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April 10, 2012

Wasting just a bit of my goddamn life
Posted by Abi Sutherland at 09:51 AM * 28 comments

One of my favorite comments from Patrick, one I’ve quoted and linked to a number of times, is about how much energy we should put into caring who is surprised about what and when.

I have an inchoate, perhaps indefensible, and yet powerful sense that conversation about this whole range of issues would be improved immeasurably if we could all just fucking stop one-upping one another over what is and isn’t legitimately surprising.

[…]

If we spend our goddamn lives sneering at one another over whether we were angered or amazed or appalled at exactly the right time or not, we’ll have wasted our goddamn lives.

But I’m a tester, you know, and I always knew I would eventually find an edge case to prove that rule. Well, now I have, in a quote from the UK Chancellor of the Exchequer, George Osborne. In an interview in the Telegraph today, he says,

I was shocked to see that some of the very wealthiest people in the country have organised their tax affairs, and to be fair it’s within the tax laws, so that they were regularly paying virtually no income tax. And I don’t think that’s right.

I’m talking about people right at the top. I’m talking about people with incomes of many millions of pounds a year. The general principle is that people should pay income tax and that includes people with the highest incomes.

“Shocked”! Really? Honestly? Or, as the internet says, What is this I don’t even.

With notable self-restraint, Guardian writer Polly Curtis treats this statement as fact and attempts to check it. While she admits that emotions cannot be proven or disproven, she looks at his previous speeches and widely available information to determine if he should be surprised. Her article is remarkable both for the amount of linked evidence she brings to the BGO* and the constructive tone she uses to discuss it. But in the end, there’s not much to say beyond duh, so she discards fish-in-barrel marksmanship and gets interested in what his comments mean for the future of British tax avoidance†.

Her colleague Larry Elliot is much less patient, comparing Osborne to Claude Rains in Casablanca.

In one of the best scenes from the film, Rains says he is “shocked, shocked” to find gambling going on in the establishment, only to be handed his winnings by a member of Humphrey Bogart’s staff.

Elliot is blunt where Curtis is tactful:

Osborne is not short of a few bob himself. He has plenty of prosperous friends and is supposed to know a thing or two about the UK economy. If he is genuinely surprised by the tax arrangements of the well-heeled in the UK, he has either been living in a cave for the past 20 years or is unfit for his current post.

I think everyone who follows British politics knows that Osborne is neither clinically insane nor terminally stupid. So I wish to hell that he—and all of our politicians—wouldn’t act like they think we are.

But I’m not surprised when they do. Just in case anyone’s wondering.


* Blinding Glimpse of the Obvious
† Technically, tax avoidance is the use of legal means to reduce one’s tax burden. Tax evasion is the use of illegal means to do so. This entire discussion concerns the former, not the latter.

Comments on Wasting just a bit of my goddamn life:
#1 ::: Terry Karney ::: (view all by) ::: April 10, 2012, 10:40 AM:

Yeah. I'm not sure which is worse, the ability of the really rich to shirk their share of social contribution, or the ability of politicians to pretend it's 1: not happening, and 2: they aren't making it easier for rich people to do.

I think the latter, because people being venal is nothing new, nor is it something I expect, to go away.

Much as I might like to live in an earthly paradise.

#2 ::: Fragano Ledgister ::: (view all by) ::: April 10, 2012, 10:41 AM:

George Osborne appears to be channelling Claude Rains's Captain Renault. Will he next announce that he is going to round up the usual suspects?

#3 ::: Megpie71 ::: (view all by) ::: April 10, 2012, 11:01 AM:

Fragano @ 2:

I've no doubt they've already started the process. Particularly if, as I suspect, this whole business is an exercise in gathering public support, boosting the opinion poll figures of a shaky government, and possibly getting the name of the Chancellor of the Exchequer into the press associated with something to make the average voter think positively about him. As has been remarked, the Chancellor is usually the Bad Man of a British government - he's the one who raises taxes, and he's the one who tells the British peoples that they can't have nice things.

If this were happening over here in Australia, I'd be pointing to the PM's position and muttering the words "leadership challenge". I don't know whether the dynamics are quite the same over in the UK, but certainly a Chancellor attempting to get a good name for himself in public is a pretty reasonable indicator that the PM's position probably isn't as firm as he'd like.

On identities of "usual suspects" - I'd guess at a clearing-out of the upper wealthy, removing the more "Non-U" members of the group. I'd almost suggest a certain Australian-born media magnate with a surname starting with "M" as a possible candidate, but he rather publicly went and got himself US citizenship a number of years back.

