Are the motives for taxation to blame for poverty?

Government needs revenue to do the things that governments do. And, without getting into the slightly loopy world of magic money tree beliefs, the only source for that money is the taxpayer. This, not the stuff about austerity or ridiculous arguments about 'punishing the poor', is why lower taxes are desirable. Only a relative few anarchistic folk actually believe that there shouldn't be any tax (or government for that matter) and this means we have to put up with politicians making decisions about who to tax and how much to tax them.

It's also true that in the UK's modern liberal democracy part of that taxation is intended to relieve poverty. And this is right and proper - the criticism of the very bad report by some law professor from New York wasn't that there's no poverty but rather that the chap seemed to think poverty was deliberately created by an evil government (I paraphrase his risible 20-odd page report). The report also ignored the self-evident fact that the reasons for poverty are not entirely external economic, fiscal or environmental forces acting on individuals. Simply using taxation for redistribution does not resolve the problem - P J O'Rourke, in 'All the Trouble in the World' pointed out that, when you add up the poverty (the gap between what people have and what we think they should have) and subtract from it the money spent by government on relieving that poverty, there is no poverty in the USA.

The same goes for the UK - we spend over £100 billion every year on projects and programmes intended to alleviate poverty and for some reason this has failed to get rid of that poverty. It could be that £100 billion isn't enough (I doubt this) but it is more likely that, as with a great deal of what government does, that money is badly spent - we give money to people who don't need it (wealthy pensioners, for example) and take money away from those who probably do (homeless young men maybe). We behave like the operators of Victorian workhouses towards some groups (those unemployed young men again) punishing them for minor mistakes, disorganisation and oversight whilst we lavish money without question on others (middle class mums perhaps).

It seems to me that the problem here isn't simply that government is bad at spending money efficiently (it probably is) but more that the motive of the people levying the taxes and managing the handouts is about punishing wrong behaviour or choices not the effective collection of the cash needed to provide the services and support people require. It's like this:

The avowed point of the taxes, according to Macron, is not just to subsidize environmental programs, but to force people to "change habits" by making fossil fuels more expensive.

Now you might be nodding and saying "absolutely, climate change y'know" but the reality is that this is the same mindset as that which asks the benefit system to withdraw cash from some 30 year old recovering drug addict who forgets an appointment. It's a short journey from nudge to freezing in a tatty sleeping bag in a Manchester shop doorway. Government really does believe that its purpose is to shape us into better people - thinner, less drunk, without nicotine-stained fingers, quietly employed. In the civil servant's (and too many politician's) mind we should be Mr Potter's 'thrifty working class' living in homes kindly rented from grand organisations, municipalities and supposed charities. Look at the great and good of local government as they get all excited at the prospect of building more council houses to cram the poor into - a new generation dependent on the state for the roof over their head. It may be better than Potterville's slums but it's not inclusive, optimistic or aspirational.

It makes me angry that conservatives don't say this, choosing instead to treat most of the poor as Mr Doolittle - the undeserving poor to be controlled or managed rather than people who, given better incentives, will stop being 'undeserving' and become the sort of aspirational citizens government keeps telling us they want ! The motives for taxation - changing bad habits as often as raising revenue - are the problem and government needs to focus its efforts on actual social outcomes rather than on vain attempts to create the perfect man through fiat, order and direction.

Poverty is a scourge but, given the money we (supposedly) put towards its relief, it should not persist. That it continues isn't a failure of capitalism or the market, it is entirely the failure of government - bad policy, misplaced priority and the inevitable buying of votes by promising free stuff to people - wealthy pensioners, middle class mums, public school kids heading to university - who really don't need it. The sad truth is there's no votes in eliminating poverty, no incentive to get rid (what would the growing poverty industry of think tanks, 'campaigning' charities and consultants do?) of its curse, and every incentive to carry on blaming the poor for being poor rather than government for putting its efforts into looking like it cares rather than seeing less poverty as a measurable, achievable outcome from over £100 billion in public spending.

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The case for Devo (Akron, Ohio version) - can we get satisfaction?

Aaron Renn headlines his commentary "Their Problems are not Your Problems" by which he means that basing our economic policies on the needs of superstar cities (New York, London, San Francisco and so on) rather ignores what's going on elsewhere. Renn cites an article by David Zipper:

If you live in a place like San Francisco or New York where urban tech startups (and, ahem, national media) are concentrated, these conflicts seem to be reshaping cities throughout the country. But if you dig a little deeper, it’s clear that’s hardly the case. With fewer than twenty new homes built in a city of 200,000 last year, Akron recently abated property taxes for new housing as a way to prop up the construction market. Many of Akron’s leaders would love to have the problem of excessive housing demand that Airbnb has allegedly created.

There are probably more places more like Akron than like San Francisco yet our discussion about public policy is still dominated by the problems of the latter (housing costs, transport investment, disruption and the gig economy, etc.) except for vague references to other places being 'left behind' with their people being unsuited to the shiny and exciting new economy being forged in the Superstar Cities. And when (as Trump did by unpicking some of the energy greenery policies promoted by his predecessor) policies do lean towards a place like Akron, they are attacked by politicians based in those superstar cities.

