Scrap the duty on cask and keg beer sold in pubs

I called on a local publican (business not pleasure on this occasion) to talk about some issues with his pub. It will come as no surprise to anyone (except perhaps the idiots in public health) to know that the pub in question, a wet-led pub, is struggling - takings have halved as people drink less and when they do, drink at home. It's not so long ago when you could walk to the local with a tenner and come home an hour or so later, suitably oiled, with change.

Meanwhile politicians, locally and nationally, babble on about how pubs are the heart of the community, places to be celebrated, supported and encouraged. Or so the rhetoric goes. The problem is that it's just that, rhetoric. For sure, politicians have done idiotic things like make every pub in Otley an "asset of community value" in the silly belief that this is somehow going to help them stay in business. None of this, however fine it sounds, does anything to sell more beer and, in case all my fellow politicians have forgotten, selling beer is what pubs are for.

We can't do anything about changing consumer habits - if, for reasons of health or taste, people drink less beer the chances are that the places selling beer will struggle. But we can and should stop putting barriers in the way of those beer selling places - pubs - succeeding. Britain has the highest beer taxes in Europe. We've banned smoking in pubs. And a host of petty regulations add cost to marginal businesses. All before we get to talk about rapacious pubcos (the pub I visited isn't owned by one of these) and other popular excuses for the decline in the pub.

Right now, the best thing we could to for these vital community assets would be to scrap beer duty for keg and cask beer on-sales. This wouldn't eliminate the price differential between a pint in a pub and a pint in a supermarket but it would level the playing field sufficiently to give the remaining wet-led pubs a fighting chance of surviving. It would be good if pubs were given an option of having a smoking room but I'm not holding my breath on that one.

If we think that going to the local for a pint fights loneliness, promotes community and turns a dormitory into a place then we should do something about it. Gabbling on about "community pubs" and weeping political tears when a pub closes is all most politicians do right now (in between putting out lies and exaggerations about the impact of drinking beer on our health). It's time to put up  - let's scrap the duty on cask and keg beer sold in pubs, let's do something that actually helps pubs for a change.

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Amazon didn't kill the high street and taxing online sales won't save it

We were on Gordon Terrace at Saltaire on Monday to pay a bill, have some lunch and do a little shopping. This street is as close as you'll get anywhere these days to that idea of a 'traditional' high street. Gordon Terrace has a greengrocer, a baker, a butcher and a grocer (OK it's a Co-op) those stalwarts of that high street of old plus a shoe shop, ladies' boutiques, a great menswear store and assorted delis. Even on a Monday lunchtime when rain is promised (and delivered in spades while we were in the greengrocer) the street is buzzing and busy. OK it's not perfect but there was just the one empty shop and a distinct lack of betting shops, tanning parlours, cheque cashing agencies and other such common features of today's high streets. It demonstrates that, given the right demographic and a benign parking regime (free short term on-street parking) the high street can succeed. Let's also note here that the busiest places were the cafes and restaurants - leisure an dpleasure rules the day on the high street. Saltaire is, however, pretty much the exception not the rule when it comes to high streets. And some folk seem to think we can make everywhere like this by the action of government - those folk are wrong.

The reasons for the decline of the traditional high street are many fold and date back a very long time. The first part of the decline came as a result of the success - based on choice, convenience and price - of the supermarket. Back in the days before supermarkets (Ken Morrison opened his first at Girlington in 1961 the year I was born - so that long ago) places like Cullingworth had a myriad of shops providing all the things those supermarkets came to provide, just not with the same range or the same low prices or indeed under one roof. The supermarket with its scale, distribution chains and efficiency resulted in tens of thousands of small grocers, fishmongers, greengrocers and corner shops closing down. They didn't all close suddenly overnight but gradually as folk retired, sold up, cashed in or, sadly, went bust.

At about the same time technology hammered another nail in the high street's coffin as the fridge freezer began to spread. This meant that women didn't have to shop nearly every day (something that helped make it easier for those women to go out to work, have a career) but could stock up for days ahead and, instead, spend their time on something more pleasant than dragging a heavy bag back from the high street. And those families also began to have cars too meaning they didn't have to use the shops in the nearest high street but could scoot down to Mr Morrison's grand store for what was now their weekly shop. The little shop in the village (or on that row of suburban shops at Bywood we used as kids in Shirley) couldn't compete with the car, the freezer and the supermarket so they slowly went from the high street.

By the 1980s the supermarket was joined by other stores in big sheds - category killers they were dubbed as they targeted hardware, gardening, toys, furniture and linen (in the USA books, cars and clothing were on this list too). Instead of going to that slightly intimidating store run by the man in a brown coat to buy some screws, paint or tools, people drove out-of-town to a sharper, cleaner, friendlier (and cheaper) store offering more choice but a bit less personal service. But if what you wanted was a hammer, personal service probably got outvoted by price and choice, so you went to B&Q. And the same went for bedding plants, toys for the kids at Christmas, settees and duvets - out-of-town offered more choice and a better price.

All of this decline, you might call it the decimation of the high street, took place before anyone except a few physicists had access to the Internet. For sure there was mail order but, unlike the USA where distance selling was a boon to remote places, the thing mail order companies offered that wasn't easily got in the British high street was credit - the liberalisation of finance in the 1980s bashed a huge hole in businesses based on the never-never. By the 1990s all the 'big book' mail order businesses were declining (the closing of mills and factories with female workforces didn't help as mail order relied on agents to sell through these places) while more nimble direct-to-customer mail order like Damart was thriving. But these latter weren't affecting the high street as their modus was selling niche products (thermals, outdoor clothing, plastic storage and so forth) - many of these business, Lakeland Plastics being a good example moved from mail order into high street retail.