#4 ::: Victoria ::: (view all by) ::: April 10, 2012, 11:03 AM:

Call me cynical, but I've always viewed politicians who do the Shocked and Horrified About _______, as an idiot attempting to assert plausible deniability after they've done the deed they're shocked and horrified about. And if they haven't done it, they have supporters who have.

#5 ::: Jim Macdonald ::: (view all by) ::: April 10, 2012, 11:35 AM:

The original article in The Times appears to have vanished (or retreated behind a subscription/paywall), but here's a trail of breadcrumbs to J. K. Rowling's take on British tax avoidance:

Crooked Timber
Democratic Underground
Mother Jones

They all use pretty much the same pull-quotes. I recall the original column, though, which I read when it came out two years ago: It was long, impassioned, and well-reasoned.

Surely Mr. Osborne reads The Times?

I'll requote a bit from Ms. Rowling's piece:

Now, I never, ever, expected to find myself in a position where I could understand, from personal experience, the choices and temptations open to a man as rich as Lord Ashcroft. The fact remains that the first time I ever met my recently retired accountant, he put it to me point-blank: would I organise my money around my life, or my life around my money? If the latter, it was time to relocate to Ireland, Monaco, or possibly Belize.

Lord Ashcroft, who sits in the House of Lords (former Deputy Chairman of the Conservative Party), a man with an estimated fortune above a billion pounds, pays no UK income taxes, as he is officially domiciled elsewhere.

#6 ::: Fragano Ledgister ::: (view all by) ::: April 10, 2012, 11:42 AM:

Megpie71: I've no doubt that Osborne is eying the PM's job. A fair number of Tories are unhappy with the coalition, but are unwilling to force a crisis and risk bringing Labour back in.

#7 ::: Tom Womack ::: (view all by) ::: April 10, 2012, 12:15 PM:

George Osborne is from a distinctly well-off background. He owns one house in a good part of London, worth about three million pounds, he owns 15% of a (luxury wallpaper-making) company with about three hundred employees and a valuation of about £25 million, and he is paid about £150,000 a year as one of Britain's most senior politicians.

That puts him at the bottom of the top 1% of British incomes (stats from http://en.wikipedia.org/wiki/Income_in_the_United_Kingdom), though (doing a few calculations on Pareto distributions to extrapolate off the end of the charts there) he's around the top 0.1% in wealth. He's about level in wealth with the fiftieth richest person in the US Congress.

But that is still two to three orders of magnitude less wealth, and one to two orders of magnitude less salary, than the richest or best-paid people in Britain. And his wealth is not terribly liquid.

For example, he does not make enough money to employ a whole accountant for himself; the richest people in Britain could employ a dozen full-time.

So I wouldn't necessarily expect him to have very much insight into what the richest hundred people in Britain do with their income; because it's qualitatively different from what he does; he's a rich man but he's not in a position where essentially all his income is purely discretionary spending.

#8 ::: Dena Shunra ::: (view all by) ::: April 10, 2012, 12:26 PM:

The Tory Treasurer recently caught on camera offering access to Cameron (and a policy adjustment) for a mere GBP 250K, one Peter Cruddas, is reported to have lived for years as a tax exile in Monte Carlo.

Cruddas is also reported to be the second highest donor to the UK Conservative Party. He seems to be very selective about who gets his funding.

It would be interesting to know if the fact that he no longer has to live in MC in order to avoid paying taxes has anything to do with that 2nd-highest-donor status.
He has, however, stepped down from his position as Tories' treasurer.

Perhaps now he has time to explain things to the astonished Osborne, to save him some shocks in the future.

#9 ::: abi ::: (view all by) ::: April 10, 2012, 01:50 PM:

Tom Womack @7:

Thank you for the perspective on Osborne's wealth. I agree that he might not have direct personal experience of living that lifestyle.

But on the other hand, even I, with a couple of years' chartered accountancy training, know how much tax can be evaded by even the most transparent of methods*. Surely someone who works in business and finance would have caught, in the air as it were, hints of this sort of information?

Put it another way. I'm not surprised in the least. And I have much less personal fortune than he does. Unless he's been hit by a covey of Gorm Vampires, who have preyed on him night after night until he is truly gormless, why has he not stumbled upon this kind of information before?

