Removing 50p tax rate – seems to be a BBC campaign

RPRT – the first two paras are fact / opinions – a basis from which an argument / debate is prepared.

My thoughts are just that – balanced growth (2% if you want hard numbers), keeping close tabs on inflation and employment.

However, my last two paras looked to the future, natural resources and inflation linked to increase in costs associated with humna consumption of natural resources. Those are my thoughts.

so you want to make sure we keep some people unemployed then whilst we make sure we do not tax the rich too much ?
Seems likes a most excellent idea

Just got to make the kids’ tea. I’ll be back.

RPRT – are you happiest when you are arguing? 😉 The BBC headlines seem to follow a chronological order of when various announcements where made. So if Lawson made a statement that day, it’s hardly surprising that he is the headline.

It’s funny that you “attack” me for arguing from an economics perspective. I only do this because economics gives us tools to answer the questions that you and others raise. Frustratingly though, it doesn’t give us the answers. I actually approach the whole issue far more from a philosophical stand point even though this has the same frustrations as economics! So, if you want to attack my foundations – read John Rawls “Theory of Justice” (1971) – possibly the most important book on political philosophy to have been written in the past 50 years. He addresses the issue of a just society, what is meant by equality and what is the role of taxation?

“No one deserves his greater natural capacity nor merits a more favourable starting place in society. But is does not follow that one should eliminate these distinctions. There is another way to deal with them. The basic structure of society can be arrange so that these contingencies work for the good of the least fortunate.”

Blimey, you two, give Mashie a break!

The target of approximately 2% growth in entirely consistent with economic history that indicates that above this level inflationary and balance of payments pressures (high marginal propensity to import) tend to rise and choke off growth in the UK.

THM,

The chronology of the BBC stories wasn’t my point (have you actually managed to follow any of my points so far?) Go back and read the post that I started this thread with. What surprised me wasn’t that they covered the story, but the prominence they gave it given the other things that were happening in the world.

Not sure about your next bit though:

…economics gives us tools to answer the questions that you and others raise. Frustratingly though, it doesn’t give us the answers.

So have I got this straight? economics gives us tools to answer the questions, but doesn’t give us the answers?

In the spirit of a shared quest for knowledge though, I’ll read your book if you read mine? Limits to Growth, the 30 Year Update. by Meadows, Randers, Meadows – possibly the most important book for people locked into the belief that past performance of the economy can be sustained into the future.

Like the quote though:

“No one deserves his greater natural capacity nor merits a more favourable starting place in society. But is does not follow that one should eliminate these distinctions. There is another way to deal with them. The basic structure of society can be arrange so that these contingencies work for the good of the least fortunate.”

Is the next sentence… “By taxing the f***ers!”

I do wonder,

simple question, the world is finite, growth even at 2% is effectively infinite given long enough.

How can the two be reconciled?

😆 @RPTP

Social and economic inequalities are to be arranged so that (Rawls, 1971, p.303):
a) they are to be of the greatest benefit to the least-advantaged members of society (the difference principle).
b) offices and positions must be open to everyone under conditions of fair equality of opportunity

Surely this can be achieved by lower taxes for the rich [ and maintaining unemployment] then 😯

i suppose the best way forward might be to return to the black ball approach, local government is done by picking a ball out of a sack, if you get the black ball, then you are a councillor.

No elections as such, with heavy punishment for abuse of position, think jurors as an approach.

RPRT – 🙂

1. Yes, I think you were being paranoid with the BBC!!

2. On economics not giving the answers – this is true of many social sciences/humanities. There are certain economic tools that help us to frame a debate. In the case of taxation, these include concepts such as elasticity of supply. But the conclusions are rarely clear cut. Different data will give you different shapes of supply and demand curves and will lead to different conclusions. So while, economics can lift the debate away from mere dogma/stupidity, it doesn’t give answers. Like philosophy, this can be unsettling and exciting at the same time.