By the time the Internet arrived most of the traditional local high streets with butcher, baker, greengrocer, grocer and hardware store had gone. Some survived by diversifying - butchers and bakers built businesses that depended as much on selling lunchtime sandwiches as on loaves of bread or gammon joints - but where this wasn't possible the businesses went. And they went most quickly in places where people benefited most from cheapness - poorer communities.

At the same time as all this, the out-of-town shopping centre arrived - Gateshead's Metro Centre, Meadowhall, the Trafford Centre, Lakeside, Bluewater. And these - again - offered a bigger range, more choice, a nicer environment and keener prices than the traditional town centre. The first to lose out here was comparison shopping on that traditional high street - ladies' wear, shoes, children's clothes all began to struggle as people found travelling to the mall more convivial, no less convenient and certainly cheaper.

All of this - and there's a lot more that could be said about how technology changed consumer behaviour, drove down prices and increased choice - is a long-winded way of explaining why Ruth Davidson and others who blame Amazon (and even more daftly, Amazon's tax bill) for the decline in high streets. In the simplest of terms high streets are dying because fewer consumers are frequenting those high streets. And, to make matters worse for small centres, the people who have deserted these high streets fastest have been the people with more money who have more ready access to transport and therefore take advantage of the bigger choice and better price offered by out-of-town shopping.

Unless the sales tax for online sales is so onerous as to force consumers to pay higher prices on the 'traditional' high street (assuming what they want to buy is available on that high street) the effect will be merely to make things a little bit more expensive for everybody without changing what consumers do in any notable way. It's good politics to talk about how it's not "fair" that Amazon doesn't pay high street rents and business rates but this is an argument for reforming business rates not an argument for taxing Amazon (I'm steering clear of the economists' point that business rates are a tax on the landlord not the tenant as it's contested and hard to explain to a retailer with a tax bill). It may also be true that we need to reform corporation taxes to make it harder for the likes of Amazon to use international trading to hide profit (again I'm staying off those pesky economist arguments about how corporation taxes fall on workers, customers and shareholders not the company itself).

Trying to blame a complicated social change like the decline of high street retail on one competitor (and a competitor that didn't even exist for most of the time the high street has been declining) is ridiculous. What we should be asking is why places like Gordon Terrace in Saltaire work so well while other places don't. Perhaps we need to think about which high streets need saving (or have the demographics and current range needed to survive) and which don't. There used to be at least 30 shops in Cullingworth covering everything you might need - there are now just twelve and three of those are hairdressers. Taxing online sales won't save the high street - asking what makes a high street work (the clue is in the second Grimsey Report where, in effect, he says the answer's leisure and pleasure not old-fashioned retail) is a much better question.

We have too many shops and probably too many high streets. I know this is a hard point to make and no comfort when we're talking about the centre of a Lincolnshire market town but it has to be said. There's a case for looking at reforming rents, at a business rates system that more directly falls on landlords, and at further changes to corporation taxes to reduce their burden on small business. There's no case for a tax on sales - over and above VAT - as this is just making things more expensive for us consumers. It may "hit" the bad boys of Amazon but it will also damage thousands of small businesses selling everything from gin and tonic marmalade to classic car parts through online methods. The result of this sales tax wouldn't be salvation for the high street but higher prices, closed businesses and another bundle of cash for government to squander on pet projects in town centres or subsidising failing businesses.

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This year's stupidest policy proposal (in a crowded market)

It's annoying enough when a conservative policy response is to call for a new tax, even more annoying when it's as stupid as this one:

THE Chancellor is being urged to slap a 3 per cent sales tax on internet giants to help Britain’s ailing high streets.

Influential Tories are calling on Philip Hammond to fast-track a tax on the likes of Amazon, eBay and Google to “level the playing field” with UK business.

Tory rising star Neil O’Brien MP claims the move could raise as much as £500million a year. He told The Sun this money could be used to slash sky-high business rates blamed for pushing shops to the wall.

Let's get something clear here. What these 'influential Tories' are proposing is a tax that will make things we buy more expensive so we can reduce a tax on retail landlords:

In the medium to longer term, changes in rates paid appear to be reflected in corresponding adjustments in rental values. This relationship appears to be stronger for the retail sector than the office sector. However, there appears to be a significant relationship between the centrally set uniform business rate multiplier and rental values for the office sector.

Whether we should have a better way of taxing retail landlords is a different question to whether we should make consumers pay more for goods so we can reduce the apparent tax on retailers (and business in general). And that is exactly what the proposal from these 'influential Tories' will do - Amazon and eBay aren't going to absorb the new tax, it'll go straight on the cost of goods. Worse still, all those independent retailers who rely, in part, on sales through eBay, Amazon or Etzy will be the ones who take the biggest hit.

The high street is not struggling because of business rates, it's struggling because consumers have decided they rather like being able to order on-line and have it delivered to the door or the post office in the village. All dropping business rates would achieve is a delay in this decline - at the cost of higher inflation, consumer spending shifted from buying goods and services to paying a tax, and a sharp brake applied to one of the fastest growing parts of our economy. Stupid or what?

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Quote of the day: taxing the poor till their pips squeak

From Dick Puddlecote:

And lastly, we have the type who knows very well that this is a load of bollocks but just like the fact that sin taxes are regressive. They will leap on any old nonsense to justify a tax which punishes the poor, for the simple fact that they hate people who are not like them. They don't care whether the sugar tax will work, they are simply a modern version of a Victorian aristocrat who would sneer at the choices of the poor. It is now considered shameful to advocate an income tax rate for the low-paid which is higher than that for the rich, but positively encouraged by government to support disproportionately gouging the less well off for products which the rich can afford quite nicely, thank you.

The poor must be punished for making the wrong lifestyle choices (even if those choices are their main source of pleasure in an otherwise dreary life).

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Don't give a single penny of your hard-earned, post-tax income to Oxfam

It's always a little depressing when you read something from a university - an elite university to boot - that is really dumb. And even more depressing when you discover that the author of the dumbness isn't some over-idealistic second year student but the "Director for UK Poverty" at international development charity, Oxfam.