----
* My tax lecturer at ICAS in Edinburgh laid out an extremely complicated transaction in class, full of sales and repurchases, with a little leasing and depreciation on the side. "Hands up," he said, "if you think this is taxable." About half of the hands in the room went up. "So the rest of you think it's not taxable?" Nods from the people with their hands down.

"It's the wrong question," he said. "The relevant question is, does the client want to pay tax on it?"

#10 ::: fidelio ::: (view all by) ::: April 10, 2012, 02:19 PM:

abi #9 Upton Sinclair's observation may explain Osborne's apparent lack of gorm:

"It is difficult to get a man to understand something, when his salary depends upon his not understanding it!"

#11 ::: Bruce Cohen (Speaker to Managers) ::: (view all by) ::: April 10, 2012, 02:24 PM:

Victoria @ 4:

Almost by definition in Western politics these days, a "supporter" (as opposed to a "grass roots supporter") is someone who is funneling money gotten from tax avoidance to politicians who will guard the parts of the tax law that enable that avoidance.

#12 ::: praisegod barebones ::: (view all by) ::: April 10, 2012, 02:26 PM:

I'm happy to assume that Osborne is telling the truth here. Because if he is, it's a clear and frank admisision that he's not competent to be in his current job.

I think that rather than looking for signs that he might be lying, his political opponents should be applauding his honesty and suggesting that he step down in favor of someone who is a little bit less in over their head.

#13 ::: Jim Macdonald ::: (view all by) ::: April 10, 2012, 02:48 PM:

Or, perhaps, now that Osborne knows about this he will bloody do something about it. Which he is excellently situated to accomplish.

#14 ::: Tom Womack ::: (view all by) ::: April 10, 2012, 06:00 PM:

I noticed while looking things up for my post that Osborne's prospective solution (effectively making deductions stop working for people with an income above a million pounds) is similar down to the percentage used (33% vs 30%) to Barack Obama's "Buffet Rule".

Maybe they share advisors, but to look at the same advisors from what are reasonably different political perspectives and come up with the same number suggests that there might be something sensible going on not very far behind the scenes; it makes me very slightly more optimistic.

#15 ::: Alan Braggins ::: (view all by) ::: April 10, 2012, 06:07 PM:

I'm dubious about the implication that a man who is supposed to know about the economy as part of his job is not necessarily unfit for that job if he has in fact been living in a cave for 20 years....

If this is a prelude to making evasion harder, I will be pleasantly surprised, but I suspect it's genuinely hard to create a cost-efficient system to get much tax money out of a small number of people for whom it is efficient to pay a lot to accountants to find ways of evading it.

#16 ::: Jacque ::: (view all by) ::: April 10, 2012, 07:01 PM:

Alan Braggins @15: "Look, people! Just fire all the accountants, pay 95% what you would have payed them as taxes, and it's all good!"

Nah. They'd never go for it.

#17 ::: Bruce Cohen (Speaker to Managers) ::: (view all by) ::: April 10, 2012, 07:28 PM:

Jacque @ 16:

Are you kidding? If we did that the accountants would take their revenge, and they're the ones with their hands right next to the cookie jars holding the deadman switches. Half the companies on earth would be in bankruptcy because the operating funds were sent to the IRS, and the execs of the other half would be in jail or the hospital because their spouses were mailed the records for their lovers' hidden bank accounts.

#18 ::: Stephen Sample ::: (view all by) ::: April 10, 2012, 11:14 PM:

Bruce Cohen @17: ...sounds good to me.

#19 ::: j h woodyatt ::: (view all by) ::: April 11, 2012, 02:06 AM:

It's possible that Mr. Osborne wasn't expressing faux surprise out of any contempt he may or may not hold for the sanity and intelligence of the British electorate.

It seems very plausible to me that his comments were intended to reinforce conventional norms of discourse. We all know that everyone should pay income tax. We also know that an exception is officially and routinely made for the obscenely wealthy and politically powerful. We also know that changing or eliminating this exception is not supposed to be discussed seriously by policy makers and other influential people. The people who actually pay income taxes might take such ideas seriously, and then— well, you can only imagine what horrors might transpire.

Therefore, when the topic arises in conversation, it is polite to pretend surprise, because the alternative would be regarded as unnecessarily rude by the people whose reactions Mr. Osborne actually cares about, namely the policy makers and other influential people who otherwise would be quite happy nobody ever discussed the tax avoidance strategies of the obscenely wealthy, in public, where the little people can follow every word of it.