3. Have read the intro of Limits to Growth on Amazon. Thank you – some interesting points and some questionable ones so far. I will read more later. Out of interest, do the authors show any graphs that use a logrithmic scale? I am naturally suspicious of “growth” charts that miss this point. I am ashamed to admit my ignorance about this book especially as it’s conclusions (1) had a big impact and (2) seem very contraversial. In relation to your question above re economics, I was amused to read one critique of the World 3 model that stated, “The World3 model was not intended to be predictive or for making detailed forecasts, but to provide a means for better understanding the behaviour of the world economic system. “In this first simple world model, we are interested only in the broad behavior modes of the population-capital system.” (Meadows et al., 1972, G. Turner p.91).

4.

Is the next sentence… “By taxing the f***ers!”

😉 Guess what!! But the interesting thing is why not, especially given that Rawls rejects free market libertarianism. But I will let you read that for yourself!!

I will give you two quotes though – One from Kant (who Rawls seemed to draw a lot from) and one from Rawls himself.

Kant: “envy is the vice of mankind”

Rawls: “it is rational to envy people whose superiority in wealth exceeds certain limits” …nevertheless this is not the basis for a theory of justice.

Junkyard – the key thing about the difference principle is that it has a vision of equality that doesn’t require an equal distribution of income and wealth…”those who have been favoured by nature, whoever they are, may gain from their good fortune only on terms that improve the situation of those who have lost out.”

Rawls views are often summarized in the saying that “inequalities are allowable only to the extent that they improved the condition of the least advantaged in society.” But I think he goes further than this to say that the goal is to reduce poverty among the less fortunate, not to reduce the higher incomes among the more fortunate. He argues that the ability of the fortunate to earn more is a welcome source of tax revenue to boost the rewards of the poor.

economics can lift the debate away from mere dogma/stupidity

When is this likely to happen?

Out of interest, do the authors show any graphs that use a logrithmic scale? I am naturally suspicious of “growth” charts that miss this point.

What point?

THM, so i assume you are saying a return to a more victorian philanthropism is a way forward? where employers were more likely to supply accommodation, schooling, libraries, museums, etc. i.e. using the wealth they have for the benefit of the community.

mashie

My thoughts are just that – balanced growth (2% if you want hard numbers), keeping close tabs on inflation and employment.

However, my last two paras looked to the future, natural resources and inflation linked to increase in costs associated with humna consumption of natural resources. Those are my thoughts.

I’m glad you’ve got some awareness of the physical limits that we face BUT, I think that your simultaneous beliefs that we can have 2% GDP growth and a sustainable future are out of whack.

Firstly, one of the reasons that I don’t like to see GDP as a measure of progress is that it makes no judgement about the value of goods and services EXCEPT in financial terms. So the building of sea defences to mitigate climate change is viewed as a +ve thing. As is all packaging. As is the production of virtually disposable electronics gadgets that get replaced every year . As is tobacco production. etc etc.

But secondly, GDP growth expressed as a % is an exponential function (this maybe what THM was on about with his logarithmic scale question above)

If you are worried that we may be approaching (or over) some of the physical limits of our planet (maybe fish, timber, clean water etc etc. are already being used faster than they can be replaced.) Then perhaps you’d like to hazard a guess at how long it will be before a 2% growth rate will take to DOUBLE our GDP (and presumably DOUBLE, or near double our DEMAND on some of these already scarce resources)?

RPRT – missed this yesterday and its all gone quiet here as the SWT aggro turns to God and helmets!! But just to add a little bit of kerosene to keep the embers glowing!!

http://www.telegraph.co.uk/finance/economics/8761237/50p-tax-rate-costing-Treasury-500m.html

RPRT – you will have to excuse the link and the bias that inevitably will bring 😉 😉

I haven’t read the actual IFS report only this Torygraph summary, so I am not sure how much of the perceived loss is due to tax avoidence or evasion (quoted in the article) and how much to the elasticity of supply (not quoted at all). The former is more inflammatory (even though it is understandable in a non-moral judgement sense), the latter is more objective and interesting.

From the IFS press release:

Government, through the tax system, takes around £4 in every £10 earned in the economy. It is not surprising that getting tax design wrong can be hugely costly. Yet the level and quality of debate on tax policy is inadequate; there has rarely been any clear sense of direction from governments; and expensive and damaging mistakes have been all too common.

