It is Obvious

Chris Rick has got altogether too much to say

Holiday time

Posted by chrisrick13 on August 20, 2011

It is obvious: I have been away

At some point along the way I’m going to be able to say: I told you so.  What I find intriguing is how the public perception denies the obvious but gradually swings around to different positions.  I remember outright denial of a double dip recession not so long ago.  Now I hear the groundwork being done to prepare us for one.  Latest is the BoE giving low odds on one happening.  Given their previous performance on forecasting this makes a double-dip an absolute certainty.  Of course it is…it always was.

I have been drawn by the debate on taxation which brings me back to the prostitute’s question or the house price question.  The Laffer curve is an example of this.  It simply says that if the government taxes at 100% then it will get no income as nobody will have any incentive to work.  If it taxes at zero percent it will similarly get no income.  Therefore there is a rate in between which maximises the government’s take.  The Laffer curve is by no means universally accepted.  It provides no useful data.  What it does do is to give an insight into the fact that increasing taxes does not necessarily increase government income.  Indeed for every point on one half of the curve there is a point on the the other half that yields as much income for a lower tax rate!  Indeed for every point bar one there are at least two tax rates on the curve that yield more tax!  For a chancellor it must be heart wrenching.  The shape of the curve can be modified a little by ‘tax-engineering’.  I suspect that GB was attempting that all the time.

This is why I have an interest in taxing the rich.  I will define rich as anyone with more money than me – a view that everyone holds whether they admit it or not.  Should I tax a rich person so that he/she pays the same tax as everyone else or the same percentage as everyone else?  I think that if we all paid, say, 20% on everything earnt then I could go along with that.  The government would save a fortune in tax collecting fees.  Or perhaps a punitive rate is required of rich people for…having more money than me.

That then brings me round to maximising the tax revenue of the government.  If the government always acted in my best interest and spent my taxes efficiently for the greater good then maximising the tax take is obvious.  Do you believe the government is like that?  Do you think they are good spenders of your money?  I do not.  Perhaps as a good citizen I ought to minimise the money I give to the government, spend it efficiently on my own needs and live to a christian ethic?  I wonder that the likes of Buffet and Gates are not already doing that and doing it much better than the US government.  They pay less than 17% in tax but are in the process of giving away more than 50% of their wealth to charities doing good, efficiently in ways that count.  I think I trust them to do a better job than the US government.  I would be hard pressed to find someone I trusted less than Gordon Brown.

What of the ideal that we all pay the same tax or people richer than me pay more?  Perhaps if we moved to that state where things were all evened out we might discover that the whole pie was smaller so the net ‘richness’ of us all was reduced.  This could be because rich people gave up doing as much of the things that made them rich because there was little point.  This net reduction in richness might mean 1 hospital less, or 100 ambulances less, or 1,000 policemen less.  Then we can put a cost on taxing the rich that is counted in bodies.  Not such an easy argument then is it?

So are high taxes for rich people justified in terms of who can spend the money better or are they a way of punishing someone for being richer than me?

I wonder that the debate is on tax rates for the rich when it needs to be on what the government does with it, a question that will be much in our minds over coming years.

It is obvious: I have been away…thank goodness.

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