Right now in the UK we're in the throes of another somewhat occult but rather important debate linked to our planning system. The national government is consulting on a standardised methodology for the 'objective assessment of (housing) need' or OAN. For the layman this is the way in which the planners (backed up by lucrative consultancies selling macroeconomic models) decide on the number of houses that need building in a given 'local planning authority' or LPA. The reason for this new system is pretty straightforward - without a great big stick lots of those LPAs won't be allocating anything close to the amounts of land needed to meet housing need in their area. We're solving a problem for San Francisco (or London) rather than a problem for Akron (or Burnley if you'd rather).

The case for devolution - appropriate because the splendid 1970s semi-punk band, Devo came from Akron - is very clear when you realise the extent to which near every policy in England is determined by the needs of London and a few other over-heating places. It's not just the obvious stuff about housing and transport but also things like health systems, benefits and policing that get policies designed for London, Cambridge and Brighton rather than Bradford, Oldham and Stoke. Despite this case, the English programme of devolution is ridiculous consisting as it does of 'coalitions of the willing' competing through 'asks' for the few crumbs of power central government is prepared to give up.

I guess this brings us to the real deal in devolution - taxes, benefits and regulation. There's a debate in the UK about returning business rates to local councils (note this is the cash not the ability to set the rate) but no-one has raised the question as to whether local councils should get other taxes devolved - stamp duty, for example - or whether things such as planning and licensing policies should be locally determined rather than constrained within a tightly drawn national framework. Akron could zero property taxes to incentivise development but such an option isn't available to Burnley. In the 1960s, Singapore could use corporation taxes and investment exemptions as a way to attract business investment - Leeds and Manchester can't. We talk about the 'Celtic Tiger' but fail to notice that it was low taxes and business-friendly regulation that made those big tech companies head to Ireland (the EU noticed as they're busy trying to clobber the Emerald Isle for having the audacity to be creative in order to develop its economy). None of these policies are available to the North of England (even the bits with Heseltine's mayors) - we don't even get to decide which roads get improved first, we just get a promise of a meeting with the national agency responsible. Same goes for flood defences, for health services and for education investment.

For the North of England - or for it's constituent regions - the case for devo rests with the fact that, without real devolved powers, policy will always be determined by the demands of England's superstar city, London. And, right now, the devo deals on offer involve elected mayors with limited (now officially termed "soft") power and not much else. It may be that the Two Andys will transform Birmingham and Manchester by sheer force of personality but I suspect that real devolved power - even what Wales has got would do, we needn't go full Scots - would be a deal more effective as a way of transforming the economy and society of England's provinces.

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Do we obsess too much about land?

Let's start by agreeing with this statement (and I think the recent Housing White Paper starts to help):

Secrecy surrounds much of the country’s land ownership. It’s time for the Land Registry database to be completed and opened up to all

And then let's not disappear down the rabbit hole of believing that somehow everything in our economy is ultimately derived from land ownership or that what matters is acres not five pound notes. This is the mistake that Guy Shrubsole makes in this article:

“The ownership of land,” wrote the 19th-century radical economist Henry George, “is the great fundamental fact which ultimately determines the social, the political and … the moral condition of a people.”

Who owns land matters. Landowners get to choose how their land is used, and that has big implications for almost everything: where we build our homes, how we grow our food, how much space we set aside for nature. Owning land confers wealth, status and often political power.

Shrubsole goes on to talk about how many acres the Ministry of Defence owns and how much of the UK is grouse moor. The thing is that, as even Henry George knew, what matters is land value not acreage. Self-described 'radicals' have an unhelpful obsession with how much land folk own rather than how much that land is worth. This obsession harks back to a nineteenth century viewpoint that saw land as the sole source of value and the ultimate store of wealth.

Housing covers just 10% of the UK's land but represents by far the largest proportion of land value (I appreciate that part of Guy Shrubsole's mission is to answer the question 'what's all that land worth'):

The value of all the homes in the UK has reached a record £6.8tn, nearly one-and-a-half times the value of all the companies on the London Stock Exchange.

Since agricultural land values are typically about 1% of housing land values meaning that, for a back-of-the-envelope guesstimate, the rest of the UK's land outside cities is worth between £600bn and £1tn. And, discounting mortgage lending, owner-occupied property accounts for £4.4tn of that value (65% of £6.8tn). Back in the 1880s when Henry George was writing, land value probably was in the hands of a relative few men. Today this just isn't true - for all the 'Generation Rent' stuff (and this really only applies to London and the South East) we remain a property owning society.

The problem is that George and other 'radicals' were focused on rents and saw that much of the UK's national income came in the form of rents to that land meaning that taxing land value represented an effective and fair way to tax those rents. Not only does most of the UK's land value - all those owner-occupied properties - not generate any actual cash rent but most people's income comes from the less aristocratic process of trade. And there is precious little link between trade and land values.