Yes I know, I know. You all though Oxfam was all about feeding starving folk in war-torn Africa. Well think again. Oxfam's connection to its original mission of relieving famine is tenuous at best. This 'charity' (and I place it in scare quotes deliberately) has ceased to be one dedicated to such a purpose but has become instead a lobby organisation using its income to create jobs such as "Director for UK Poverty" that have precisely zero connection to the idea of relieving poverty and everything to do with promoting an odious - and discredited - political position.

Here's a taster:

So, even if it is difficult to see how people can escape from poverty without working, it is also increasingly difficult to claim with any degree of understanding that work is the route out of poverty. Lots of jobs which are essential to our society and economy – and indeed to bigger business – need wider support.

By wider support, Oxfam mean higher taxes and more welfare benefits. And the idea that there is any - even the tiniest - comparison between children growing up in the soft embrace of the UK's welfare system and children growing up in, say, Congo or Laos is utterly, criminally wrong. The life chances of UK children with access to free healthcare, free education, generous welfare payments and extensive social services is better than those for most of the world's children. Yet this man from Oxfam wants us to believe that, in global terms, what he calls poverty in Britain is comparable to actual elsewhere in the world.

The article continues for some time in this vein, presenting selected facts and gratuitously exploitative graphical comparisons all wrapped about with references to 'social justice' - as if that actually means anything. And the solution? The pathetic, risible, thoughtless, ill-informed and crass solution? The 'social justice'?

Take more money off someone else, live up to the adage, "there's always someone, somewhere not paying enough tax and it isn't me". It sickens me that the only response to inequality these people can dream up is higher taxes on an undefined group of "tax avoiders". And, in this case it reminds me why we should not give a single penny of our hard-earned, post-tax cash to Oxfam.

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Millionaire migration...

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When we think of people moving, we tend to focus on the traditional sort of economic migration or the terrible consequences of war, oppression and terror. There's another collection of mobile people who don't get talked about - millionaires.

In a fascinating article for New Geography, Joel Kotkin looks at where there millionaires are moving to and from. And he starts by reminding us how important the spending power of the rich people is to many urban economies:

Former New York Mayor Michael Bloomberg has suggested that today a successful city must be primarily “a luxury product,” a place that focuses on the very wealthy whose surplus can underwrite the rest of the population. “If we can find a bunch of billionaires around the world to move here, that would be a godsend,” Bloomberg, himself a multi-billionaire, said toward the end of his final term. “Because that’s where the revenue comes to take care of everybody else.”

You don't have to be comfortable with this dependency on the very rich to understand the realpolitik of Bloomberg's observation. And Mayor Mike knew it is an issue because the very rich aren't moving to places like New York, nor are they moving to London:

The biggest winners are not the elite global cities, like New York or London, but ones that are comfortable, and boast pretty settings and world-class amenities. The leading millionaire magnets in 2015 were Sydney and Melbourne, gaining 4,000 and 3,000 millionaires, respectively, many from China. In third place is Tel Aviv, a burgeoning high-tech center which is attracting Jews fleeing Europe, notably from France.

Dubai ranks fourth, luring many Middle Easterners seeking a safer, cleaner business locale. Then comes a series of some of the most attractive cities on the planet, including Seattle (seventh) and Perth (eighth). In many cases these cities are gaining from “flight capital” from Asia and the Middle East.

Kotkin observes that the migration of millionaires seems driven by two factors - the safety of money and the safety of the millionaire. As a result millionaires leave Russia and China where property rights are weak and leave France because they don't feel safe (the big French exodus is of Jews and it's striking that they feel safer in Tel Aviv than they do in Paris).

Countries and cities need to worry about the exodus of millionaires - here's the impact of just one individual switching US states:

The movement for example of one billionaire — hedge fund manager David Tepper — from New Jersey to Florida could leave the Garden State with a $140 million hole just from his change of address. Overall New Jersey depends for 40 percent of its revenue of income taxes, one-third of which is paid by the top 1 percent of the population.

And the two top destinations for millionaires? The USA and Australia.

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Quote of the day - tax fraud as a thought crime

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Quite amazing:

Despite this new evidence providing the artist had paid his taxes, Nerdrum was sentenced in June 2014 to one year in prison for tax fraud after the case had been appealed twice “because he had admitted to considering evading his taxes,” says Molesky.

All-in-all a strange story involving Icelandic citizenship, allegations of state corruption and the mixing of paint by an artist with the splendid name, Odd Nerdrum. Plus an arcane "when is a painting a new painting or an old painting" debate. It does appear that the artist paid his taxes in full through a scheme that could be used to avoid taxes.

Governments, dontcha just love 'em!
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On those fizzy drinks taxes MPs want...

OK the results are preliminary but a big study  (pdf) (8000 people) into Mexico's 'soda tax' has shown that it hasn't affected overall calorie intake one jot:

Obesity and its costs are high and rising and we know little about the effectiveness of different policy tools. We measure the short term impact of one such tool: taxing high caloric density foods. The results are still preliminary, but the evidence shows that the effects of the Mexican taxes on calories consumed in-home are very small. Results also show that lower SES may pay a higher percentage of their income from these taxes.

And that last sentence tells us that the poor ("lower SES") are the ones paying the tax. So Jamie Oliver, nannying MPs and the legions of public health fussbuckets are proposing a tax that won't solve the problem (an overstated problem but that's by the by) but will disproportionately fall on the least well off.

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No Dr Pirie, you can't say that. It ain't so. Taking the Adam Smith Institute to task on the elderly.

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The Adam Smith Institute is one of the good guys. I like their consistent defence of liberty and classical liberalism. Sam Bowman, the Research Director is one of those amazingly and eclectically brainy people that challenge how we look at things.

