Tim Worstall writes one of the more objectionable blogs in the web. I won't link to it: it's too offensive to do so.
This morning he did, however, write in a comment on this blog:
I was involved in producing those UKIP [tax] proposals.
I didn't know whether to laugh or cry.
But then I went to check the page I referred to just the other day to insert the link I found this:
I think two conclusions follow.
First UKIP read this blog.
Second, they don't like Worstall's tax policy recommendations.
I won't say that means I agree with them, because I', not sure I'd ever do that, but it did make me smile.
I'd almost call it tax justice.
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:
It’s been like that for a while now – before you wrote your article.
I got it when writing my article – that’s how I could quote it
So, as ever, you’re wrong
Ah, the infallible Mr. Murphy. As opposed to me, who is always wrong.
Can I ask you a quick question, which will relate back to the tax question shortly….
You have previously said that government debt doesn’t matter as the government can simply print as much money as it wants through QE. Do you stand by this? yes/No will suffice.
Your question is meaningless so no answer is possible
Your comment has been posted further to point 5 of the comments policy to which attention is drawn.
I’m not sure how it is meaningless – you have said time and time again that the UK should embark on a massive spending spree (Green QE) funded by QE, that debt owned by the government can cancel debt owned by the BoE (it can’t) and most importantly, that cuts aren’t needed because we can simply print money through QE.
Given this position, I am struggling to work out why taxes are needed at all – given by your logic, the government can effectively fund everything we need.
In this case then, wouldn’t the simplest and easiest to administer tax system (a flat tax of some sort) be the optimum solution?
Read modern monetary theory
“I’m not sure how it is meaningless — you have said time and time again that the UK should embark on a massive spending spree (Green QE) funded by QE, that debt owned by the government can cancel debt owned by the BoE (it can’t)”
QE is not a debt. The money was created. No debt involved. The bonds bought up by this money have been extinguished and could be ripped up. The policy of the BoE is to reverse the process, sell the bonds and take back the money, apparently to stop this money inflating the economy, yet in the case of banks, the money has just sat in their reserve accounts.
Also, all £1000 of cash has done, for example, is swap that cash for £1000 of bonds. There has been no extra money put into the economy. Just an asset swap.
Money could be created and spent into the economy, debt free and interest free as it was with the tally stick system for up to five centuries. Any excess liquidity can be removed by taxation. Indeed, a large proportion of that tax money could simply be recycled back into the economy.
But unfortunately, that isn’t likely to happen anytime soon!
“Read modern monetary theory”
Fistly, please just do me a favour and answer the question I asked – I would be interested in your response.
As for MMT, or neo-chartalism as it is more generally called, has some serious flaws. I’ll ignore many of the assumptions it makes (or realities it ignores). The primary one is that it uses tax to control inflation but then allows the central bank to print money to finance debt. So any control over inflation would only be on the private side, not the public side.
Regardless though, even if you think MMT is correct, it suggests a flat tax would be the most efficient way to manage taxation, even if not necessarily the most redistributive.
You are answering your own questions
“You are answering your own questions”
Not at all.
MMT argues that you can control inflation through taxes. That might not be the case though as goverment spending (through money printing) can increase the inflation rate beyond any ability of tax rates to control CPI – because that government spending becomes de-linked from tax rates/revenues.
“MMT argues that you can control inflation through taxes. That might not be the case though as government spending (through money printing) can increase the inflation rate beyond any ability of tax rates to control CPI — because that government spending becomes de-linked from tax rates/revenues.”
As long as there is enough supply to meet demand, there should be no problem with inflation. Since the government would be creditor rather than debtor, therefore no debt to pay to bondholders, the government will be spending considerably less. As creditor, businesses can be helped by low interest loans; money which returns to the government and can be redistributed into the economy – maybe to offset taxation or into a sovereign wealth fund Inflation only occurs when the money is not being used productively. When or if that happens, excess liquidity can be taken out of circulation by taxation. As stated before, a large proportion of that money could be simply be recycled back into spending again, helping to keep the money supply stable.
