How much can the Institute of Economic Affairs get wrong about tax? In the blurb for a new book it is publishing, written by its long-time associate Dr Eamonn Butler, it says in the first line:
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- Taxation may be necessary to fund public services, but policymakers must consider its moral and economic costs.
As opening howlers go. that's a good one. Tax never funds government spending. Money creation by a central bank does that. It has to in a fiat-money economy or there could be no government-created money in existence. Tax then exists to control inflation and for social purposes. Publishing a primer on tax in which you reveal you do not understand what tax exists to do is pretty good going for a supposed educational charity.
But then, this is not about education at all. As the IEA notes:
In An Introduction to Taxation, economist Dr Eamonn Butler investigates the moral case against excessively high taxation.
Most charities exist to relieve poverty. The IEA goes out of its way to prove it is all about increasing the concentration of wealth. For example:
Butler is particularly critical of capital gains tax, which reports indicate the new Labour government could increase in a forthcoming budget. He says taxing capital gains discourages savings and investment, resulting in lower productivity, wages, and growth.
Most of these claims are totally unproven. All abolishing CGT would, for example, actually do is reduce the tax rate on the wealthy, and cut government tax revenue, which the IEA claims must then be matched by reduced government spending. Increasing wealth for a few whilst denying services to the many is the very transparent agenda in this book, and never more so than when the IEA says:
The book challenges the notion that progressive income taxes are always fair or beneficial. Butler points out that high marginal rates on top earners can reduce tax revenue through avoidance or decreased economic activity. A study found that raising the top income tax rate would reduce total GDP by almost three times the revenue raised.
The argument here is that of the utterly discredited Laffer curve. How can they still be banging on about that when the effect does not exist at any known tax rate, except, maybe that on moving from universal credit into work?
And finally, they note:
The book concludes by exploring alternatives to taxation for funding essential government services, such as user fees, private provision, and better utilisation of state assets.
So, privatisation and US-style healthcare, which is utterly inefficient and fails to provide a service to vast numbers of people, is their prescription.
It is time the IEA was put in the museum for obsolete thinking.
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Obsolete thinking or politicised thinking?
“politicised thinking? “.. thinking? perhaps you are being too kind.
Grooming. An early attempt by neolibtards to keep their show on the road.
In the unlikely event it is stocked by bookshops – perhaps it needs to be put on the top shelf?
Very useful book for politicians who want to serve the rich and in so doing enrich themselves. Lots of simplistic arguments (lies) no doubt for gullible voters.
Most charities exist to relieve poverty. The IEA goes out of its way to prove it is all about increasing the concentration of wealth. For example:
Butler is particularly critical of capital gains tax, which reports indicate the new Labour government could ” He says taxing capital gains discourages savings and investment, resulting in lower productivity, wages, and growth. Most of these claims are totally unproven. All abolishing CGT would, for example, actually do is reduce the tax rate on the wealthy, and cut government tax revenue, which the IEA claims must then be matched by reduced government spending. Increasing wealth for a few whilst denying services to the many is the very transparent agenda in this book”
“Unproven” is the existence of deadweight costs of tax, which vary by type of tax. There are several Nobel Laureates who would disagree. Vehemently disagree with a retired accountant from Ely.
So, you think that studies that cobsider the ‘cost’ of tax without the bebefits they provide prove anything?
And you even think that the non-Nobel prize in this subject is about anything but maintaining right wing thinking?
You really do belong in the same Museum as the IEA
It would appear Paul Maddeley that you have no idea that a society’s use of money involves the redemption of money created. Secondly, you appear not to understand that how much redemption and by who is determined by the democratic choice of voters who most decide on the level of government spending. I doubt that your argument voters must allow a version of highway robbery where market based controllers of capital should be allowed to minimise (even evade) paying tax would receive many votes!
Thank you, Paul.
Are you aware of the difference between the Nobel prizes awarded for science and literature and that right wing con from the oligarch influenced Swedish central bank?
Thank you, Richard.
One is lost for words.
Butler has had to go some to exceed the performances of the Orange Order Liberal Mark Littlewood, ordoliberalismus fan boy Kristian Niemitz and colonials Kate Andrews, Divya Chakraborrty (not be confused with the far more sensible namesake at the Grauniad) and Chloe Westley. Perhaps, bonuses are awarded for the most outrageous output.
Are you being rude about my long term Radio 2 broadcasting partne, Comrade Littlewood? He doesn’t seem to like the name…
And I think you nmay be right about the IEA
Thank you, Richard. :-).
Here’s the Work and Pensions Secretary Liz Kendall mouthing off about the need to do the sums before the two-child benefit cap is lifted :-
“Liz Kendall says government needs to do ‘the sums’ before scrapping two-child benefit cap ahead of potential Commons rebellion”
https://www.theguardian.com/politics/live/2024/jul/23/conservative-leadership-james-cleverly-labour-keir-starmer-uk-politics-latest-news-updates
You know full well she won’t personally involve herself in doing the “sums” which identify whether the taxation system in the UK is equitable which in turn will help determine whether lifting the cap is feasible. As such she is simply a shill doing the work of the rich like Eamonn Butler in her utterances!
