issue 220 - June 1991
The GREAT REVENUE ROBBERY
We all feel the weight of tax on our shoulders. Still
government never seems to have enough to run things properly.
Tax reform has meant light taxes on wealth and profit
and a financial squeeze for everyone else.
Changing the rules to favour the rich.
• By 1990 some 86 countries worldwide had substantially reduced their top income-tax rates. llIn the UK the income-tax rate paid by top earners has been slashed from 83% to 40% since 1979.1
• Over the past two decades the top rate charged to high-income earners in Canada has dropped from 57.6% to 29%.2
• With adjustments for inflation the top one per cent of income earners in the US paid $84.4 billion less in taxes in 1990 than they did in 1977.3
• In Sweden the top marginal tax rate dropped from 72% in 1989 to 51% in 1991.4
• In Bolivia it is estimated that 75% of the income tax from labour is collected while only 20% of the income from capital is collected.5
• In Aotearoa/New Zealand the top income-tax rate dropped from 66% in 1985 to 33% by 1989.
• In the UK you can make £5,500 ($10,000) in capital gains every year before you have to pay a cent of tax.6
• The net effect of the liberalizing of US capital gains taxes proposed by the Bush administration in the fall of 1990 was an average annual gain of $68 for those earning incomes of $10,000 or less and $15,454 for those with incomes over $200,000.7
• Estate taxes in the US made up 2.3% of revenue in 1965 and by 1991 they are projected to drop to 0.5% of revenue.8
• Business and investment breaks will cost the US Treasury $212 billion in corporate taxes and $205 billion in personal income taxes between 1989 and 1993.9
• In Canada the Federal Government gives $9 billion in annual tax subsidies to business, the same amount that it collects in taxes. In the 1970s the tax ran at about 50%; by 1988 it had been dropped to 28%.10
• Until 1982-83 UK company profits were taxed at 52%. The current rate is between 25% and 35% depending on income.9
Cash-starved Third World governments lack the capacity to tax income of the rich (who hide it) or the poor (who don't have it). They must seek revenue elsewhere.
• Third World low-income countries rely for three-fourths of their tax income on commodity taxes, particularly import and export duties as well as sales and excise taxes. Middle-income Third World countries get half their revenue from these sources.12
Who pays most?14
• Thirty per cent of all international trade takes place within transnational corporations allowing financial manipulations so that corporate income can show up in those countries where the tax advantage is greatest.15
• The average medical deduction by Americans earning over a million dollars is $44,000 a year.17
• Audits of suspected tax evaders in Turkey in the early 1980s found that 50% of income was undeclared.
• Every 1 per cent levy on the incomes of the best-off 10 per cent of US citizens would raise $15 billion taxes.18
• In French-speaking West Africa 84% of taxpayers pay based on a presumptive tax - whereby tax owed is estimated from business volume and living standards (amount of property, number of servants, foreign travel etc.) This system increases revenue.
• An annual 8% tax on net assets of over $300,000 in the US would raise enough revenue (about $155 billion) to pay off the national budget deficit while affecting just 2% of the population.19
Direct and indirect taxes
Base and rate
1 Changing Tax, John Hills, (Child Poverty Action Group, 1988.)
2 Behind Closed Doors, Linda McQuaig, (Penguin 1987).
3 Growth and Equity, Bruce Fisher and Robert MacIntyre, (Citizens for Tax Justice, 1990)
4 Financial Times, Friday Feb. 24th, 1991.
5 World Development Report, World Bank, 1988.
6 Budget Notes, Critchleys Chartered Accountants, March 19th, 1991.
7 Fisher and McIntyre, op. cit.
8 Tax Policy in the Twenty-First Century, Herbert Stein ed., (Wiley 1988).
9 Fisher and MacIntyre, op. cit.
10 Is it Fair?, Leon Muszynski, Centre for Policy Alternatives, 1988.
11 Hills, op.cit.
12 World Development Report op. cit.
13 World Development Report op. cit.
14 Hills, op. cit.
15 Hills, op.cit.
16 Mirages and Miracles, Alan Lipietz, (Verso 1987).
17 Harpers Magazine, March 1991.
18 Fisher et al.,op.cit.
19 William Dugger, The Wealth Tax: A Policy Proposal, (Journal of Economic Issues, March 1990).