Tag Archives: wage cap

Corbyn’s pay cap plan boosts the rich, not the poor

By David Thorpe | Wed 11th January 2017 - 10:55 am

As usually happens when hard line Socialist utopias are created, Jeremy Corbyn’s maximum pay plan would help the rich not the poor.

That is because when employees reach the maximum, other ways would be found to reward them which would increase inequality and reduce the tax take from the rich.

In Soviet Russia access to the splendour of the Bolshoi Ballet was a perk for the wealthy. The poor weren’t helped, and no tax was collected on the perk.

So it would be if Corbyn got his way. Employers would pay bonuses, perhaps in shares or profit share, when they can’t pay extra cash. The thing is, shares or profit shares, when sold, are liable to Capital Gains Tax, not Income Tax as wages are, and the capital gains tax rate is lower than the income tax rate above £140,000.

The problem with a wage cap

By Jeremy Hazlehurst | Tue 10th January 2017 - 7:30 pm

Jeremy Cobyn’s proposal to bring in a maximum wage (or, if you like, a 100% tax rate) would not work, for two reasons. The first, is that the swing voters he needs to attract would never vote for a party with this potty policy. If you are flirting with voting for the Conservatives, you are not going to like the idea of a wage cap.

If any further discussion is needed, then the second reason is that it would not have the intended effect. Presumably the reason to bring down wages would be to reduce inequality. But most rich people do not get their income from salaries, but from dividends, capital gains, rental income etc.

I don’t know if the Duke of Westminster takes a salary, but capping it would not change one iota the fact that he owns a huge swathe of London’s most valuable real estate. If your only source of income is your salary, then capping it only stops you being able to catch up with the already-rich. Or encourages you to take income in other forms.