Nor does land ownership have very much to do with the UK's (or rather London and the South-East's) problems with housing supply. I'm pretty confident that, were we to designate some land currently used for agriculture as housing land, there will be some happy smiling land-owners. Grubsole talks about the housebuilders sitting on land, something that may or may not be true, but fails to recognise that the amount of land actually allocated for housing in the UK is tiny (less than 1% of the UK's land area) and the housebuilders own only a small part of that housing land.

Our obsession with landed estates strikes me as an unhelpful hangover from a time when these estates really were where the UK's land wealth was held. Those estates are still pretty big and pretty valuable but they are pretty marginal to the UK's economy - the existence or not of moorland maintained for shooting may be a public policy issue but it isn't a matter of any real consequence for the economy or indeed for the majority of the population. And, for all its importance, agriculture is similarly insignificant as an economic sector.

Overwhelmingly the value added in our economy - our national income - does not come in the form of rents and is not dependent in any way on land values, however much you contort the concept. Yet people still look back wistfully to those nineteenth century 'radicals' as if people actually want "three acres and a cow"! Today, our obsession with land only continues because the systems we've created to govern the use of land make it that way. Our planning system creates that huge disparity between agricultural values and development values, local taxes are based (admittedly poorly) on land values, and because house prices are a staple of private conversation the experts in real estate become a mix of celebrities and exploiters of innocent punters.

But it's not the grand acres that this system is bothered with but rather the millions of little plots on which our homes sit. That's where the 11 million mortgages worth £1.1tn are found not on Lord and Lady McMuck's hundred thousand acres of Scottish moorland. Yet Guy Grubsole and the land obsessed fret more about the latter than the former. I agree that knowing who owns stuff would be useful but let's not allow this to distort our view of the UK's wealth simply to satisfy some sort of agrarian radical wet dream based on a world long gone.

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"We need safe spaces..." - how the NHS ducks the big questions

I can't remember the precise moment or why the subject came up but some point in 2016, in a meeting with NHS folk, something along these lines was said: "we need safe spaces to discuss the real challenges facing the health and care system". What they really meant was that some subjects are just to difficult to discuss other than in a carefully protected space - protected, that is, from the public. This answer is a reminder that our populist, planned health system is facing something of a crisis.

Before we go on to talk about the challenges we can't discuss in public we have first to talk about money. I had a Twitter exchange with someone recently where I asked what she meant by 'adequately resourced' in the context of the NHS. The answer, as these things often are, was something of a cop out but was at least better than the more usual response to such questions - a response typified by this piece of populist cant from Tim Farron:

Farron said voters had reached the stage of not believing the NHS’s problems could be solved through efficiency savings and might be willing to pay more if they were convinced it would go to the health service.

He said he did not want to pre-empt the conclusions of an independent panel formed by the Lib Dems, which will look at possible taxes to help the NHS.

In varying forms this is the default response to concerns about our health system - more taxes, more resources. The problem is that, for all that sticking a ring-fenced penny on income tax sounds good, it goes nowhere to making the NHS more sustainable. Bear in mind that, despite the claims of its founders, the NHS has required above inflation increases in funding throughout its existence meaning that it now spends approaching £120 billion out of those taxes.

In one respect our health system needs that extra cash - as Jonathan Portes pointed out recently the proportion of GDP spent on health has fallen and we do spend less per capita than other places (significantly so than the USA). But when you open the NHS up, every single element within the system will tell you that with a little extra cash they can solve this or that problem. Indeed most of those individual bits of healthcare systems - the non-clinical as well as clinical - will tell you that right now they are starved of cash meaning that people might die.

So maybe we do need more cash. But first we need to huddle in that safe space and discuss some more fundamental things about the NHS. By way of example, West Yorkshire has eight or nine general hospitals (I forget the precise number but it doesn't matter for this discussion). All of them are seen by their local community as "their" hospital and the popular expectation is that the general means they do everything that community needs. The question we need to ask in that safe space isn't how do we get more cash for those hospitals or what services do we cut to stop them overspending. No the questions are more fundamental - does West Yorkshire need all those hospitals, are they in the right places, do the facilities meet modern needs or public expectations?

We might ask, for example, why Leeds has two huge general hospitals with real access issues right bang in the city centre? Should we be finding a greenfield site somewhere more convenient and building a new large hospital? And do all those hospitals need to have high support accident units, heart care centres and cancer wards or would it be a better service to have specialised units?

I don't know the answer to these questions - or indeed to thousands of other questions about health and care provision - but I do know (because I've been given a privileged peep inside the system) that the NHS simply isn't discussing these issues at all. Mostly for fear of adverse public reaction but also because the planners within the health system are driven by issues of sustaining what's already there rather than by more fundamental questions about structure and organisation.

