maximum wage?

There's been some really interesting debates taking place so I'm playing catch up here - but I'll try to get round to everything that others don't cover *eventually*.

Just come out of the first session voting on substantive policy (rather than agreeing end of term reports, conference agenda, etc.). Motions are prioritised by members' ballot so the items that most members are interested in discussing comes first in the agenda, it's part of a really interesting set of systems that allow members more control over their conference than any other party.

First motion was proposed by London's MEP Jean Lambert and was on trade union reps in the workplace. This is one of those motions that essentially has complete consensus and there isn't even a speech against.

Talking about the right of trade unionists for proper facility time it also describes the rights of workers to determine the policies and standards in their workplace - which includes the establishment of environmental reps who would have powers equal to those of health and safety reps.

With some unions going greener and greener it's important we find ways to empower those rank and file trade unionists in the workplace to make their place of work safe and environmentally sound.

Which brings us on the second motion in the batch and one that was slightly more controversial. The ominously named CO2 motion (in that it came second in section C) Pete Murray put forward his proposals for a minimum/maximum wage.

In fact the title does not do the motion justice as it also makes important points about the European working time directive and for the increasing of the UK's minimum wage in accordance with Europe's decency threshold - all good stuff and undisputed. But it's when we come to the concept of a maximum wage (or 100% taxation rate as the motion puts it) that there was more dispute.

Darren Johnson, one of our London AM's who won the backing of the FBU with his campaign for a decent living wage for fire station cleaners, put forward an amendment taking out the maximum and replacing it with a more general call for progressive taxation, ie a tough new top rate of tax that would levy perhaps 70 or 80% taxation on the highest earners.

There were good points made on both sides but personally I was in favour of the amendment. As Johnson said a 100% is completely pointless in that previous attempts have found simply massive scale avoidance that rendered the rate fruitless and brought in no revenue.

I had been considering speaking to this but in the end it wasn't necessary. If I had spoken, this is roughly what I would have said. That a maximum wage does nothing that progressive taxation plus judicious use of windfall taxes does not do more effectively. Whilst the Green Party certainly does need a clearer economic policy - and I think the Green New Deal is part of developing that - a maximum wage is a sledgehammer rather than a sophisticated tool.

It's actually simpler to use the formulation that if you earn more you pay a greater proportion of your income as tax. As a propaganda tool that can pressure the powers that be a maximum wage is pointless, a call for a just taxation system does not. When the row about the ten pence tax rate erupted it was because it was patently obvious that doubling the amount of tax the lowest paid in the country pay was completely unfair.

The work Darren and others have done in boosting the wages of the lowest paid is the best and most positive message to send out there - and an example we can follow right now. A maximum wage policy that would require a green party government to enact is simply abstract propaganda that wouldn't win over even one soul to the cause of fighting the corner of the lowest paid.

Having said that once the amendment passed (taking out the maximum wage) we were left with a very good and worthwhile motion which passed without any problem what-so-ever. Just to hammer the point home this was then followed by passing policy on the right to rent for those who've houses have been repossessed and free school meals that would ensure a "minimum requirement that all children are provided free of charge with a balanced, nutritious lunch including local and organic non-GM food, free from additives."

Good session.


Adrian Cruden said...


I seconded Peter's motion and, whilst I am happy we have a good policy coming out of the debate, I can't quite agree with you on a maximum wage not being a desirable or enforceable objective.

We have for a long time held, sensibly I feel, that a Green economy will be either very low or no growth / steady state. Technological developments may permit some growth in the goods available, but the policy of neo-classical economists in the grey parties of "trickle down economics" and high growth cannot feature in any realistic politcal programme for the 21st century, (unless you were the US Republicans who want to destroy what's left our environment and then engage in war over the scraps that remain!)

So, in a society and world of limited resources, and where we have already far exceeded the point of sustainability, I can't buy the argument that we can simultaneously limit growth and increase the incomes/ wealth/ living standatds of the poorest in society without some sort of cap at the other end of the income and wealth spectrum. The cap we unsuccessfully proposed yesterday of 10 times the new minimum would have set the maximum annual income at £150,000 - affecting somewhere less than 0.3% of income tax payers. As someone said in the debate, it would be interesting to hear why someone needs more than six times the average income.

If we don't do this, I can't see how we can square the circle of limiting resource use whilst increasing the incomes of the poorest with continuing to allow the richest to continue to grow their wealth - in any traditional economics' scenario, this would simply fuel an inflationary spiral which would hit the poorest hardest.

There was an argument put that a maximum income policy would leave us accused of squashing innovation. Yet the vast majority of those on such high earnings are employees - the CEOs, company secretaries and others who head up huge, faceless corporations and who are not taking any risks with their own money, but rather with the employment of their staff and, perhaps, their shareholders' dividends. Very few are actual small business/ independent risk takers busy creating jobs for others. And in any case, survey after survey about workplace motivation shows that pay actually plays a very small part in job satisfaction and motivation - control over your work, the chance to innovate, and non-monetary recognition are all actually more important than earnings - though earnings do become an issue where people perceive wide inequalities between themselves and colleagues. viz., in the last 20 years the average ratio of a FTSE 100 Chief Executive's income against that of the average employee in their company has grown from 17:1 to 75:1.

There certainly is tax avoidance -right now, never mind on 100%. As revealed last year, many CEOs pay no tax at all and those that do often pay less than their cleaners. But on that basis, we would be as well to not levy any income taxes, as someone will try to avoid them. It may not seem very Green to say this, but whatever we decided - 100% or if it is going to be 70% or 80% (I wouldn't lose sleep over a 98% rate like Healey had in the 70's!), I hope we would ensure that the tax is enforced and avoidance detected and dealt with. Social security fraud has massive amounts of time and money inviested into its detection and court pursuit; but the real scandal of the last 30 years has been the obscene levels of tax avoidance (set against lower not higher income and corporation tax rates). I hope whichever way we voted yesterday, if we ever get the chance, we will ensure that people pay their social dues.

best wishes

Jim Jay said...

Hi Adrian, thanks for this thoughtful reply.

i don't think it's a question of need - I think it's a question of the right tools for the job. If you're going for 100% taxation you might as well expropriate and not pretend it's a tax system.

I'm for progressive taxation - where the poorest pay nothing and as you go up the income scale you pay more and more of a proportion of your income.

I genuinely feel we should be concentrating on those battles we are fighting and winning - bringing the lowest pay levels up, arguing for windfall taxes and taxing the rich - these are effective, practical measures that are easily understood by the public - whilst 100% taxation levels are leaning much more towards abstract propaganda... what would Darren, for example, practically do to advance this?

Aaron said...

I voted for it more or less on the grounds that we should state that we see wages of £150,000+ a year as complete excess.

Sam said...

May I join this interesting discussion from the Atlantic's other side?

I've done a great deal of thinking about the notion of a "maximum wage" and actually written a book about the notion (now available to read online at

Seems to me that the historical record demonstrates clearly that societies with a steeply graduated progressive tax system function considerably more decently than societies without.

But history also shows that no seriously progressive tax system has demonstrated multi-generational staying power. In society after society, the rich and powerful have eventually been able to wipe away serious tax progressivity.

Maybe we need a new approach to progressivity. By setting a maximum wage as a multiple of the minimum, we would give the rich a new incentive. They would be able to enhance their own financial well-being if they first helped enhance the well-being of society's poorest.

Under progressive taxation, as traditionally structured, the rich have only one incentive: to do battle against progressive tax rates.

I'd like to live in a society where the richest and most powerful had a vested interest in improving the well-being of society's poorest and most vulnerable.

Sam Pizzigati