You get it Stevo
Odd some don’t and yet that is exactly what happens
No SteveO, I’m afraid you don’t get it.
The inflation risk from MMT doesn’t come from supply/demand factors, it comes from debasement of the currency. Government able to print money will do that to a currency, and it will tend to create asset bubbles.
Sure, you can take excess liquidity out of the *private* sector via taxation but that can’t control government spending in the MMT case where it can print money.
It’s a wholly fatal flaw in MMT. You can constrain the total money supply and control inflation via taxes, or you can let the money supply float and control it via interest rates, but you can’t control inflation in any case if there is no proper transmission mechanism to do so.
I think you are completely failing to understand money
It is a variable, not a constant
It can be and has to be made by lending
It Dan be withdrawn in the same way
We have moved on from printing and mining but your theory has not
“Sure, you can take excess liquidity out of the *private* sector via taxation but that can’t control government spending in the MMT case where it can print money.”
So government money just sits there, does it? Money that goes to government employees never gets spent? It never gets captured by private businesses?
Of course it does! Money circulates and passes from hand to hand. If people are given jobs and hence have money to spend, they spend it on goods and services, not speculation. When money is spent on goods and services, it can be captured by businesses to help create more business.
That is why asset bubbles like housing cause rapid inflation. The money invested is unproductive and largely just pumped into jacking up the prices of existing housing.
The reason QE, as it is practiced at the moment, is causing asset bubbles is because the money is ending up in reserve accounts of banks or into the hands of bondholders, not the real economy.
Again, if demand largely meets supply, there should be little inflation. If government borrows from its own central bank and issues it directly, it has nothing to pay back, hence services become considerably cheaper, obviously meaning less money has to be spent.
The only taxation needed, as already stated, is to take any unproductive money out of the system, much of which could simply be recycled into the economy at a later date, meaning less money creation.
I suspect that your view of Worstall and his blog are genuinely held, but that surely means you should not mention him at all. Not linking to him is not enough. I would assume that selecting and copying the name, opening a search engine, pasting into the search bar, and clicking on a link is not beyond most of your readers. So even without the link your readers are immediately exposed to that which you consider objectional and offensive. But information is a dangerous thing. Your readers may not agree with him, but ideas are like seeds – those ideas will germinate – opinions will change.
NO, if you want blinkers you have to do it properly. Remove his name from your blog. Never mention him. Its the only way!
My word, that is amazing, isn’t it?
A political party takes down an old manifesto in the run up to a new election.
It wouldn’t be amazing except for who you wrote it with, what has been said by the party leader about that manifesto, what it said, who drafted it and the fact hat it disappeared after I blogged about it
That apart, not amazing at all. I agree
Not strictly true Richard.
The Google cache for the page you reference was cached last by Google on 14 Feb, the UKIP site seems crawled by Google daily looking at the other cached pages so the page or links to it was removed around 14/15 Feb, 3 days before you wrote about it.
No; I got it the day I wrote about it
I certainly did not have it cached and did not look for a cached site
You’ve made something of a leap here Richard. A large one too.
I said “And it is precisely this point which leads to the UKIP proposals: for it is not a coincidence in the slightest that I was involved in producing those UKIP proposals. ”
I did not say that I wrote the manifesto, nor that I wrote the tax policy. Neither with nor without Godfrey Bloom or anyone else.
I said that I was involved: as indeed I was. But that is not the same as writing a policy nor a manifesto. I’m afraid that you’ve rather jumped the gun on this one.
As to my involvement, you do recall that I was actually working for the party, yes? So it’s not actually a surprise that I was involved?