There's a further problem, one stemming from the very top of the NHS (indeed from the World Health Organisation), which is the belief that the drivers of rising costs are lifestyle factors especially smoking and obesity. Even when the health systems own statisticians point out that longevity is the problem, we still get strategies founded on the idea that being fat and liking a fag is the problem. This is where the proposals for limiting access to surgery come from (like this one from York) - they don't really address the problem, they're usually overturned and they make it look like the Clinical Commissioning Group (CCG) is doing something.

It seems to me that the NHS, for all the "Our NHS" and "Save the NHS" rhetoric, isn't really all that good. OK, I'll grant that it's better than a system such as that in the USA which manages to be both very expensive and to leave out great chunks of the population from effective care, but there are other approaches - Sweden, France, Holland, Singapore - that might offer some ideas about how we might improve our health outcomes. The UK has a very centralised system that is painted to look like a dispersed and localised system. As the recent round of reorganisation - called Sustainability and Transformation Plans in that jargonistic NHS way - has shown, the idea of local control or direction is anathema to the system's bureaucracy.

The Tim Farron solution - whack up a few taxes - sticks a slightly bigger plaster over the wound but doesn't address the fundamental problems (just as allowing councils to stick up council tax a bit more does solve the care crisis) in the health system. We have a health estate that was mostly designed by Victorians (to which we've added a lot of prefabs) and a structure that would do the Soviet Union proud - right down to the endlessly revisited five-year plans. Until we actually use that safe space we mentioned to discuss the real problems of the health system the NHS will carry on lurching from self-generated crisis to self-generated crisis. And worse, populist politicians like Tim Farron will go on waving the NHS's problems about as a cheap source of votes.

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Sucker Taxes - how we're fooled into believing a tax is good for us

Let's get one thing out of the way. The new impost on fizzy drinks isn't a public health measure it's a tax raising measure. Not a single pound from a single child will be shed because of this new tax. But HM Treasury will have £500m to splurge on a whole load of nannying interferences dubbed 'school sport'. There'll be - if there isn't one already - a new national agency, School Sport England, created to spend the money. It will have a well paid chief executive and some flash offices somewhere in either central London or a shiny regenerated city centre like Bristol, Brighton or Norwich. And it will have a chairman who used to be a (sort of) well known runner, swimmer or rower.

The 'sugar tax' as this measure has been dubbed (at least the Mexicans got their description right by calling theirs a soda tax) will join a load of other measures - from stamp duty through to insurance levies - that are, in as far as this applies to any tax, popular. Over the past couple of years, a coalition of public health agitators have banged on about sugar creating the belief in the public mind that, compared to other ingredients, 'sugar' (and especially that product of chthonic cunning, 'hidden sugar') is peculiarly bad for us. Add to this a campaign by Jamie Oliver of egregious misinformation and weapons-grade hypocrisy and the result is that the public will accept the imposition of a tax on sugar - or rather a specific tax on the special kind of bad sugar that only appears in cheap fizzy pop.

The wedge has been rammed into a crack - one created essentially by the lies of public health campaigners and self-serving celebrities like Jamie Oliver - in the food business. We can now expect an avalanche of further proposals - advertising bans, health warnings, taxes on confectionery, duties on table sugars, the banning of free sugar in cafes and coffee shops, and the further deappetising of school dinners to the point where they're little more than tasteless pap with half a flavourless apple on the side. In the same way that fast food takeaways, for no evidential reason, are being banned near schools, we will see planning controls extended to sweet shops, bakers, cake shops and ice cream vans.

And none of these measures, not a single one, will result in any child losing any weight. But they will result in a new industry funded by taxes on the bad things, and more opportunities to nanny the pleasure out of being a child. Once sugar in food has been taxed to the hilt and given that the illusory 'obesity crisis' will still be with us, public health campaigners and assorted nannies will move on to another ingredient. It might be fat. It might be grains. Maybe red meat. Sausages. Bacon. Cheese.

They'll churn out hundreds of poorly researched, badly referenced, scientifically inaccurate articles for the sort of journals that used to publish real science but now realise that propagating illusory health scares is a better business than science. Newspapers, magazines, TV shows and the new industry funded by the sugar tax will leap on this crappy pseudo-science to push for more taxes, bans, controls and limitations.And the taxman will rub his hands with ill-concealed glee as the public is suckered again into believing paying more taxes on everyday ingredients is good for their health - or rather good for the health of the children.

These are the sucker taxes of tomorrow - measure after measure sold to us as a public health benefit but, when stripped to essentials, nothing of the sort. Just taxes. Just new ways of extracting money from the public to squander on the deranged priorities of the Church of Public Health, its acolytes and useful idiots in the media or celebrity-land. This sugar tax is an object lesson in Colbert's law - we are the goose and we're letting the taxman pluck a load of feathers. Worse still we think this is good for us!

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There's a case for looking at how we tax housing but it's not the reason for the supply problem

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That housing is taxed differently and, for most housing, doesn't get clobbered with capital gains taxes does make housing a more attractive proposition. Perhaps reducing capital gains taxes to a sensible level and applying them to all capital sales might work?