In the UK poor tax design contributes to an inefficient housing market, distortionary taxation of financial services, excessive reliance on debt finance, employment levels lower than they need be and distorted and
inefficient savings and investment decisions. The review sets out a long term strategy for reform, and in doing so speaks to immediate policy priorities.

When does the winter of discontent/strike thread start-up. I am sure that would be some nice, moderate conversation all round!!

The Institute for Fiscal Studies warned that the tax has led people earning more than £150,000 to resort to legal tax avoidance schemes to escape paying the higher rate. ……It could lead to more people investing in tax avoidance, illegally hiding their income or even leaving the country altogether. I wouldn’t have introduced the 50p rate in the first place”

What superb logic. Abolish the 50p rate because people are avoiding it. Should we abolish burglary laws because too many are getting away with it or gun laws because too many are carrying illegal weapons? How about abolishing VAT as some are avoiding paying. The answer is obviously to close the loopholes but the super rich wouldn’t like that.

http://www.ifs.org.uk/mirrleesReview/design

at 500 pages ish enjoy yourself should keep you quite for a while

Taxes account for between 30% and 50% of national income in most developed economies, with the UK lying somewhere in the middle of that band.

presumably we have it about right being distinctively average – actually we are 38 ish but remeber the NHS costs 8% and low tax nations dont have that so we are really towards the bottom if you remove healthcare.

You realise there are legal tax avoidance schemes? They are a popular monetary vehicle where only the tax avoider and their accountants and lawyers win. There’s even a box on your tax return to tick if you are part of one.

Now if you taxed the “rich” less, what do you think they would do with the money? They would spend it and help boost the economy. Nobody sits on piles of gold like Scrooge Mcduck you know, they make their money work for them, which creates jobs, income, tax receipts etc

Somehow the FT managed to cover the IFS report without mentioning the 50p tax rate.

FT article

And yet the Torygraph came up with the headline “50p tax rate ‘costing Treasury £500m'” for its coverage.

Funny that, eh?

so they have no money in the bank just sitting there then? These billionaires are out spending it all- thanks to the two in the premiership those huge fees for players and wages have been a big help and far better than if it was used via general taxation obviously? In fact they would do more of this if we just took a lot less of their money …. Seems unlikely tbh.

they make their money work for them, which MAY create jobs, income, tax receipts etc

So they create tax receipts even though you accept they avoid tax 😯
They don’t care as they are making their money work for them they don’t care how it does this and investing in gold, fine arts, expensive wines, rare antiques would achieve very little of what you claim

It is a childish fairy tale account you have to suggest they use their money to benefit us all that is not matched by reality.

Now if you taxed the “rich” less, what do you think they would do with the money? They would spend it and help boost the economy. Nobody sits on piles of gold like Scrooge Mcduck you know, they make their money work for them, which creates jobs, income, tax receipts etc

Actually they invest it for seemingly ever dwindling returns, at least in the terms of dividends. The whole point of shares was originally that you owned a share of the company and took a share of the profit. Now dividends are negligible for most shares and companies seem to strive to raise share value by any means possible rather than as a result of actually being good at what they do. Why? because the rich spend more money investing in companies than buying their output.
And to be honest, investing is a bad term, because it has actually little to do with investment, its just trading stocks.

JY – I sympathise with what you are saying. The download to the actual report doesn’t work at the moment, so to be fair to the IFS, the Torygraph is only quoting one part. From the press release, there are plenty of other recommendations, so this is not there sole logic.

The problem is that from a categorical moral perspective I agree with you, but not from a consequential one. But I need to see what IFS is really saying about revenue generation before commenting here.

Again I am conscious that I am going to quote to RW sources here (forgive me!!) but what the quote is indicating are well known consequences that many have highlighted before:

Adam Smith: The drive to equality goes against the basic instincts of all human beings, “The uniform, constant and uninterrupted effort of every man to better his condition”…and of his children and children’s children.

