newsweek 1
s the world enters the second year of the pandemic, two crises are unfolding. The more urgent and visible one is in poor countries like India, where a surge of covid19 cases is threatening to overwhelm the state. India is recording more than 350,000 cases a day, and many more than that are thought to be going undetected (see Asia section). The suffering is griev ous. Oxygen supplies at Indian hospitals are running far short of what is needed, and crematoriums are overwhelmed. The other crisis is more subtle. This is long covid, which is becoming apparent in rich countries like America, Britain and Israel that have largely vaccinated their way out of the pandem ic, but which will affect poor ones, too (see Science section). Postcovid syndrome, to give it its formal name, is a set of symp toms affecting any part of the body that persist for at least three months after a bout of covid19. Three stand out: breathlessness, fatigue and “brain fog”. In Britain three in every five people with long covid say their usual activities are somewhat limited, and one in five says they are limited “a lot”—which often means being un able to do even a parttime, deskbased job. The numbers are chilling. Half a million people in Britain have had long covid for more than six months. Their chances of full recovery are probably slim. The vast major ity are in their workingage prime. At the last count (which does not fully take in the country’s second wave) 1.1% of Britain’s pop ulation had had long covid for at least three months—a group that includes 1.5% of those of working age. About 15% of Britain’s population had been infected by then. Applying this rate to glo bal covid19 cases, numbering an estimated 1.2bn so far, suggests that more than 80m people may already have long covid. The costs of the condition have yet to be tallied, but they will be huge. Britain’s National Institute for Health Research found that, in 80% of sufferers, the illness affected the ability to work. Over a third said it had weighed on their finances. As yet, long covid has no cure. What scientists know so far about the disease points to it being a combination of a persistent viral infection (for which a drug may be found at some point), a chronic autoimmune disorder (which would need expensive, complex care like that for rheumatoid arthritis or multiple scle rosis) and lingering damage to some tissues caused by the ori ginal covid19 infection. Medicines for the first two of these causes may ultimately be found. America alone has put $1.15bn into research. At the moment, though, sufferers need months of rehabilitation to help them cope. Healthcare systems and employers must prepare to assist longcovid sufferers, including those who have no proof of past infection because they were not able to be tested. Prompt rehab ilitative care can prevent a downward spiral in personal health and finances. Dedicated long covid clinics will speed things up. As things now stand, patients often bounce from one spe cialist to another in search of a diagnosis. Employers, for their part, must rethink how to accommodate workers with a disability that flares up in unpredictable bouts. Governments can help, with incentives that encourage sufferers to stay in work and employers to cater to their condition. If governments miss the boat, millions of young and mid career workers could permanently drop out of the labour force. One approach could draw on a scheme for disability benefits that is used in the Netherlands. Dutch employers and employees who are too unwell to work as normal are required to come up jointly with a plan on how the sick employee can return to work under new conditions. Remote working and flexible schedules would make it easier for long covid sufferers to work at least part time. Many of them will improve, though even that can take months. Lots of mistakes were made in the pandemic’s acute phase. But that came out of the blue. There is no excuse for failing to respond to long covid. And there is no time to waste
tion face extra levies? Discouraging saving and investment hurts the economy in the long run, which is why a review in 2010 by the oecd, a club of mostly rich countries, ranked corporate taxes as the most harmful of four common taxes to economic growth. Economic models predict that Mr Biden’s business tax plans would cut the size of America’s economy by around 1% by 2050. Set against this is the scourge of tax avoidance. Tax capital lightly and it pays to disguise wages as capital income—a particularly lucrative pastime for the rich. One problem is the “carried interest” loophole. It lets privatee quity and hedge fund managers class their fees as capital gains rather than income. Another issue is the explosive growth in “pass through”firms, for example partnerships, which ac ounted for more than half of American busi ness income by 2011, up from about a fifth in 1980. Many capitallight labourintensive businesses such as law firms, consultancies and medical offices are organised this way. Nearly Federalcapita US, top rate incl. 3.8half of the earnings that pass through investors receive are classified as dividends and capital1960 70 80 90gains. Mr Biden is right that bringing taxes on wages and capital into line would make tax avoidance harder. The tradeoff between inefficiency and tax avoidance is painful, but two principles can help chart a sensible course. The first is to realise that taxes on capital stack up. Before they can return their profits to investors in the form of dividends and capital gains, firms pay corporate taxes. Whack up every capital levy to rates resembling income taxes and you will take a larger bite out of investment income than out of wages. Shareholders in California, for example, face Mr Biden’s proposed 28% corporate tax rate, his 39.6% federal capital gains rate, a 13.3% state tax on cap ital gains, and a 3.8% levy on investment income introduced as part of Obamacare. They could, in theory, keep less than a third of their nominal returns under the Biden plan—and even less of their real returns given that some of those taxes would be paid on the illusory capital gains generated by inflation. In reality it is not as simple as compounding rates, because the corporate tax is leaky and the current system, egregiously, waives capitalgains taxes when assets are inherited. Still, after taking into account the revenues raised from closing loopholes, Mr Biden should en sure that taxes on capital do not rise above taxes on labour. The second principle is to reduce inefficiency with allow ances for investment. Exempting from capitalains tax rate Obamacare levy, % 45 Proposed 30 15 taxation modest “normal” returns, which are usually measured by the interest rate on low riskbonds, cuts distortions, as the normal re urn is in theory the minimum needed to make private sector projects worthwhile. The idea is baked into America’s tax code for many types of000 10 investment but only until the end of 2022—and Mr Biden plans a new minimum tax on firms’ accounting profits which would interfere with the carveout for the largest companies. Individual investors should also receive exemptions for the normal rate of return—which already hap pens in Norway and has been suggested in Britain by the Insti tute for Fiscal Studies. As Mr Biden proposes, inheritances should not be exempt from capital gains tax. Genuine parity between capital and labourtaxation, tempered by investment incentives, might not raise as much money as Mr Biden’s current plans. But such a reform would still help pay for his spending and reduce tax avoidance—without making the American tax system needlessly inefficient. .