But this conclusion is wrong:

The biggest distortion to the housing market is our tax system. This not only increases demand for housing as an asset but it also encourages owners to be less flexible about allowing developments which might affect their wealth. We suspect that this is the root cause of much of the supply problem which needs to be addressed if we are to deal with the longer-term housing challenges.

The first part might be true except that most of us buy houses because we want to use them and the capital gain is nice. The second part is rubbish. Owners are not in charge of the development process (other than by ganging together to stop development) plus there's precious little link between new development and house prices at the very local level - i.e. those 100 new homes round the corner won't affect the value of your house by much, if at all.

The reason for the supply problem is because we don't provide enough land for housing in places where people want to live. And this is entirely down to the planning system. Not the housing delivery and development management part of that system but the local plan bit - this allocates the land. We can fiddle around with the taxation of housing until the cows come home but the supply problem remains if we don't have enough land available to build houses.

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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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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 really is a joke....

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...a cruel joke on all those poor folk in council houses coughing up for the license fee (and filling up magistrates courts when they struggle to pay it):

The BBC sent 140 crew members to cover Nelson Mandela's memorial despite receiving more than 1,000 complaints over its 'excessive' coverage of his death. The number of staff dedicated to the iconic leader's death was far greater than its rivals, including ITV which reportedly despatched just nine staff to South Africa.

I'll grant it's a leading news story, I concede that it merits high profile coverage but this scale of indulgence - it has cost the BBC over £1m to cover just this one story - is an insult to all the people who fund the BBC.

Apparently this degree of coverage was justified because Mandela was:

 “the most significant statesman” of the last 100 years. 

Seriously - not Churchill who led Britain through the war, not Kennedy who started the space race, not Gandhi who help create the world's biggest democracy, not Thatcher and Reagan who with Gorbachev brought the 'Cold War' to an end, not Roosevelt who led America through depression and war, not Kohl who unified Germany, not any of these people.

I give up with the BBC. And so should the rest of us, it doesn't serve us, it just exploits our credulity and indulges its own bias. At an unnecessary cost in taxation.

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Government was always a rent-seeker and it's now the biggest robber baron by far

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In broad terms profits are a consequence of imperfections in the market - I know this because it's in the first few chapters of the economics text book I had at A-level. In that utopian perfect market there is no rent ergo no profit. However, what makes markets so wonderful isn't this de facto rent-seeking but the consequences of exchange. In most cases (in theory, in every case) I get something I want and, in doing so, allow you to get something you want.

If I were one of those people who think 'neoliberal' is a swear word and consider markets to be akin to beating you over the head and steal your stuff then I would be all aquiver about these evil profiteers and their rent-seeking behaviour. This is not to suggest that those evil profiteers do not seek rents but to remember that the real world meaning of 'rent-seeking' isn't about markets per se but about the fixing of markets to favour the rent-seeker.

Rent-seeking is a culture in which the principal route to wealth is not creating wealth, but taking possession of or benefiting from wealth created by others.

So says the Financial Time (and who am I to argue). Indeed that definition makes reference to the Rhine's medieval robber barons charging river tolls.

Now let's switch a bit in our focus - away from rapacious plutocrats - and look at government. The government we might, in our naivety, want to protect us from those profiteers. The problem here is that government, in its origins and subsequent behaviour, has always behaved as a rent-seeker. For sure, the feudal lord in his shiny armour promised to protect the serf (from whence the lord's wealth derived) but this was via taking from the serf that which was his - the product of his skills and labour.

To do this government's exercised controls over those things that might threaten their ability to take rents by force. Thus governments created monopolies - chiefly and most powerfully a monopoly of money. They did this absolutely and specifically so they could continue to seek those rents, the rents that paid for the baron's new horse and the king's new crown.

I know, I heard you shouting 'stop' and talking of democracy. But the truth is that democracy didn't see the end of that capture of markets through rent-seeking. In truth that capture has extended through the rhetoric of what Tony Blair called "schools-'n'-hospitals", a sort of 21st century version of giving the masses food and entertainment. Over the period from the 1870s to the turn of the 21st century, government nationalised health care and education drawing schools, universities, hospitals and much else within the control of government - handing them over to rent-seekers within those businesses and then, when those rent-seekers caused problems with the masses (by not being good enough), bringing in external rent-seekers to create a sort of faux competition.

Note how the main form of rent-seeking - taking wealth rather than creating wealth - comes in the form of taxes. In the UK this is over four pounds in every ten - a triumph of rent-seeking beyond the wildest dreams of those medieval robber barons with their ship tolls. And within each of those places seeking rent there are the enthusiasts for more - the teacher unions, the BMA and medical colleges, the CBI. A whole host of well organised (and paid) folk each agitating for more rents, for more taxes to be grabbed from the pot of wealth.

We seek behaviour comparable to those robber barons where the poorest in the land are rolled over for taxes - think for a second about the justice of someone earning just £12,000 having to cough up taxes so some public sector plutocrat can earn over £200,000! That is the sort of immorality that would bring joy to the Sheriff of Nottingham's dark heart.