I thought you’d left
The fact that a UKIP supporter uses EU rights to live in Portugal does amuse me, a lot
The page is still available via Google’s cache here:
http://webcache.googleusercontent.com/search?q=cache:WhWZoGg7ZgUJ:www.ukip.org/issues-2/policy-pages/tax+&cd=1&hl=en&ct=clnk&gl=uk&ccm_invalidtoken=1
(This would suggest that it was indeed only taken down recently.)
It’s also permanently archived (albeit without images or formatting) here:
http://web.archive.org/web/20130930105417/http://www.ukip.org/issues-2/policy-pages/tax
Thanks
“As to my involvement, you do recall that I was actually working for the party, yes? ”
“Was” is indeed the past tense in the English language.
“I thought you’d left”
Yes, I have indeed left the employ of the party.
“The fact that a UKIP supporter uses EU rights to live in Portugal does amuse me, a lot ”
I’ve lived and worked in Russia and the US as well, for several years in each place. Without, note, EU rights to do so.
None of which seems to change anything
As so often I find myself confused by you Richard. it may be me, but could you spell out your points for us.
As far as I’m aware Tim Worstall (he’s a big boy and will correct me if I’m wrong) is an economic liberal, as am I (you call me a neoliberal). So living and working around the world would be perfectly compatible with that.
The problem with this is not an economic problem. It is that the unfettered movement of workers around the globe, which would suit the affluent such as me, would have a devastating social impact on those groups at the lower end of the socio-economic scale in countries such as ours . It is these people to whom UKIP (which does not have my support and which I believe Tim has since left) is attmepting to appeal.
So I would be interested to know where you stand on this, if this the point you’re trying to make. I’m sure Tim can speak for himself.
The amusement in Tim’s situation is obvious to all other then neoliberals it seems
Your points simply miss the point
Yeah, I see I have completely miss the point, whatever it is. And, sitting there in the early spring Algarve sunshine, I’m sure Tim doesn’t see the amusement in his ‘sitution’ either (I’m quite jealous actually). So please spell them out for me Richard; I’m a bit thick.
I’m sorry, if you can’t see the paradox of UKIP’s tax adviser siting out in Portugal because the EU lets him then I can do little to help you
“UKIP’s tax adviser”
Again you rather leap to a conclusion. I am not, and have not been, “UKIP’s tax advisor”. That sounds like a rather formal position and it’s not one I’ve ever held.
You mean you can write their policy but are not a tax adviser?
How odd…
Is that it? An economic liberal, i.e. someone who believes absolutely in trade, the movement of goods, labour, capital, has business in the Czech Republic, lives in Portugal and has previously lived in the USA and Russia.
Please tell me there is something more to this defenestration of yours. Do you understand what Euroscepticism is?
P.S. Where do you stand on the free movement of labour into the UK? What social consequences do you think it might have?
I personally have limited concern about the free movement of labour
But I do not campaign against the EU, flawed as it is
On the other hand you do seem keen on the idea of paying taxes where the income is earned – which seems at odds with the idea of allowing anyone in the EU to gain benefits from the UK, regardless of where they might have originated, and paid taxes.
I admit your logic has beaten me
Maybe I am Fair Tax Marked out
Well I have considerable concerns about the impact on the low paid. It manifests itself in a number of ways, such as my opinions on removing the tax burden from them.
To be fair, I imagine mine is very much a minority view on this blog.
I refer you to Jonathan Portes
You’ll be in favour of abolishing VAT then, Ironman? Because that’s a tax which weighs heavily on the lower paid (including people who don’t earn enough to pay income tax, in fact even people who don’t earn anything at all). Whereas in fact the ConDem govt increased VAT by 2.5 percentage points so that they could fund income tax cuts which go overwhelmingly to the better off.
The tories also completed a double whammy when they introduced the Council Tax (the most regressive tax we have) and increased the VAT rate to cover the shortfall in direct grants from central government.
Is there a connection between those who believe in flat taxes and the flat earth society?
🙂
Ironman
(& yes the name is funny)
You don’t have concerns. You have opinions. Silly ones. That’s it
Regards
This comment has posted further to point 5 of the comments policy to which attention is drawn.