“It is difficult to get a man to understand something, when his salary depends on his not understanding it.”
@ Mariner. Thanks I’d forgotten this definition of a shill by Upton Sinclair. Indeed Sinclair wrote a book describing how the right-wing of the Democratic Party used insidious means to defeat him in his run for the Californian governorship in the Depression Era 1930’s (History now repeated in the UK with the current Labour Party!).
https://www.amazon.co.uk/Candidate-Governor-How-Got-Licked/dp/0520081986/ref=tmm_pap_swatch_0?_encoding=UTF8&qid=&sr=
https://en.wikipedia.org/wiki/Upton_Sinclair
One of the reasons for CGT was of course to deter attempts to convert income to capital and exempt it from tax completely. Abolishing CGT would no doubt cause a rise in such behaviour again and reduce the income tax (and presumably CT too) take until such time, if ever, as HMRC might get on top of it.
As the IEA is, to put not too fine a point on it, opposed to the overall concept of civil society, no wonder Butler proposes this.
CGT is an essential backstop to IT
“the utterly discredited Laffer curve”
What the Laffer curve says, all the Laffer curve says, is that there’s an optimal point for taxation. It’s bleeding obvious that there is. At a 0% tax rate, you’d get no tax and at a 100% tax rate virtually no one would bother working and you’d get virtually no tax. Somewhere between those rates is a tax rate where work is worthwhile and tax maximised. It’s going to be different for different people. I see it in practice every day. Clients who limit their income to £100k where they can so as not to go into the penal tax band that operates between £100k and £125,140 where the personal allowance is withdrawn. That’s a practical effect. They don’t mind 40% tax, they don’t like an effective 60% tax rate. You’d raise £4k extra on £10k of £110k if the rate was 40% but you raise £0 at 60% because people don’t take that £10k salary. Some people don’t have a choice. Whether more is raised than lost is one of the nuances you seem incapable of grasping.
Would you take a toll road that cut a 50 mile journey to a 30 mile journey if the toll was £1? Yes, you probbaly would. If the toll was £5,000? No you wouldn’t. There will be a price point at which the toll raises the most amount. Even you should understand that that’s a simplistic example of the Laffer curve in action.
Laffer never claimed to have invented the concept. Nor did he ever say “if you lower taxes you will always raise more”. The concept dates back to at least the 14th century and has been written about by many economists people have heard of, even if some virtually no one has heard of don’t get it.
What’s ‘utterly discredited’ are people who mangle what Laffer was saying either because they don’t understand it or because they deliberately misinterpret it.
I have debated Laffer with Laffer and won in front of a decidedly right wing audience
Politely, I know what I am taking about
https://www.taxresearch.org.uk/Blog/2021/10/07/the-day-i-took-on-arthur-laffer-and-won/
HI Simon,
” You’d raise £4k extra on £10k of £110k if the rate was 40% but you raise £0 at 60% because people don’t take that £10k salary”
So what you are saying is that those people are turning down an extra 4K? not very financially astute, are they
Regards
Laffer presented a single tax model to fit a multi tax environment.
That some people choose to manipulate their tax affairs by juggling tax thresholds does zilch to justify this Jackanory plaything for neoliberals.
HI Richard,
I presume this book will be found in the Fiction section of bookshops, along with all the other fairy tales
Regards
You know, it’s been a while since the last time I saw such a high concentration of fallacies in a text. But I no longer bother about debating leftists. You can give them as much data, empirical evidence, studies, historical examples, models, and even plain logic as you like. They will simply ignore it, throw out another fallacy and speak as if they had debunked everything you said. And, if you continue exposing the fallacies in their arguments, they just get angry and accuse you of defending the rich, hating the poor, being a racist, a fascist or whatever else they are and accuse others of being. But I’m pretty sure you will keep finding lots of useful idiots to believe your cult and continue ignoring the reality.
If you no longer debate leftists, why turn up here with literally no argument on offer at all?
Is it you have none?
The Laffer Curve appears in Ferris Buellers Day Off
https://www.google.com/search?q=laffer+curve+ferris+bueller&oq=laffer+curve+fer&gs_lcrp=EgZjaHJvbWUqBwgAEAAYgAQyBwgAEAAYgAQyBggBEEUYOTINCAIQABiGAxiABBiKBTINCAMQABiGAxiABBiKBTINCAQQABiGAxiABBiKBTIKCAUQABiABBiiBDIKCAYQABiABBiiBDIKCAcQABiABBiiBNIBCDc5MjBqMGo3qAIAsAIA&sourceid=chrome&ie=UTF-8#fpstate=ive&vld=cid:fff5f34e,vid:X_wHBlouFSc,st:0
Best place for it
Just DONT watch the film, its dreadful