So next time you see someone frothing about 'neoliberal rent-seekers' or some such other left-wing nonsense, just tell them that the government is by far the biggest rent-seeker. And that government has always been the biggest rent-seeker, indeed government exists purely to capture wealth for those who control government to spend on what interests them.

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There is no moral basis for taxation...

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This isn't an argument against tax but a simple statement of fact. We pay taxes because we have to and, possibly, because we get some sort of benefit from the payment of those taxes. And in paying those taxes it is entirely proper for us to arrange our affairs so as to pay only the tax that is due and nothing more. I would add that it is for the tax authorities - and no-one else least of all parliament - to assess what we pay and determine whether we have complied with the rules parliament has prescribed.

If parliament believes that I do not pay enough taxes (and assuming that I am not guilty of evading taxes which is a crime) then parliament has it within its power to change the rules that determine how much tax I pay. None of this is about any sort of moral duty or responsibility. Taxation is merely expedient - the means whereby government secures the revenues that government needs to carry out its purpose.

It rather worries me that - for reasons of political opportunity rather than good government - politicians (aided by their friends and relations in the broadcast media) have decided to whip up some sort of mob, to conduct a sort of moral crusade targeted primarily at large corporations.

Why does it worry me? Quite simply because corporations - businesses of one sort or another - are what will lift us out from the ire of recession. It won't be government however much they wish to scatter the magic fairy dust from the basement of the Bank of England across the land. It won't be shiny new value-destroying railways, ridiculous floating airports or delving ever more tunnels under London (there is something wonderfully Swiftian about today's infrastructure schemes) that will provide that elusive growth.

Yet every politician is now dragged into condemnation of tax 'avoidance' - from committees of MPs asking impertinent questions of people who actually contribute to the economy (unlike those MPs) to cabinet ministers writing pleading letters to jurisdictions with tax regimes that have met with disapproval. All to pretend that somehow this attack will help make the economy better and, worse still, accompanied by words like 'evil', 'corrupt' and 'immoral'.

There is no moral basis for taxation - government imposes a levy on our incomes, wealth and expenditure because it can do just that. But this is not a moral act and seeking to reduce how much tax we pay is therefore not immoral. What we see in a ghastly ignorant mob egged on by politicians and other hacks who point at businesses and successful men crying: "look there, wealth and money! We should have more of that for us to spend. These people are moral pygmies for not paying more tax than they owe!"

And the business people are dragged before the media - the court of mob rule - and accused of what? Essentially of complying with the rules set down by parliament, the European Union and contained in solemn treaties between sovereign nations.

Put yourself in the place of those businesses - international in scope and purview. Do you decide to develop your UK business? Or do you go somewhere else? Perhaps China, Brazil or Indonesia - places where the government welcomes your acumen, investment, jobs and wealth.

There is so moral basis for taxation - saying so is stupid and damages our economy.

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Things that are true....

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From Longrider:

There is a word for this and that word is stealing. Because that is what socialists do –  steal other peoples money and give it to their friends.

Yep.

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Five things to remember...

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From Counting Cats:

These are possibly the 5 best sentences you’ll ever read...

1. You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity.

2. What one person receives without working for, another person must work for without receiving.

3. The government cannot give to anybody anything that the government does not first take from somebody else.

4. You cannot multiply wealth by dividing it!

5. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is the beginning of the end of any nation.

Absolutely.  There is no money tree, there is no magic wand. We are richer by exchange and richer still when that exchange is free. Government is never the solution if you treasure liberty.

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More stupidity and ignorance from those folk at Joseph Rowntree Foundation

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In an article about the use of words - a po-faced little lecture from the word police - the author, one Gary Rae, says this:

That said, according to the Department for Work & Pensions’ own figures, last year we overpaid 0.7% of the welfare budget due to fraud. Compare that with an estimated £70 billion lost through tax evasion.

Note the two figures - the first one is an accurate and referenced link to information from the government. The second one - well it's a load of rubbish, deliberately misleading rubbish. Here's the truth:

The latest estimates show that tax evaders, including those operating in the hidden economy and those who undertake organised criminal attacks on the tax system, deprive the public purse of around £14 billion

Still a lot of money but not anywhere close to Mr Rae's figure. With one flutter of his typing fingers the author destroys his argument (albeit a very thin argument) and reveals himself - and JRF - to be just as manipulative and exploitative of language as the rest of us. That and misleading.

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Perhaps we should make higher rates of tax voluntary?

Yesterday evening I made – via the wondrous medium of Twitter – an observation about tax. It was simply that, if someone had a choice between two tax environments – high tax and low tax, then they’d opt for lower tax.

Of course, it’s not a simple as all that – living in the glorious South Pennines may indeed be sufficient of an incentive to pay higher taxes. The set of choices – ‘choice architecture’ I believe the boffins call it – do not exclude remaining in a place where there are higher taxes.

However, the real lessons in all this are firstly that there remain many people who at least claim to be fans of progressive taxation and argue that they’ll joyfully hand over most of their income to the benevolent state – it is as one remarked “the price we pay for living in a civilised society.”