More fairy tales from TW to add to his collection – 1001 Algarvian Nights!
“You mean you can write their policy but are not a tax adviser?
How odd…”
Once again, I did not write UKIP’s tax policy and have never claimed that I did. It is you making that, incorrect, assertion.
I most certainly contributed to the discussions about what that tax policy should be. But that’s fairly normal in a political party. You know, members of the party discussing the manifesto for the party?
Worstall was ‘Communications Director’ though, despite his complete ineligibility to be a member of UKIP and consequently his attempt at being an MEP.
So rather than just a ‘contributor’, it could easily be imagined that he had a significant role in the wording and publication of any externally facing literature.
“despite his complete ineligibility to be a member of UKIP and consequently his attempt at being an MEP. ”
The requirement is that one be on the electoral roll. Which I was and was therefore eligible.
Good
Howard Reed
Nice to make your acquaintance.
“You’ll be in favour of abolishing VAT then, Ironman? Because that’s a tax which weighs heavily on the lower paid (including people who don’t earn enough to pay income tax, in fact even people who don’t earn anything at all).”
Yes indeed I would, or at the very least I would limit it to genuinely luxury goods, which wouldn’t impact so much on the low paid. (And yes, I do realise just how long this might take, given the high proportion of the tax take it now makes up).
Incidentally, I welcome your statement that the incidence of this tax is largely on the consumer. You may have noticed, I have had a devil of a time trying to convince Richard that the incidence of CT isn’t only on Capital, but he just won’t have it. A week ago or so Chris Dillow wrote a very clever and amusing piece on the Incidence of Benefits (impossible to disagree with him really). The multiple incidence of CT was self-evident to him – and to me!
Oh, and while we’re in correspondence, do you personally share my desire to remove the burden of direct tax from the low paid?
My arguments on incidence are based on the most authoritative source on the subject – Prof Kimberley Clausing http://ntj.tax.org/wwtax/ntjrec.nsf/notesview/0102292B0EF57B0F85257B35007299B7/$file/A06_Clausing.pdf
You and Chris Dillow – who can be remarkably conventional in his thinking – may well be wrong on this
Ironman: ideally I’d like to see a tax-free basic income payment to all families at the minimum income standard level combined with a simplified, highly progressive, income tax system. An outline of this approach is contained in a recent paper I wrote with Richard for CLASS and I am hoping to do more detailed modelling this year.
I read the Chris Dillow blogpost you referenced – very interesting. The main point Chris seemed to be making was that the incidence of in-work benefits (e.g. Working Tax Credit) may be partially on the employer – i.e. Employers can get away with paying lower wages because workers are subsidised by the tax credit system. It’s certainly possible (although the empirical evidence is somewhat inconclusive). If true it provides a strong additional justification for the minimum wage.
Howard
Have to agree with that
R
Your view is based upon Kimberley Clausing work is it? (I am familair with it… And with her very useful e-mail exchange with Worstall)
I ask because you were of course making tour case long long before you read that paper. So your opinion before then was based upon…predisposition? Outright prejudice?
BTW, I personally will always take great care to do my research before I choose to disagree with Chris Dillow; would you mind if I offered you the same advice?
There is a long literature on this
Kim Clausing knew that
So did I
She went and proved that the nonsense on incidence was wrong
And as for the Worstall mail – that’s evidence? Oh come on….a quick answer to a loaded question. Please pull the other one. Read her work for heaven’s sake
Howard
May I first apologise if I seem to be responding to different posts in a in a shaphazard and somewhat random manner; it’s just a feature of Richard’s blog I’m afraid.
Thank you also for your response. The basic incomeh, as with much of what we have discussed would need a very long transition to introduce. Making it essentially theoretical I but so what! I too would like to see that, as would Tim Worstall. This shouldn’t be surprising, it is amazing how many common ideas can be traced back to Milton Friedman isn’t it.
