“…Perhaps I can find new ways to motivate them.” - the force of the tax incentive

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The force is with us.

That is the force of tax incentives it seems:

Chancellor George Osborne met executives from Disney-owned Lucasfilm in London earlier this year to discuss the plans and the production is thought to be eligible for a tax break.

Now let's think a little more about what this means. Yes, folks, you've got it - reducing taxes on businesses increases business investment. So why is it does in this favour-mongering, no longer smoke-filled rooms inhabiting manner? Perhaps it's so the Chancellor of the Exchequer can tweet gleefully of his success or maybe it's just a consequence of the lunacy of over-taxing businesses.

It seems to be that the nation is privileging one sort of investment - making blockbuster feature films - over the totality of business choice and investment option. Are we to offer tax incentives to a company that wants to do something more prosaic, perhaps building a recycling plant or setting up a cleaning company?

I am delighted that the jobs and money from this production are to come to the UK. But let's learn the lesson - cutting business taxes helps investment and job creation - if it's good for Disney it's also good for some South Korean company you've never heard of or indeed for the wholly homegrown business. So cutting those taxes makes sense (and will make it a whole lot less likely that businesses will engage is complicated schemes to reduce liability - but that's another story) and it supported by evidence:

...we find that a higher provincial statutory corporate income tax rate is associated with lower private investment and slower economic growth. Our empirical estimates suggest that a 1 percentage point cut in the corporate tax rate is related to a 0.1–0.2 percentage point increase in the annual growth rate.

So George, rather than doing behind doors deals with favoured businesses, just cut corporation tax some more - perhaps, as some argue, to as low as 10%:

At the same time, he could also announce his intention to reduce it even further – to 15% or even 10% once the appropriate anti-avoidance measures are in place. Such a move would have numerous benefits. For one, it would boost business confidence, encourage new investment by businesses (as it would improve net returns) and would send a strong signal that the Coalition is taking the supply-side measures necessary to restore growth. It would also immediately fulfil the Coalition pledge to “create the most competitive corporate tax regime in the G20”.

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Time for tax cuts...

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...and not just because the stimulus they'll bring will help economic growth but because they are popular. Yes folks the age of people meekly telling pollsters they'll happily pay more tax "for the NHS" or some such weakness are over:

One in three British adults think taxes should be cut and the amount of funding for social housing reduced, according to a survey by a left-leaning think tank.

A survey of 2,000 people carried out by Yougov for the Labour-affiliated Fabian Society think tank shows 32 per cent of people agree that ‘tax rates should fall to pay for less provision’ of public housing.

A total of 35 per cent said the current balance is about right with just 16 per cent saying tax rates should rise to pay for more social housing services.

The survey showed that 72 per cent of people think social housing should be means-tested or partly paid for by the taxpayer. Nine per cent said there should be no state funding for social housing at all.

The findings also showed that two in three people think funding for programmes to help people out of work is too high or about right.

A total of 27 per cent think taxes should be cut to pay for less help for the unemployed, with 40 per cent saying the balance is about right.

Just 16 per cent said there should be higher taxes to fund more services to help people out of work.

The whining mithering left-wing commentariat are wrong - both about the economics and also the politics. And it's the welfare budget that ordinary folk have their eyes set on - the idea that we can give people just enough money that, despite a pretty depressing life, they have an active disincentive to risk that position.

So, rather than pouring endless cash into the bottomless pit of bank balance sheets, or squandering billions of 'grand projects', let's cut taxes for ordinary people. Raise the tax threshold to the minimum wage, cut the basic rate of tax to 15% and lower the top rate to 40%. We might have to lose a few civil servants (perhaps ministers would like to start with their own offices - all those 'special advisors' are an utter waste of cash) and close down some much loved programmes. But the population will have cash in its pockets, cash to spend on food, on home improvements, on clothes - on the things like holidays they can't afford at the moment.

And wouldn't that help just a little? And wouldn't it put a little deep blue water between the Conservatives and that subsidiary of public sector trade unionism, the Labour Party?

Go on George, you know you want to!

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The only bit of the economy that's growing is...

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...government.

As I observed yesterday in a point about jobs, these cuts, this austerity - at least as far as the public sector is concerned - seem pretty illusory:

Well, strictly, “government and other services”, so it includes defence, the National Health Service and so on, but also private education and private healthcare. That sector of the economy has expanded by more than 5 per cent since 2008; health and social care has expanded particularly strongly.

The only austerity measures have been tax rises - higher taxes on buying stuff, the closing of so-called loopholes and an avalanche of increases in duty on things like booze, fags and petrol.

The public sector - and all us politicians hovering round its honey pot - isn't where the austerity is biting. We're OK - it's the bloke who hasn't had a pay rise in five years and can't afford his pension any more, the pensioner on a fixed income while inflation rockets and the mum juggling a part-time job with a couple of children, who are being bitten.

And - however much it may pain the big unions, the Labour party, the panjandrums of civil service and the state employees at the BBC - the answer is still just what is was back in 2008, and 2009, and 2010, and 2011...

...cut taxes on incomes, reduce the tax on jobs that is employers national insurance and stop treating businesses as if they are the spawn of Satan rather than the only hope for us seeing out the recession.

Get on with it...

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