And this is fine – if somebody believes that it’s a spiffing idea for the government to have 75% of his earnings that who am I to stop them handing over this cash to the government? But these enthusiasts for progressive taxation don’t do this do they? We know they don’t because almost nobody  makes such payments to the British government (and I’m prepared to bet that the same applies in France, Germany and the USA – indeed more or less everywhere).

Instead people who want to pay more taxes – for whatever reason – choose instead to clamour for higher taxes on “the rich”. What these people want is for everybody to pay more – including those like me who think the government takes way too much off us in taxes (certainly for the service we get in return).

If these progressive folk are so keen on paying more nothing is stopping them from doing so. And if such people believe that giving more is about securing “social benefit” then consider some alternatives:

• You want money to be spent on caring for people? Rather than give it to the government, how about paying the nursing home fee for an elderly neighbour or providing someone to clean her house, bath her and help get her shopping?
• Perhaps you want your money to go to housing the homeless? Here’s a suggestion, rather than giving it to the government how about paying the rent yourself or – here’s a thought – putting the homeless person up in your spare bedroom
• Maybe you want lots of lovely arts stuff from your taxes? Just an idea, pay the money to your local gallery, sponsor a struggling artist or cough up for music lessons at your local school.

I could go on but you get the point. What these progressives are saying to us selfish Neanderthals is that we should be made to pay more in taxes because they want to pay more taxes. And what we get is a load of chittering about ‘civilization’ and ‘fairness’ – as if this is of any real consequence.

We live in a society where morality is defined – for some people – as being a fan of government. A culture where our duty to look out for our neighbour is sub-contracted to some state official meaning that we don’t have to do anything. Indeed, that state official actively dissuades us from such activity since it does him out of a secure, tax-funded living.

I am not a worse person than you if I believe that government isn’t the solution to social problems. Indeed, as one reads through the history of government, we see that for much of its time that government acts in the interests of the governors rather than the governed. And those governors include the scribes, the bureaucrats and the administrators as well as the god emperors, kings, senators and prime ministers.

The point of the revolutions – if I might be a little bit Jacobin here – was to secure the end of this tyranny, to establish a world where the interests of the governed, as determined by the governed, were paramount. And, since those interests were not universal (my wants, needs and preferences are different from yours) such an establishment can only be achieved by granting sovereignty to the individual. And this means removing that sovereignty from those god emperors, kings, ministers and scribes.

There remains a role for collective action, for collaboration, cooperation and co-production. And this can be delivered through a ‘government’ (indeed is perhaps best organised in this manner). But this doesn’t give us the right to argue that we should remove money from Fred simply because there are 100 or us and only one Fred. Yet that is precisely the principle behind “progressive” taxation – not that it is more practical to take money in this way but that it is somehow more moral to do so.

It would be a delight if, rather than coercing higher rates of tax from people, we make those higher rates voluntary. We can then apply the arguments – “fairness”, “civilisation”, “social value” and so forth – to persuading people to sign up to that higher tax rate. And it would finally call out the “progressives” – put up or shut up we might say.  And – forgive me for my cynicism – I’d bet that a fair few of those currently heaping coals of fire on the heads of us sinners would be found wanting in the taxpaying stakes!

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Liberal Democrats? You're kidding - nannying fussbuckets more like

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Not content with proposing to rob public sector pensions to build "social" housing, the Liberal Democrats have opened up a new front in the attack on personal choice and freedom:

The plans to levy charges on drinks like Coke, Pepsi and others will be debated at the party’s annual conference and could become Government policy, party officials said.

A motion, to be debated on the Sunday 23 September, says the party should call for “fiscal measures such as the taxation of heavily sugared drinks”. The motion is "quite likely" to be passed, officials said, although it could be amended

That's right folks, our Liberal Democrat partners are starting the 'denormalisation' process for pop. And at the front is this woman:

Prior to her elevation,Baroness Parminter worked as a freelance consultant advising charities and companies (including Lloyd’s, the City of London Corporation, Mencap & Age Concern) on charity issues, campaigning and corporate social responsibility. From 1998 to 2004 she was the Chief Executive of the conservation charity the Campaign to Protect Rural England. Between 1990 and 1998 she worked for the Royal Society for the Prevention of Cruelty to Animals, rising from public relations officer to become Head of Public Affairs. She also chaired the Campaign for the Protection of Hunted Animals, which helped to ban hunting, between 1997 and 1998.

A professional nannying fussbucket if ever there was one. And quite prepared to make stuff up to support her unpleasant, illiberal ideas:

“I am concerned by the timebomb that we have of obesity – particularly among children; we have 500,000 children who have liver disease because of obesity."

This is a lie. A complete untruth. Indeed, if the good Baroness shut her mouth for a second and engaged her brain, she'd work out that liver disease would - on these figures- be the only childhood illness! The figure comes from a (pretty questionable) claim by Professor Martin Lombard, National Clinical Director for Liver Disease, in July last year:

From this sample of two year groups, Professor Lombard has estimated that for all children between 4 and 14 there are half a million who could be at risk of developing fatty liver disease either now or in the future.

