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January 27, 2014

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Tom Bowker

In the case of Per Mertesacker's replacement, if Arsenal stump up the difference in order that his replacement takes home the same as PM used to, this is a transfer from profits to the exchequer. In a conversation we had on Twitter this morning you didn't seem to think this would be a net gain for the economy - though I suspect it would, as profits accruing to Arsenal's owners probably get in large part saved or spent elsewhere.

You suggest though that there could be a shift from profits to wages, which leads me to make a pedantic but perhaps still meaningful point: lots of footballers incorporate themselves in order to dodge tax. So it's actually a shift from Arsenal's profits to Per Mertesacker Inc.'s profits. Pedantic, but at the end of the income distribution that footballers inhabit it might be more useful to think of their wages as profits, as they won't spend them in the economy in the same way as normal mortals would.

Luke

Tom, "but at the end of the income distribution that footballers inhabit it might be more useful to think of their wages as profits, as they won't spend them in the economy in the same way as normal mortals would."

If you wanted to illustrate the tendency of high earners to save rather than spend, I reckon footballers are probably not the best example.

Going back to the post, I sometimes wonder how much Bill Gates, Steve Jobs etc knew or cared about income and capital gains tax rates when they *started* their companies. (Different once they were rich.)

Shinsei1967

So if all the star footballers left for the Spanish or Italian leagues you suggest this would have no impact on UK GDP as people would just spend their Saturday £50 on something else than a football ticket.

But what about the 10s if not 100s of millions spent by foreigners buying the rights to Premiership games or Man Utd jerseys.

Tom Bowker

Luke, fair point, but I reckon they spend a lot more in e.g. Dubai than the 1,000 supermarket workers who collectively earn the same amount do..

Neil Wilson

"But what about the 10s if not 100s of millions spent by foreigners buying the rights to Premiership games or Man Utd jerseys"

What currency are they spending in and where did they get that from?

Floating rate changes the rules of the game. You can't think foreigner. You have to think in terms of exchange relationships - one out, one in.


Luke

Shinsei
"But what about the 10s if not 100s of millions spent by foreigners buying the rights to Premiership games or Man Utd jerseys."

What about the £ms that would be paid by Spanish and Italian clubs to buy those players?

TickyW

The tax-rate is a red herring to any serious discussion concerning the decisions our self-annointed wealth creators may take.

Homo econimicus (is my Latin correct?) is concerned with post- tax income. Just as with investment decisions, decision makers are indifferent to the tax rate. It's post-tax income that is the relevant decision criterion (along with other criteria of which the tax rate is not one). Chris recognises this point when he says,

"If top tax rates were important, the media would be worrying about migration to Bulgaria, with its 10% tax rate, rather than from it.."

Nice one, Chris :-)

Hoover

We hear that "productivity and hence earnings are properties of jobs, not individuals."

And in direct contradiction, it's said that "Tesco might lose from having to hire a second-rate CEO."

It all seems highly muddled.

joe

I once worked for one of the World's top engineering consultants. Talented people from all over the World queued up trying to get in. Wages were well on the low side but that meant that top project bids were easier to win - job security and career development were further rewards. The company grew year by year. End of year bonuses were allocated by head count equally throughout the organisation - no one argued that their effort was any more worthwhile than a colleague's. The experience, working atmosphere and job satisfaction were all. Taxes never came into it and they reached 95% levels at the time.
If you have to pay people huge salaries and huge bonuses to turn up for work then that industry really is in trouble.
There is a huge pool of talented young people from all over the World that would rapidly replace the current overpaid bluffers that cause such business stagnation in UK. If they would only go, then UK GDP would rise to undreamed of levels. Then taxes can fall for everyone.

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