Shorter james: maybe not contempt for your intelligence and sanity; could be complete and utter disregard for your thought processes entirely.

#20 ::: Bill Stewart ::: (view all by) ::: April 11, 2012, 02:38 AM:

Surprisingly, the reason most rich people choose the investments they do is to make money. It would be surprising if they didn't take taxes into account, especially if the tax system is designed to favor some kinds of investments over others and tax people with high incomes more than people with low incomes. And there are some tax avoidance strategies that have large setup or maintenance costs or which can only protect investment income but not wages, and it would be surprising if rich people didn't use those more often than less rich people.

England (or maybe it's the UK?) has a few special variants on that theme, like spending a year dead for tax purposes. The California version of that is to live in Reno Nevada, which is only a couple hours drive from civilization (except in winter), and you really only have to move there when your company's about to go public.

#21 ::: Dave Bell ::: (view all by) ::: April 11, 2012, 03:07 AM:

A great many people just aren't going to pick up the Captain Renault references

So maybe this is a signal, a warning shot, that he is going to have to take notice. There's some limits in the works on charitable donations, and one of the methods mentioned was the rich man who sets up his own charity. Wasn't that what Howard Hughes did? In a genuine charity, the donor passes on the money, only getting an indirect benefit (such as Sir Pterry donating to Alzheimer's research), while the implied abuse involves a charity set up in a foreign jurisdiction for the direct benefit of the donor and his family.

Sometimes, making the distinction would be tricky.

But, even without Casablanca, this does seem a foolish way of saying it. If he were trying to say that he knew there was a problem, he asked HMRC to provide some hard figures, and it is worse than he thought, this was the wrong soundbite. And he has been saying that he wanted to decide things, like the 50% tax rate, on the basis of some hard data.

So he's not been particularly clever, politically, but he might be trying to do the right thing. And it's what a politician does which matters. But I am not optimistic.

#22 ::: Fragano Ledgister ::: (view all by) ::: April 11, 2012, 10:43 AM:

Dave Bell #21: If I can parse your mention of the rich man who set up his own charity, albeit in a foreign jurisdiction. If that's who I surmise it to be, that was in the first country where I did field research (on the relationship of voting to ethnicity from the early 1960s through the mid-1980s).* The noble and wealthy gentleman in question is, I gather seen as a genuine benefactor in that country, in part because he has been a generous donor to both political parties.

* A copy of my paper may be found in the national library of said country.

#23 ::: Dave Bell ::: (view all by) ::: April 11, 2012, 12:09 PM:

Fragano@22

It took a little while to pin down that claim in the reporting. But have a look here for a more in-depth view of that issue. Brief summary: Osborne says one thing, and lets us infer the charities are somehow fraudulent, but there is already more regulation that he implies. It looks as though the "foreign charities" have to be in the EU, and have to be registered with HMRC—that is, the UK's IRS-equivalent.

It's hard to escape the feeling that Osborne doesn't really approve of philanthropy.

No, I wasn't thinking of anything like the sort of charity you refer to. The Howard Hughes Medical Institute maybe wasn't just a tax dodge, and the US system is different in some ways: the IRS challenged the original set-up, when Hughes gave the charity all the Hughes Aircraft stock.


#24 ::: CJColucci ::: (view all by) ::: April 11, 2012, 04:45 PM:

Osborne's Labour counterpart, the shadow chancellor, is a fellow named Ed Balls. Let's see if he takes this and lives up to his name.

#25 ::: Fragano Ledgister ::: (view all by) ::: April 11, 2012, 07:17 PM:

Dave Bell #23: A country with no charities? That would be truly awful.

#26 ::: praisegod barebones ::: (view all by) ::: April 15, 2012, 02:27 PM:

While somewhat out of date (October 2009), this story this story seems to be in the same ballpark. (or, since it's the UK, on the same cricket pitch).

[Although your company was pleasant, we have released this comment and fixed the borked link. Please do feel free to come again after we have restocked the tea cakes. -- Roquat Rufus, Rex Gnomi]

#27 ::: praisegod barebones EATS TEA WITH GNOMES ::: (view all by) ::: April 15, 2012, 02:31 PM:

Sorry, I think I must have borked a link on my new device. ( which seems not to want me to use the word 'borked'

#28 ::: praisegod barebones ::: (view all by) ::: April 16, 2012, 10:51 AM:

Roquat Rufus: many thanks for freeing my comment, and even more for deborking the link.

What is Your Highness's favourite flavour of tea-cake?

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