This is based on the revelation that around 22% of reception children were overweight or obese and about a third of Year 6 children were "above a healthy weight" (whatever that means). More to the point the explosion in obesity simply isn't taking place. Here's the statistics from the National Child Measurement Programme:

In Reception, the proportion of obese children (9.4%) was lower than in 2006/07 (9.9%). The proportion of overweight and obese children combined (22.6%) was also lower than in 2006/07 (22.9%). The proportion of underweight children (1.0%) was again lower than in 2006/07 (1.3%).

In Year 6, the proportion of obese children (19.0%) was higher than in 2006/07 (17.5%). The proportion of overweight and obese children combined (33.4%) was also higher than in 2006/07 (31.6%).The proportion of underweight children (1.3%) was lower than in 2006/07 (1.5%).

I'm not saying we shouldn't be concerned about obese children - being very overweight is pretty unhealthy - but the figures tell us this isn't a worsening problem and may even be a diminishing problem. What the Baroness Parminter's of this world are doing is judging other people's choices as wrong - she doesn't approve of fizzy drinks just as she didn't approve of hunting and doesn't like the thought of working class people being able to live in the countryside.

How on earth she can lay claim to the title "liberal" defeats me - surely it breaks the trade descriptions act?

What she is is a nannying fussbucket.

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Come on Christine put your money where your mouth is...

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Christine Lagarde called the other day for Greeks to pay their taxes:

And I think they should also help themselves collectively [by] paying their tax"

Today we discover that this grand lady doesn't pay any taxes either:

As an official of an international institution, her salary of $467,940 (£298,675) a year plus $83,760 additional allowance a year is not subject to any taxes.

So come on Christine put your money where your mouth is...if you want others to pay taxes, pay some yourself.

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The right isn't stupid - it just disagrees with your stumbling and mumbling

Apparently “the right” – of which I am a proud member – are stupid:

What interests me here is: why should the standard of rightist argument be so low - almost wilfully ignorant of opposing evidence?

And the reasons – such as they are explained – relate to several specific factors:

1. The relationship between “employment protection” and levels of employment
2. How minimum wages – especially for the young – affect the economy
3. Whether taxes and specifically higher rates of income tax impact negatively on enterprise

We’re told by this (I assume) left-inclined expert that there isn’t any evidence supporting what the right asserts.

So let’s have a look:

Here’s the International Labour Organisation (ILO) on the subject of how employment protection legislation (EPL) impacts on the labour market:

EPL is significantly correlated with certain labour market flows across countries, such as labour turnover, inflow into unemployment, duration of unemployment and the share of long-term unemployed. The stricter the EPL is, the lower the labour turnover, the higher the inflow into unemployment, the longer the duration of unemployment and the higher the proportion of long-term unemployment in total joblessness are.

So the ILO says that stricter EPL contributes to higher levels of unemployment and especially long-term unemployment. There are a load of caveats to this but it seems that “the stupid right” do have a point when they suggest that looser employment rights might have a positive impact on employment.

In the case of minimum wages the research is (I’ll be kind) all over the place. Much of this is because of ideological and/or theoretical prejudices – both for and against minimum wages. However, nearly all the research shows a small effect on employment and a bigger effect on levels of long-term unemployment especially among young people.

We find that movements in both French and American real minimum wages are associated with relatively important employment effects in general, and very strong effects on workers employed at the minimum wage. In the French case, albeit imprecisely estimated, a 1% increase in the real minimum wage decreases the employment probability of a young man currently employed at the minimum wage by 2.5%. In the United States, a decrease in the real minimum of 1% increases the probability that a young man employed at the minimum wage came from nonemployment by 2.2%.

The “stupid right” are on pretty sound grounds questioning minimum wages and in suggesting that reducing the level of such wages for young people might stimulate employment. For sure, like changes to employment legislation, it won’t solve the problem but it might help!

And the high marginal tax rates – they don’t helpeconomic growth:

This article explores the impact of tax policy on economic growth in the states within the framework of an endogenous growth model. Regression analysis is used to estimate the impact of taxes on economic growth in the states from 1964 to 2004. The analysis reveals a significant negative impact of higher marginal tax rates on economic growth.

OK it’s just one piece of research – there will be others that suggest different outcomes. Indeed, some studies on entrepreneurship see cuts in personal taxes as a disincentive to self-employment – mostly because it’s a damn sight easier to avoid taxes if you’re self-employed!

But again the research suggests that the “stupid right” have a fair point - lower marginal rates of personal tax ceteris paribus have a positive effect on economic growth. Therefore, cutting the UK’s top rate is a good idea!

None of this suggests that there aren't different policy options, different taxes and alternative appraisals of the effect that such decisions have on the economy. What I am saying is that these suggestions – lower minimum wages, less strict labour laws and low marginal rates of personal taxation – are not “stupid”.

And saying they are is well...pretty dumb, really.

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