Don’t confuse the best and the brightest with greedy self-promoters

He’s an accountant. He’s a Corkman. He’s opinionated. He’s an old friend. So when he heard me, on RTÉ’s Drivetime, suggesting that Brian Lenihan should levy enormous taxes on the very rich, it bothered him.

He texted me to gently point out that, since I can just about add and subtract and am seriously challenged by multiplication and division, he understood why I would talk complete drivel, but that I should stop it. The professor on the panel had already crushed me on the same topic by saying it hadn’t worked for Harold Wilson.

The French have a great phrase for what had happened to me between the professor and the accountant. They call it “l’esprit de l’escalier.” Meaning that it’s only five minutes after you’ve had a fight with someone that you come up with the killer riposte to how they squelched you. I was halfway up the RTE radio centre stairs when the response to the professor came to me: “But that was in another country, and besides, the politician is dead.”

The original line “But that was in another country, and besides, the wench is dead,” comes from Marlowe and refers to fornication, but it would have worked. If I’d thought of it in time. Which I didn’t. So I ended up figuring that, with a professor on one side and an accountant on the other, each suggesting you shouldn’t be let out alone, it’s time to add finance to sport as one of the topics never, ever to be addressed.

Except that the two of them are wrong. Much of the argument against taxing the super-rich is akin to the argument about reducing what’s paid to top bankers. If you reduce them to the kind of money the less-than-super-rich get, this argument suggests, they’ll get insulted, sell off their big houses and get the money they deserve elsewhere. To which the answers have to be: a) we don’t care b) they’ll have hellish difficulty and lose a lot more money trying to flog their homes than taking a pay cut and c) where the hell will they go?

Since Barack Obama is putting a ceiling of roughly e375,000 a year on the compensation packages of America’s top bankers, the USA does not currently look that attractive. Canada’s banks are likely to look askance at lads from Irish banking, since they’ve managed, in their understated way, to keep their skirts clear of the rising tide of banking problems this side of the Atlantic. The global financial services world is not awash in competitive offers for Irish bankers, right now.

All of which ignores an even more important reality, which is that the brightest and best are never motivated by money.

The brightest and best are always motivated by the desire to create something, fix something, or turn an ordinary thing into an extraordinary thing. What the last decade in Ireland and the last couple of decades in the US did was confuse the brightest and best with a bunch of arriviste self-promoters given to driving Ferraris and spending a year in Italy to avoid paying tax on companies they sold at a time when Noddy and Big Ears could have sold a company for multiple millions.

This, by the way, is not a sideswipe at Gerry McCaughey, who’s a hell of an entrepreneur and who has merely fallen foul of the New Puritanism which condemns anybody who has any money and who ever took advantage of any completely legal tax reduction measure. Like all Puritanism, our new version is nasty, self-serving, punitive, unproductive and based on a desire to blame others for allowing/encouraging/permitting us to do outrageous things like take 110% mortgages and interest-only loans when, if they had refused us, we’d have had their guts for garters.

The second danger attributed to high income tax for the super-rich is that it will deflate our capacity to attract brilliant minds and encourage some of the existing brilliant minds to retire early. Which ignores the reality that it was a generation of brilliant, highly-paid folk, (in financial services particularly but not exclusively,) which got us to where we are, and where we are is not a good place to be. Not to mention the fact that, whenever a disaster carves off the top layer of commercial thinkers and operators, Cassandra-type predictions are made that it will take years to recover from the loss. It never does. Charles de Gaulle rightly observed that the graveyards are full of indispensable men. Carve off an entire generation of leaders and the next generation sprouts to maturity instantly.

It has to be accepted that bright greedy minds tend to find ways around high levels of income tax. They always have. During the time when Ireland had a ferocious level of tax, allied to DIRT which punishes you for saving money, many clever people in every townland in this country put money overseas. Some of them were later punished for it. But to argue that because a minority of people will find a way to subvert a good policy is a reason to abandon the policy is akin to suggesting that because some people develop blood clots after surgery, surgery should be abandoned. No, you just concentrate on ways of clot-prevention.

The financial equivalent of clot-prevention — the method of obviating long-term tax evasion by the rich — is finding ways to make the punishment temporary. When it comes to income tax, humanity has a poor record preventing permanence of punishment, given that income tax was initially brought in as a temporary measure allowing Britain to fund the war against Napoleon. And turned chronic, long after Napoleon was dead.

However, an interesting start has been made in the right direction, this weekend, by New York’s governor David A Paterson, who has agreed, with his state legislature, the largest increase in state income tax in recent history. According to yesterday’s New York Times, “the plan would raise $4 billion a year by creating two new tax brackets, the highest one affecting those who earn $500,000 or more.”

In New York, they’re already calling it “The Millionaires’ Tax,” despite the fact that it would hit people earning as little as $300,000 a year, which indicates a profound change in thinking about what constitutes the rich and the super-rich.

Let’s face it: in Ireland, over the past few years, many 20-somethings, when their basic salary, commissions, bonuses and dividends from cost-effectively-priced share options were added together, were earning close to that sum in euro. And, with luck, will do so again.

New York has other links with Ireland. The deterioration in its finances since its autumn budget is startlingly close to that of this country’s since Minister Lenihan’s last budget.

Paterson says the harsh new income taxes will last for three years. Our Minister for Finance should follow the governor’s example.

Such a temporary Millionaire’s Tax would give rise to none of the dire consequences of a long-term rise in taxes, keep us within borrowing limits, and prevent our grandchildren having to pay off money borrowed this year.