Sometimes they get stuff badly wrong:

Popular perception of the circumstances in which pensioners live is somewhat out of accord with modern reality. The image of a woman with a blanket over her shoulders, huddled over a fire and wondering if she can afford to toss another stick onto the flames does not accord with present day reality for most pensioners. Some 86% of pensioners live in households with assets in excess of £50,000. The average income of over 65s is £15,400. A young person working on current minimum wage for a normal working week earns just under £13,000. Yet the young person is taxed while the older person is guaranteed a triple locked pension that will rise with inflation, or average earnings, or 2%, whichever is the highest. On top of this comes a winter fuel allowance, a Christmas bonus and a free bus pass.

Don't get me wrong here - I have some sympathy with the argument being made (although the 'it's all baby boomers fault' schtick is a load of nonsense). But if you're to make an argument do it in a way that doesn't open you to having your argument blown out of the water.

"Some 86% of pensioners live in households with assets in excess of £50,000"

Yes. And this is a consequence of twenty or thirty years paying off a mortgage plus maybe fifty years squirrelling money away in a pension pot. Nothing to do with taking money from the young. And does Dr Pirie really think assets of just £50,000 is such a great big deal - especially since those assets, most commonly, represent the person's home and the savings they'll need to see out today's long retirement. More to the point, Dr Pirie is deliberately conflating assets with income to make his point.

"The average income of over 65s is £15,400. A young person working on current minimum wage for a normal working week earns just under £13,000. Yet the young person is taxed..."

First we've compared average income for the elderly with minimum wage for the young. Secondly most working young people are earning more than minimum wage. And while its true that the personal allowance is higher for those elderly over 77 (and they don't pay national insurance), it's not true to say that old people aren't taxed. And the basic state pension is included in that calculation.

This whole argument is out of the same box as the idea (which I'm sure the ASI would criticise) that somehow the rich have got that way at the expense of the poor. It really is nonsense - by all means say that pensioners get too much of a good deal but it's simply not the case that there's a great deal of 'redistribution from relatively poor young people to comparatively affluent older people'.


Finally most of those assets and that income will, in the end, get spent (quite rightly) on providing social care (mostly delivered by those low paid young people).

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There isn't as much tax dodging as you think...

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At least according to those lovely number-crunchers at 'Full Fact':

While HMRC estimates the total tax gap at £34bn, only £7.2bn of this is attributed to tax avoidance and evasion.

All this makes a fiscal strategy founded on reducing tax dodging pretty unsustainable - given that the current deficit is nearly twenty times that number. Mind you, it doesn't mean that folk don't try to pretend that there's oodles of cash out there in tax that should have been paid (by evil multinationals, bloated plutocrats and the sleazier sort of alternative comedian - all Tory scum of course).

The only remaining target isn't those wicked capitalists (or rather the ones who work in banks or run big companies with Swiss HQs) but the informal economy - about £5.9bn according to HMRC. Now this is a tricky area for two reasons - firstly, unlike the bankers and plutocrats, a lot of the people in this 'hidden' economy really are criminals and secondly another huge chunk of this economic activity is ordinary folk paying the milkman, plumber or cleaner in cash. And if that payment suddenly gets a whole lot bigger because of taxes we're going to do less of it.

All told there's not only less tax dodging than the typical leftie believes but action to get at the taxes alters people's behaviour. Which means we might not get more taxes even if we tighten up or change the rules:

The savings attributed to anti-avoidance measures usually come with a warning attached: all of the costings produced by the Treasury for the policies announced in the last Autumn Statement were given a ‘medium’ to ‘very high’ uncertainty rating by the OBR (with the largest savings also being those that were most uncertain).

The reason for this is that those looking to avoid tax may change their behaviour in response to a change in the law, or may find alternative avoidance schemes before legislation can catch up. This means that the tax currently avoided through these schemes is not necessarily the same as what would be recovered if they were closed – the participants may simply move their money elsewhere.

Given that 'Corbynomics' is, to a large part, dependent on this new stream of income. And if it isn't there the result is austerity - not the austerity of public sector budget cuts but the austerity of higher taxes, crippled private business and recession. A recession these people want to then escape by printing loads of money to throw at a problem they've created by lying about tax dodging and pretending that there's really a sustainable alternative to reformed welfare and a smaller public sector.




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A sugar tax won't make anyone thinner - just poor people poorer

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The other day a Conservative minister I'd never heard of told an audience that he supported a tax on sugar. George Freeman had this to say:

“I think that where there is a commercial product which confers costs on all of us as a society, as in sugar, and where we can clearly show that the use of that leads to huge pressures on social costs, then we could be looking at recouping some of that through taxation.

“Companies should know that if you insist on selling those products, we will tax them.”

Now there are some profoundly unconservative things in this statement - the idea that me getting fat "confers costs on all of us in society" is pretty dodgy from the Party of the individual and individual rights not to mention the idea of 'social costs'. However, my concern is that, even if you accept the validity of taxing things that are bad for society, a tax on sugar is going for the wrong bogeyman.

The first thing of course is to observe that the obesity crisis (or epidemic, if you prefer a different scaremongering line) is not a consequence of our sugar consumption. Not even a little bit. I know this because, while we've been getting fatter, our sugar consumption has been falling. And not just the consumption of the evil white stuff but 'non-milk extrinsic sugars' - that's all the sugar added to food plus honey. Even more importantly - in the UK, at least - our average total calorie intake has also fallen.

UK calorie intake. Source National Diet & Nutrition Survey

You'll notice that the amount of everything consumed (except female consumption of alcohol) has dropped in the ten years from 2000/01. So we can say with a considerable degree of confidence that any increase in obesity over that period is not down to what we eat and absolutely that it isn't down to sugar. The only health condition that is directly linked to sugar is dental caries - and we know that good oral hygiene (brushing your teeth regularly, using a mouthwash and so forth) eliminates most of that risk. Taxing everyone because some people don't look after their teeth strikes me as a largely futile exercise and deeply unconservative.