Milton Friedman (yes, I know!!): “When the law interferes with people’s pursuit of their own values, they will try to find a way around. [stay with it, please !!], They will evade the law, they will break the law, or they will leave the country. [ok, quite objective so far…but then comes the more subjective bit…]. Few of us believe in a moral code that justifies forcing people to give up much of what they produce to finance payments to persons they do not know for purposes thay may not approve off…only fear of punishment, not a sense of jutsice or morality, will lead people to obey the law”

Ok, so there will be some debate on the last bit, but what I find much more interesting is what Freidman went on to say:

…”when people start to break one set of laws (ie evading taxes etc), the lack of respect for the law inevitably spreads to all laws, even those that everyone regards as moral and proper – laws against violence, theft and vandalism.”

So leaving judgements and bias aside, are we simply seeing a historical cycle repeating itself?

I’m surprised you can ride a bike the size of that chip mate.

Look if some richy rich buys a Ferrari rather than stick the money in the Caymans or give it to the tax man, that money pays the wages of the people who work for Ferrari, who then buy stuff from other people, who buy stuff from other people, etc etc, all the while raising income tax and VAT receipts, while creating vibrancy in the economy.

But waaah the rich are all assholes, right 🙄

RPRT

Somehow the FT managed to cover the IFS report without mentioning the 50p tax rate…And yet the Torygraph came up with the headline “50p tax rate ‘costing Treasury £500m'” for its coverage…Funny that, eh?

Good point – but not surprising surely? Put the all the broadsheets together and they will all demonstrate their natural biases. The key is to understand those biases from the outset. Modern history in schools teaches kids that with their evidence questions, which is good and proper education IMHO.

adam smithis s selfish ass hat that does not mean everyone else ever borne or likely to be borne will be
Greedy avricous folk often tell us it is human nature rather than just thier nature. Human nature – ie behaviour humans exhibit- gives us lots if unsavoury bheaiour like murder or rape or child abuse .. I woul dstill rather minimise this than argue it is “natural” tbh

As for Milton he is right people who dont agree wiht laws tend to ignore them and find ways round them we tend to respond by enforcing better – speeding cameras, traffic calmin measures for example. We dont tend to capitulate to law breakers as our current drug laws will show but we should when they are very very wealthy. I dont se the principle here tbh though yes peole avoid lawsadam smith is a selfish ass hat that does not mean everyone else ever borne or likely to be borne will be
Greedy avaricious folk often tell us it is human nature rather than just their nature. Human nature – i.e. behaviour humans exhibit- gives us lots if unsavoury behaviour like murder or rape or child abuse .. I would still rather minimise this than argue it is “natural” tbh

As for Milton he is right people who don’t agree with laws tend to ignore them and find ways round them we tend to respond by enforcing better – speeding cameras, traffic calming measures for example. We don’t tend to capitulate to law breakers as our current drug laws will show but we should when they are very very wealthy. I don’t se the principle here tbh though yes people avoid laws

RPRT – just to prove your point – the Torygraph quotes, “Since 1997 Britain has dropped from 4th position to 95th in the World Economic Forum’s low tax rankings.” and JY quotes, “presumably we have it about right being distinctively average – actually we are 38 ish but remeber the NHS costs 8% and low tax nations dont have that so we are really towards the bottom if you remove healthcare.”

It was ever thus.

JY – thanks for the link. I managed most of the Vickers report yesterday, so I will give this a crack. My son is studying economics at the moment, so it is very relevant!!

Here’s another bit of selective editing for RPRT from page 72, just for fun:

“Second, the responsiveness of different population groups to incentives varies considerably and this can be seen quite clearly in the different levels of labour supply and changes over time for different groups….[we discussed ? this before]… and …

“Third, there is an inevitable trade-off between redistribution and incentives. Greater redistribution will generally reduce economic efficiency. Across the population, the substitution effect—which causes people to work less hard in response to a higher marginal tax rate—will generally outweigh the income effect—which increases effort in response to an increased average tax rate.”

Now I am being very biased 😕 because point 4 is:

“taking account of how different population groups respond to incentives allows any particular level of redistribution to be achieved at a minimum efficiency cost. “

But still, in their opinion (!) an efficiency cost.

