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Pensions, Schmensions – They Will Take Everything

January 6, 2013

Labour is always good value for a laugh when its shadow chancellor attacks Tory economic policy. This week, Ed Balls managed to get three schoolboy errors into a single sentence on what he would do with a “high earners” pensions tax. First, he announced the same tax hike last year and said he would spend the money on tax credits. Second, he said the wealth grab would be used (a second time – truly socialists and sums are total strangers) by the government to “create jobs” and third, according to Mark Wood, former deputy chairman of the Association of British Insurers, the money doesn’t exist anymore because pensioners-to-be (all of us) have placed their savings in places with more difficult access. The fact that Balls isn’t laughed out of public life for his direct contribution to our national penury is testament to the idiocy of the British voter.

Taxation is a game of cat and mouse between politicians and the electorate. The pantomime that is democracy gives the government the right to coerce as much money from us as it chooses. If it takes too much too quickly we notice and complain, so the system has developed various methods to steal from us indirectly. Without writing a history of tax, it is well known that in the UK income tax was introduced as a temporary measure to raise funds to fight Napoleon. In the US, the founders explicitly outlawed an income tax, but that was ignored from 1913 (same year as the founding of the Federal Reserve System). In the UK, the introduction of the welfare state required the imposition of higher income tax, but rather than increase income tax, the government introduced a tax on income in 1911, which was significantly expanded by Labour in 1948. Because the initial amount was low, there was no popular revolt. Unlike the rich, who are very sensitive to any potential threats to their privileges, the hoi polloi can be propagandized into anything. When the Liberals tried to introduce a very small Land Value Tax in 1909, in the so-called “people’s budget”, the landed gentry in the House of Lords voted it down on the basis that the tax rate may have been small to start with but any future government could ratchet the rate up at its pleasure.

At current levels income taxes (income tax, employers and employees national insurance) are somewhere near their upper bound, although the government will keep using fiscal drag to increase their real value. Indirect taxes like VAT and insurance may be increased further, but even the dummies at the Treasury know that there are limits on what they can take from productive labour. And yet, government revenues are nowhere near enough to meet its ludicrous spending commitments. Therefore, other sources of wealth are going to be taxed. Obviously, the government will apply its favourite tax – inflation, through quantitative easing (or creating trillions of pounds out of thin air, diluting our national purchasing power), but there are two lumps of wealth that the government will be obliged to target, i.e. pensions and housing.

As the Tories don’t like to do the dirty work, and Labour relishes expropriating the wealth of the middle class, Labour will implement Balls’s pensions raid, just as his mentor did as soon as he took office in 1997. Because Brown taxed the country 20 years into the future no one noticed at the time, but we all notice now. As far as Balls is concerned all money is owned by the government and while the government may let us use it for a time, if he needs it he can re-claim it any time he likes. And he will. In spades.

Labour will likely have the LibDems as a coalition partner, and they are fanatical taxers of housing wealth. The LibDems will be Labour’s cat’s paw to start taxing housing wealth directly and forcefully. The tax will be implemented at a low rate to ensure compliance, but once the principal is established, like all tax rates it will go to the moon very quickly.

Unfortunately, sending the value of all pensions and all homeowner equity to zero will hardly make a dent in the nation’s debts to the issuers of debt-based money, but that won’t stop the governments of the future from pauperizing us all – and we’ll let them.


From → Chapter 1

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