The next thing is to ask whether a sugar tax (and I can only assume that this means a tax on 'non-milk extrinsic sugars' rather than just sucrose) will be sufficient to change behaviour so suddenly pounds are shed from our waists and the obesity 'crisis' is solved. Certainly the evidence from other taxes is mixed - to work the tax has to be sufficiently high to actually make a difference to behaviour and, as the Danes discovered, won't work if it's easily avoidable.

So let's assume that George Freeman gets his ignorant way and a sugar tax is imposed. The impact will be to increase the price of products containing sugars - I'm guessing no distinction will be made between sugars naturally present in the product (like the fructose on your orange juice) and sugars added to the product (like the honey in those sugar puffs). If you wander round your supermarket idly reading product descriptions, you'll find that sugars crop up - in one form or another - is many processed foods. So the impact of a sugar tax will be to increase the price of a whole host of products - from the obvious chocolate, honey and jam through to pizza, ketchup and meat pies.

Now it might be that the impact will be for manufacturers to reduce the amount of sugar but that might present some challenges - the sugar's not there by accident. So what happens is that the tax (as taxes usually are) gets lumped on the price and is paid by us consumers as our purchases ping across the checkout scanner. And, assuming that the sugar tax is low, all this will mean is that everyone carries on much as before - buying the stuff they want and getting fatter or thinner depending on how much we stuff in our mouths. Except, that is, for the poorest folk who will discover that the £1.39 pizza is now a £1.49 pizza making it just a little harder to feed the family.

Unless you set the sugar tax at a rate that really changes behaviour - read this as poor people not being able to afford food - the result will be negligible. A sugar tax really won't make anyone thinner. It will just make the poor a little bit poorer.
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So cut the basic rate of income tax?

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Tax cuts stimulate employment best when they benefit the lowest paid most. Or rather as is pointed out here, the bottom 90% of taxpayers. So while I absolutely support taking the poorest out of tax altogether - indeed I would support an ambition that no-one below median income should pay income tax - a basic rate cut would be a real boost for growth and jobs;

Variation in the income distribution across U.S. states and federal tax changes generate variation in regional tax shocks that I exploit to test for heterogeneous effects. I find that the positive relationship between tax cuts and employment growth is largely driven by tax cuts for lower-income groups and that the effect of tax cuts for the top 10% on employment growth is small.

But then we knew tax cuts were a good thing didn't we?

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Morals, ethics and the matter of paying taxes

As is the case with much of our national political discourse, the recent tit-for-tat over taxation is more notable for its sound and fury than for due consideration of the principles and issues being discussed. However, at the heart of all this is a very confused debate about the morality, ethics and practicality of paying and collecting taxes. A confused debate because these three things - morals, ethics and practical administration - are all muddled up in people's minds.

Part of the muddle is deliberate. Some on the left want to make the paying (or not paying) of taxes into a moral issue - indeed something of a moral crusade. In Bradford, we recently joined lots of other local councils by signing up to something called "Towns Against Tax-dodging" - a futile piece of political posturing but one that warms the cockles of some Labour councillors' hearts. Collectively we were 'sticking it to the man', sternly disapproving of those nameless, faceless plutocrats running tax-dodging businesses and pointing out that if they all paid loads more tax then we'd have no austerity. Or something like that.

And these moral crusaders have a point. Not one I agree with but a point nonetheless - these righteous folk believe that taxation is a moral issue. Such people believe collecting taxes isn't simply a practical thing, the means by which government gets the cash to do the things government does. For the true progressive believer tax is the means by which the wrongs of inequality are righted and the sins of capitalism mitigated or removed.

So when these bushy-tailed campaigners come across people who take a different view of tax from them, seeing it as, at best, a necessary evil, their instinct is to point and shout about their moral position. How dare such people - especially the ones with plenty of money - how dare they try to avoid paying taxes. Do they not realise how immoral such acts are, how they deny governments the cash to right wrongs and mitigate the corrupt world of those rich folk.

The problem is that this debate about morality is contested. Some people - quite a lot of people in truth - take a different (and equally valid) moral stance in believing that high rates of taxation, whoever they are levied on, are essentially immoral and that governments have a moral duty to keep levels of tax to a minimum. I know that the true progressives don't get this - or recognise it as a legitimate moral stance - but it is central to why the framing of our debate about taxation is misleading and unhelpful.

The place for resolving this debate about the morality of taxation, the role of taxation in society and the need (or not) for redistribution is in parliaments. Our political process exists precisely to resolve such disputes. And, given the nature of the system, we can expect the emphasis in taxation to swing backwards and forwards between tax as a tool for social betterment and tax as primarily a means to secure government revenues. None of this is about the specific behaviour of individuals engaging with the tax system.

Such individual behaviour is a matter of ethics rather than morals. And ethics tells us that our responsibility is to comply with the rules - essentially the morals - of the system. We make a distinction between the matter of keeping what we pay in tax to a minimum (avoidance) and not paying taxes we should have paid (evasion). In simple terms it is perfectly ethical to do the former and unethical (not to mention illegal) to do the latter.

The problem comes in the fairly extensive grey area between avoidance and evasion - what some now refer to as 'aggressive avoidance'. It's one thing, we might say, to make appropriate arrangements so as not to pay tax we don't have to pay. In my self-employed days I fully expected that the money I paid my accountant to complete my tax return would be more than covered by the money he was able to save me on my tax bill. But somehow this isn't quite in the same box as joining some complicated scheme so as to reduce tax - knowing full well that the only purpose of the scheme is to reduce that tax.