JY – I wasn’t necessarily agreeing with either Smith or Friedman BTW merely interested in their logic and the parallels that this has with current developments.

Bye for now – ride, reading, lunch to do!!

there is an inevitable trade-off between redistribution and incentives. Greater redistribution will generally reduce economic efficiency.

I don’t take issue with this. What I take issue with is whether economic efficiency is as important as social cohesion.

But even in economic terms the argument is flawed because it fails to take into account (because it can’t) the economics of things like rioting.

Unfortunately “fairness” can’t be measured, but I think most people know it when they see it.

I’m surprised you can ride a bike the size of that chip mate.

No need for ad hominems it will hardly persuade me you are right and is more likely to make me think you cannot defend your point of view without insults

Rich people do not wander round spending money to help the economy/others as you yourself noted

Nobody sits on piles of gold like Scrooge Mcduck you know, they make their money work for them

Wellall of them do clearly have money in the bank, property, shares etc so they do sit on some of it. Having money work for them would generally mean not spending it on stuff like ferraris but investing it stuff like gold, shares antiques etc.

the IFS review also reccomends ending ‘fuel tax’ and replacing with congestion charging,

will this one be implemented?

im going to assume that the people who decide the fate of the 50p have a vested intrest in ditching it, whereas the fuel tax doesnt affect them in the same way it does us plebs

RPRT: got sidetracked before the ride but FYI:

“In doing that, we need to bear in mind throughout that it is social welfare we are interested in. That depends on much more than measured income. ” (p46)

Just saying!! I agree with your point though.

Junkyard – Member

No need for ad hominems it will hardly persuade me you are right and is more likely to make me think you cannot defend your point of view without insults.

Christ the ego on it. I’m not trying to persuade you I’m right, I don’t really care what your opinion is. You clearly have some issues with “the rich”. Did a rich boy take your conkers? When you finish school perhaps your viewpoint will change, I don’t know, whatever.

Thanks for lashing out at me again and not explaining your own view. Obviously you look both big and clever now.

Brings no money in, serves only to demotivate top earners who are the more productive for the economy.

Brings no money in, serves only to demotivate top earners who are the more productive for the economy.

No they are not.

Its all gone quiet here – is everyone reading. 😉 Joking apart, chapters 2,3 and 4 are very interesting reads as they cover many of the arguments raised here – theory, evidence and many of the real challenges that face the current, flawed system (even Rawls and Bentham get a mention!). In addition to obvious issues relating to high and rising levels of income inequality are some truly staggering statistics at either end of the income spectrum – the chilling %age of people who in the UK earn too little to pay any tax (I can’t find the exact figure and have re-read several times, but I think that this was extraordinarily high eg, 20-25%. I find this hard to believe, so I will re-check) and the incredibly small of people (<300,000) who contribute the bulk of taxable revenues.

But there is obviously something absurd in a situation that has a clearly regressive tax system and yet high and rising levels of inequality, where the bottom of the pyramid is forced to rely on benefits and tax for 80% of their income, where the top is forced to pay 60% of the disposable income in tax, and where low paid people face prohibitive marginal tax rates and strong disincentives to work. For me at least, the section on the reform of the tax system for people on low incomes is the most interesting section and most relevant today. It is far more insightful that the typical, “just tax the bloody rich”, that tends to characterise this debate. And hopefully, will do far more good to alleviate their problems.

the incredibly small of people (<300,000) who contribute the bulk of taxable revenues.

I wonder how this figure is worked out, and if it just assumes that corporation/business taxes are the burden of the owner* and discounts the employee as just an important contributor in paying these taxes.

*and what that would make of the claim that pensions are the major shareholders.

Sorry msp, I was being sloppy – this related to tax revenues from earnings

Is it 25 % of working age adults if so that is high
i dont disagree with you re the poor and what they pay/reducing their burden. However i really dont see how you will reduce their burden without increasing someone else’s burden -rich[er] people

TBH I struggle with long sentences on the report though I admire your commitment – i read most of the conclusions but , if I am honest, it is beyond my level of economics or interest. 😳