Thank you also for agreeing that this should be tax free. The logical intermediate step is to raise the tax free allowance and NI threshold (I also agree we should unify them) to somewhere nearer the median wage. You didn’t reply to my question directly, I will takw it that you do agree with this as well.
I’m afraid we can’t agree that taxation should be highly progressive. I don’t see the case for flat taxes as such, but ‘highly progressive’ means ‘punitive’ whem I hear it. I also hear ‘class war’ and all that stupid, evil nonsense that lost all credibility in the 20th Century.
As you agree with me on raising the basic allowance, could I ask you perhaps to bat for me in a conversation I didn’t once enjoy with Richard. He posted an idea to offer free TV licences to the unemployed. I agreed this was a great idea (really great actually) but noted that this would then increase the effective marginal rate for the in-work low paid. Exactly the sort of poverty trap he himself had decried in previous posts. Ergo I argued, we should all have free TV licences, or just scrap it! I don’t think Richard underdtood me; could you have another go?
As for Chris Dillow’s piece, I think we should both be recommending it so that the reader can make up their own mind on what was explicit, what was implicit and what has been inferred, correctly or incorrectly. I do not like your inference on the minimum wage, however. In the long run the corollory of a basic wage, state provided, would be no minimum wage and no burden on the employer (the incidence of benefits again). In short term I think the minimum wage is a very good thing. However, raising the tax free allowance would take the low paid much nearer to the Living Wage without over-burdening the employer. Overall, I believe this sits in opposition to your Landman paper on this. You have argued that a prime benefit of raising the minimum wage is increasing gov’t revenues. As we seem to agree on the incidnece of tax and benefits (sorry Richard) you will agree that the incidence of the minimum wage is on the employer and you expressly note that gov’t is a beneficiary. Well I know quite few small employers. Not rich people, just ordinary Joe’s struggling to make ends meet for their families AND provide employment for somebody else who who is also struggling to provide for their families. No, no! Much better gov’t finds its revenue elsewhere. To me it’s a moral question. And there is always that benefit to the economy – incidence again?
You can’t have a basic income that is worth the name without progressive taxation
Anything else is an excuse for cutting significantly the role of government
And that would undermine all the benefits of the basic income
Unless this is accepted there is no debate
‘Overburdening the employer’ Wallmart has so much spare cash it buys its own stock for heavens sake, yet they pay their supermarket workers about $15,000 a year and with housing costs (due to 30 years of banking created bubbles) they need food stamps -burden on the employer!!!!!!!!!!!!!!!!!!
Ironman
I don’t know if you’ll read this if you’ve given up posting on the blog but I’ll post it anyway.
Under the basic income proposal that Richard and I put forward for CLASS the tax-free allowance on earned and unearned income *other than* the basic income would have to be much lower than it is now (to make the system affordable). However, as the basic income itself would be tax free, I guess that means the effective tax allowance across combined incomes would be higher.
I think the question of incidence of taxes or benefits is essentially an empirical one rather than a theoretical one. Economic theory only delivers clear results on incidence under highly simplified assumptions which are unlikely to hold in the real world (e.g. perfect competition).
My main argument for progressive taxation is that those with the broadest shoulders should bear the heaviest burden. It’s an argument advanced by all kinds of thinkers including Karl Marx and George Osborne. (Although George honours it more in the breach than the observance).
Thanks for an enjoyable discussion in any case.
best
Howard
“…there is no debate”
No, I can see that Richard.
It’s best I don’t post here again; I’m sure you agree.
I have to be honest; I won’t miss you
I’ll miss you though.
What’s the point of a ‘discussion’ blog where you only let your sycophants respond about how wonderful you are, whilst you refuse to answer any difficult questions, often from people who know far more about the topic than you…??
Is this blog purely about stroking your ego?
I wonder if you have read the new comments policy?
I do draw your attention to point 5.