Such practices might be frowned upon - those true progressives who feel paying taxes is a matter of morality will be most frowny here - but, in strict terms, they are not unethical. Yet we have leapt on those using such schemes as if they were great sinners rather than people who, for whatever reason (probably the fine one of self-interest) choose to take a different moral stance on paying taxes. Some may not like - may even feel cheated in some way - by the schemes but the problem is the framing of tax rules not the ethics of the person legally reducing his tax liability. So the criticism should rest with the government or governments responsible for the rules of the tax game not those who make creative use of flaws in those rules (and the more rules there are the more holes and the more flaws).

There are two ways to deal with this problem. The first is to reduce the level of taxation - not just because it is morally right to do this but for the practical reason that lower taxes will mean less incentive to avoid paying those taxes. The second is to make tax rules less complicated, to cut out the reliefs, differential rates and other well meant (but exploited) elements of the tax code - with a simple uncomplicated tax the opportunity for avoidance is reduced.

In  the end we need to be rather more relaxed about the problem. Rather than point fingers at all the bad people who selfishly want to keep more of the money they're earned for their own uses, what we should be doing is trying to work out how to match those folks selfishness with our interests. That way everybody wins. For sure there's a moral debate about tax but, in truth, it's a pretty practical business that should be determined by the reality of Colbert's observation that “the art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.”

Right now there's a lot of hissing which suggests we might have got the balance wrong.

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In which Zoe Williams (inadvertently) makes the case for voluntarism...

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OK perhaps that wasn't uber-statist Zoe's intention but her (or maybe The Guardian sub's) opening statement in a piece about tax is spot on:

Good policy can’t be devised on the basis that reasonable people must be coerced or conned into paying for our services

Sadly Zoe then goes on to gibber about how big companies don't pay enough tax and how she doesn't mind taxes just  "...the people who raise it, the people who spend it, and the way it is discussed". We get the usual Guardian caricature of the Tory (in the currently favoured figure of George Osborne) and a slightly ill-informed canter through some late 20th century political history.

But the statement is still there. If we are to have a system where some things are done collectively then there needs to be a system for people to share the cost of those things. Indeed Zoe describes the problem precisely:

It is impossible to devise good tax policy on the basis that reasonable people don’t want to pay it and have to be either coerced or conned into doing so. Deduction at source turns into the mug’s option while tax avoidance becomes the natural course of the prudent person. It is often said that HMRC doesn’t have the staffing levels to deal with avoidance as it currently stands, and that’s true – but actually the resources don’t exist in the world to police an activity that nobody believes is wrong in the first place.

So the question here is left hanging about like some bloke on the corner trying to look nonchalant because his date's 20 minutes late. So let's ask it a different way - can we have a system where people are happy to pay taxes? Zoe tries to make a moral argument - tax is an 'investment'. Now this is not only utter nonsense but fails to make the point, which is that tax is a payment for services recieved. And we coerce (i.e. make it illegal on pain of imprisonment not to pay the tax) because of the free rider problem.

Indeed it is that free rider problem - people getting the goods or services without paying - that is the biggest hurdle for voluntarism, for the idea that we can have collective action and the collective provision of public goods without the superstructure of the state. The answer, of course, lies in either preventing the non-payer from using said public goods (something that proved impossible when public goods were built with private finance by private investors) or else by making the charge low enough and the benefit great enough for it not to be worth nearly everyone's while avoiding the cost.

The problem with our current system is that many taxpayers look at how the money (or some of the money) gets spent and don't like it. This is the same whether the anger is directed at the government buying Trident nuclear missiles or at this:

The state will then proceed to piss this money – that I have earned – up the wall on various fake charities, foreign aid, quangos and an over-bloated third sector. These parasites will use this money to lobby the government to restrict further my liberties to live my life as I see fit  and campaign for the state to steal even more of my money.

We know that most people, regardless of political position, find the tax system unfair or excessive. And we know that European high-tax societies have a problem with tax dodging. Not just by high profile multinational corporations but by millions of ordinary workers:

 ...the latest estimates showed about 30 million people in the EU performed work that was not declared for tax. "Around half of all construction workers in Germany undertake shadow work; and over 80% of all Danes find shadow work acceptable – at least in some circumstances."

Somewhere between a tenth and a fifth of the British economy is outside the tax system either because it is illegal (prostitution, drugs, smuggling and so forth) or because people prefer to be paid in cash. The assumption that Zoe and her sort make is that simpler and lower taxes wouldn't generate enough to sustain the system so therefore we should all grow to love tax.

The things that the Guardian reader thinks important - pensions, a welfare syste, high quality healthcare for everyone and a sense of social justice - are not things that need to be provided by a central state through the imposition of coercive taxation. Indeed all such systems do is create a different sort of free rider - millions of people who receive more in benefits from the state than they pay in taxes to that state.

Voluntary collective action, for all its problems with governance and with free riders, doesn't receive the attention is receives. Prior to the creation of national state systems of health, welfare and education such voluntarism did provide such services to nearly everyone, it's a myth that there was no health provision for the poor prior to the NHS, no elementary schooling prior to the Forster Act, or no provision for welfare prior to Lloyd George's Old Age Pensions Act. These things existed and provided for nearly everyone.

I'm not sure you could run an entire nation on the basis of such voluntarism but I do think that such institutions - friendly societies, mutual finance, worker and customer co-ops and the like - are diminished by government and that private investment will (as the turnpikes and railways show) be forthcoming even where the return on capital is compromised by the free rider problem. If there is a business benefit to building a railway from London to Birmingham, businesses will finance it even where the return takes the form of a positive externality rather than cash dividends.

So here's to Zoe Williams for inadvertently making the case for replacing much of what government does with voluntary, collective and collaborative action funded by the willing and benefiting everyone.

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We already have a 'progressive consumption tax'...

