On the Moral Maze last week I was asked why I thought we should tax. I was going to offer five reasons, but by the time I'd done four my right wing questioner was bored and I never got to offer the fifth. So these are the five reasons, otherwise called the 5 Rs of tax:
1. Raise revenue;
2. Reprice goods and services considered to be incorrectly priced by the market such as tobacco, alcohol, carbon emissions etc.;
3. Redistribute income and wealth;
4. Raise representation within the democratic process because it has been found that only when an electorate and a government are bound by the common interest of tax does democratic accountability really work; and finally to facilitate:
5. Reorganisation of the economy through fiscal policy.
Alex Cobham, now of Save the Children wrote the first 4; I added the fifth.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Don’t know if I’m responding in the correct manner (bit of a technophobe) just had to say I heard you on Radio2 on budget day and was stopped in my tracks by the refreshing sense you spoke, I understand everything far more clearly, you wiped the floor with that Alex guy, well done you. I even wrote down Richard Murphy for Prime Minister why aren’t you in a political party running for the leadership; you are the only one I’ve heard talk any sense in a very long time. The 5 R’s of tax excellent never thought I’d ever be interested in reading anything about tax. Thanks
Thanks
Why noy in polotics? Because most in Westminster think I achieve more doing this
It is probably point 4 on which our disagreement arises. My problem with point 4 is, first, that there is a difference between the burden of a tax and its incidence, second, that the final incidence of all taxes is on land values, and third, that all taxes have deadweight losses which may be intentional as in the case of “sin taxes” but may simply be damaging.
Why not accept that political accountability through the democratic process is that elected representatives should act responsibly in the way they use the pot of money they have at their disposal. There is no necessary connection between taxation and representation either “no taxation without representation” or “no representation without taxation”. The serious flaws in the UK democratic process also have a bearing on the whole matter.
Respectfully, to argue that the incidence of all tax is on land is, very politely, absurd
I assume we can agree that the incidence of all property taxes is on land values. That has been demonstrated in the Enterprise Zones and was well backed up by research done in the 1980s when local authorities levied different levels of rates.
Now try this thought experiment. Imagine that all taxes were suddenly abolished and that public services were from now on provided at the expense of a benevolent alien. What would happen to land values? In accordance with Ricardo’s Law of Rent, I would suggest that they would rise in aggregate by pretty much the amount of the taxes that no longer had to be paid.
I agree it sounds absurd but the conclusion that all taxes come out of rent is a consequence of Ricardo’s Law. The same observation was made by the French Physiocrats a few decades earlier.
When all land is enclosed, rent takes all surpluses. There is nowhere else they can go. This is why landlords have been getting away with upward-only rent revision clauses for so long. Tenants have no option than to accept – they have nowhere else to go.
This explains why most people are a bit better off than they were 50 years ago but the 1% are obscenely better off – they have got hold of the stream of wealth known as economic rent. This includes not only the old landowners, supermarket chains and property companies, but also banks, since a mortgage is in economic terms a land rental value capture device.
This is fantasy
Sorry – please don’t waste my time
You could add something on chartalism and the idea that our fiat currency only has value due to the demand created to pay taxes.
You are right – money gets its value because tax has to be settled in the currency a government nominates
I think you have your causations on demand wrong though
Read the Courageous State
The 5 Rs has a nice ditty-like ring to it which sounds nice and clever but you could have stopped after no 1. 2-5 are basically variants of 1. In fact what is the point of no 1 on its own? Just raise revenue for the hell of it?
Respectfully, only the wilfully closed minded would agree with you
[…] seem to me to apply with as much force to taxation. Taxation is supposed to do many things at once. Richard Murphy begins with five: raising revenue, repricing, redistribution, fiscal policy and solidarity (though […]
These are really great! I guess it is already included in point 5 but perhaps there could be something added about using tax to promote sustainability, particularly on the supply side? The present fiscal arrangements work against the very principle of sustainability eg the tax deductability of interest payments on debt.
Interesting thought….the 6 Rs of tax?
Actually I’d add it in to repricing where the market fails