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Bill Gates has responded to the Thomas Piketty wealth tax proposal by moaning that it's not fair. By which he means not fair on entrepreneurs and the like who invest their money in the betterment of the business or society:

Bill Gates frames his argument like this — if you have three wealthy people, one spending money on new businesses, one spending money on charity, and one spending money on luxury items for him or herself, the last one should be taxed more because the first two are contributing more to society.

Now I may be wrong here but Bill's idea already applies (at least in the UK where we have a value-added tax). And, even though there are fewer consumption taxes in the USA, that country gives generous tax breaks for charitable giving and exemptions for capital investment in new or existing businesses.

So, whatever we think of Piketty's policy solution (and I think it mad, bad and dangerous to know), it does have the merit of being an attempt to resolve what that economist sees as an essential challenge to our society and economy. Bill Gates proposal is one that favours 'charity' over consumption and investment over spending. And, this might be fine for very rich folk like Bill but for the rest of us it's a proposal for a tax on the pleasures of life.

So once more let's remind ourselves that we don't live to hoard resources, to invest in business or to have 'charitable' consumption put on a special pedestal. We live to consume.

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Labour - the real nasty party...

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There is no strategy here beyond envy, hatred and some sort of desire for a warped punishment of the "rich":

"In Stalybridge I haven’t seen a house advertised at over £500,000 and we’ve got really nice mansions. There are six, seven, eight-bedroom houses there, and you can buy them…for about £400,000.

“In the North there are people who could be paying more and aren’t.

“I’d also like to look at inheritance tax. Why be scared of it, they’re dead.”

This is the authentic voice of the real nasty party, a party filled with snippy chip-wearers who see other enjoying a modest success and can think only of taxing them, of taking that money away.

This sad belief - that one person being rich is wrong when another is poor - acts only to sustain and reinforce the causes of poverty. It is a reminder that the Labour Party sees tax as a punishment for success not as a means to raise the money government needs to deliver the services we have asked it to deliver.

God forbid these horrible people ever get near government again.

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They've found a way to tax breathing!

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It could only be the ghastly dysfunctional socialist utopia of Venezuela:

We're used to a seemingly endless range of taxes and surcharges when we fly - passenger taxes, departure taxes, fuel levies. But Maiquetia International Airport in Caracas has taken this a step further - passengers flying out now have to pay 127 bolivars tax (£12; $20) for the air they breathe.

It seems the airport installed a new system to 'purify' the air-conditioning unit - the tax is to pay for it. Or so they say except, as one radio presenter observed:

 "Could you explain to me the ozone thing in Maiquetia? The toilets don't have water, the air-con is broken, there are stray dogs inside the airport, but there's ozone?"

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Quote of the day - on M. Piketty's book

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Ouch!

"If one follows Piketty in assuming a normal return on capital of 4 percent for the 21st century, a 10 percent tax on wealth is equivalent to a 250 percent tax on the resulting capital income. Combined with the 80 percent income tax, taxpayers would face effective marginal tax rates of up to 330 percent."

How to screw the world's economy up in one fell swoop! But then we knew that as M. Piketty is an 'advisor' to President Hollande - the man in charge of the train crash that is France's economy.

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Extortion, theft and fairness - the idea of taxation

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"Abracadabra, thus we learn the more you create, the less you earn. The less you earn, the more you're given,

the less you lead, the more you're driven,

the more destroyed, the more they feed,

the more you pay, the more they need,

the more you earn, the less you keep,

And now I lay me down to sleep.

I pray the Lord my soul to take,

if the tax-collector hasn't got it before I wake."

There is no moral basis for taxation. It is, as the dictionary says:

...that part of the revenues of a state which is obtained by the compulsory dues and charges upon its subjects

This is an imposition that many argue is straightforwardly theft. Here is Rothbard:

For there is one crucially important power inherent in the nature of the State apparatus. All other persons and groups in society (except for acknowledged and sporadic criminals such as thieves and bank robbers) obtain their income voluntarily: either by selling goods and services to the consuming public, or by voluntary gift (e.g., membership in a club or association, bequest, or inheritance). Only the State obtains its revenue by coercion, by threatening dire penalties should the income not be forthcoming. That coercion is known as “taxation,” although in less regularized epochs it was often known as “tribute.” Taxation is theft, purely and simply even though it is theft on a grand and colossal scale which no acknowledged criminals could hope to match. It is a compulsory seizure of the property of the State’s inhabitants, or subjects.

Now it is also the case that the state, having extracted its income from us through compulsion, then spends that money for the betterment of society. Even the robber barons perched in their Rhineland castles didn't extract money with menaces from river traffic solely for personal gain. They provided services in their demesne (most importantly security and protection from other robbers).

In our modern democracy we even have the ability, through the ballot, to decide just how much we will take in taxation - we act, some would say, as if we are a club where the rules (including those about tax) are set through the political process. In this context the existence of taxation is axiomatic - the debate isn't whether we should have tax but the scale, nature and system of that taxation. We do not ask often enough whether taxation is necessary, appropriate or right.

The main argument justifying tax is based on how the tax is used not on the fact of the tax:

Unlike protection rackets taxation gives us something in return, namely public goods which benefit all citizens. Studies have shown that it is unlikely for people to organize to provide public goods by themselves (see the free rider problem), and thus it is in everyone’s best interests for the government to provide these goods and to support them with mandatory taxation.

The problem here is that this argument takes us no nearer a philosophical justification for taxation. A further concept - the 'free rider' - is introduced but that fact seems to be something of a red herring. After all, unless your tax system is a simple poll tax, there are plenty of free riders - taxing people does not, in and of itself, eliminate this problem.

Nor can we use the idea of 'public goods' to justify taxation - this is the 'roads, who will build the roads' argument that we know is false. The roads - the precursors of the freeways and motorways of today - were built with private finance on a voluntary basis despite that 'free rider' problem. Nor can we make this argument for health, housing, welfare or indeed most of the things provided through taxation by the modern state. All of these things can (and have been in history or are somewhere in the world today) be provided on a private, voluntary basis.

It seems to me that the crucial issue - if you reject Rothbard's simple 'tax is theft' argument - isn't some sort of theological discussion of how progressive tax is or isn't but the degree of consent to taxation. And there are two ways to assess this - firstly to look at the extent to which people avoid or evade taxes and secondly to consider whether people consider themselves to be overtaxed. A further question might be the extent to which taxation undermines the taxpayers ability to make personal choices - are we taking too much to fund 'collective' decision-making leaving to little to fund 'market' decision-making.

There is a lively debate about the extent to which taxes are avoided - we've read the attacks on businesses like Vodaphone and Amazon around their tax affairs and we've witnessed ministers and shadow ministers outbidding eachother to have a go a 'tax-dodgers'. And stories like this are legion:

The inability of HM Revenue and Customs (HMRC) to properly curb aggressive tax avoidance schemes is costing the UK billions of pounds, a report suggests. The National Audit Office said HMRC was dealing with a backlog of 41,000 cases involving individuals and small companies, with up to £10.2bn at stake. 

Add to this attacks on paying traders in cash, the rise in duty avoidance ('smuggling' and illegal production) for alcohol, cigarettes and other products, and the tightening of rules around gifts, trusts and charities. We have a situation where the proportion of society operating outside the tax system (wholly or partly) has risen:

...the latest estimates showed about 30 million people in the EU performed work that was not declared for tax. "Around half of all construction workers in Germany undertake shadow work; and over 80% of all Danes find shadow work acceptable – at least in some circumstances."

In the UK at least 13% of the economy is outside the tax system - this is some £308bn. We have to add legitimate avoidance of tax by business and individuals into this equation. All of which suggests that the degree of consent to be taxed must be questioned.

YouGov asked last year about the 'fairness' of the tax system:

Thinking about all the ways in which people pay taxation – such as income tax, VAT, Council Tax, excise duties – how fair do you think the system is for taxing people in [country] these days?

The result show that two-thirds of people saw the system as 'unfair' and this is regardless of whether respondents positioned themselves as 'left', 'centre' or 'right' politically. Again this suggests that the principle - taxation by consent - is creaking a little. However, other YouGov research suggests that - for all that we see the system as unfair - the most 'popular' choice is not to change taxes. However, a fifth of the population want to see a reduction - tax cuts with spending cuts - in the size of government.

None of this answers our question although it does suggest that a significant part of the population do not 'consent' to the current level of tax. And this part - whether through behaviour (avoiding or evading taxes) or through opinon - represents the challenge to those who see delivery via the state as the only option.

Finally there is the extent to which the individual is able to make personal choices post-tax. It it a statement of the obvious to say that high taxes - wherever and however they are levied - will reduce the amount of money available for consumers to spend in the market. And that if taxation reaches the point where this reduction is disempowering to the consumer then we can only describe this taxation as 'extortionate' - for want of a better word, as an act of theft.

The problem is where this point of consumer loss sits. For Rothbard it was simple - any taxation reduces the ability of the consumer to make choices. But we have rejected this argument because of the 'equity' obtained from the collective provision of some services (security, health, education). It is true that these things could be provided voluntarily and privately but also true that the guarantee of the state is positive in providing these services.

We also know - although in the UK this is generally not the case - that funding through taxation does not prevent the use of choice within a market as the means of distributing a public service. What using taxation does is make these services -typically health and education - available universally regardless of the means available to the consumer.

If, however, taxation to provide health, education and security results in some individuals being unable to sustain themselves without external assistance, then that taxation certainly conforms to our idea of 'extortionate' - the act of taxation is an act of theft, even if we subsequently give back some money in the form of benefits allowing the consumer to sustain himself.

But what if the result of taxation is to prevent someone having the means to pay a mortgage, have a holiday, buy a car or have a meal out every now and then? Is this level of taxation justified? Are we disempowering these consumers by making it difficult for them, even impossible, to have commonplace things (cars, holidays, a night out)? Stopping people - through taxation - from having things that most of us consider aspects of a regular life indicates, again, that the level of taxation for such individuals is 'extortionate' - an act of theft.

The UK is such a society - we tax the income of people on low wages meaning that for many (probably millions) things we consider normal are precluded and for some that sustaining a basic life is only possible through welfare support. The UK is also a place where millions of people avoid paying taxes, mostly in little ways, and where the majority believe the tax system to be unfair.

The solution does not lie in taxing wealth (although we have pretty significant proxies for such taxation in the form of business rates and council tax) not does it lie in getting companies or the rich to pay taxes. It lies in recognising that taxation lacks any moral basis - it is simply a matter of finding an equitable and effective way to deliver a set of services (security, health, education).

It seems to me that two things are needed:

1. The end to taxing people below the point at which we provide benefits or subsidy
2. Where we can create 'markets' or choice-based systems within public services, we should do so

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The BBC is completely out of control...

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Yesterday I noted that the BBC had sent 140 people - at the cost of over £1m - to South Africa following the death of Nelson Mandela.

Today a couple more examples of our state broadcaster's egregious waste of tax money:

The BBC is spending up to £500,000 on a major refit of its £1 billion new headquarters because staff have complained their state-of-the art surroundings ‘lack character’.

The high-spec London HQ was only opened in June – four years behind schedule and £55 million over budget.

But the Corporation has already decided to revamp two floors of New Broadcasting House to make them ‘more creative and vibrant’ – following a string of gripes from staff.

And...

The corporation said it had no choice but to have two studios, which are expected to cost it close to £500,000 in building costs and rent...

That's right the BBC is not only lavishing money on the sports coverage of next summer's World Cup finals in Brazil but is planning on sending a whole news team over to Brazil as well. And building them a studio (apparently because of some nonsense about 'broadcasting rights') - in Rio where England aren't even playing!

Accountable? Not in the slightest.

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