Mirrlees and savings – making inherently unjust proposals

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The Mirrlees report assumes that savings equal deferred consumption.

As such their whole approach to the tax of savings assumes that this is simply an issue of when to recognise income during a persons lifetime and so tax them.

Oh dear. Yet another false assumption. Our society does of course include many people who make savings with the view to undertaking future consumption — most especially through the saving of pensions. But this is a relatively small part of the overall savings market. The vast majority of people never undertake enough saving to accumulate any serious wealth. But serious wealth exists. And it is inherited, accumulated and largely unearned. This fact they utterly ignore.

But they do all they can to benefit those who own that wealth. They would like a system where all sums saved be exempt from tax. And that all sums withdrawn from savings be taxed. Because of the sheer absurdity of identifying what is and is not savings in this case they instead use this logic to argue that interest earned be wholly exempt from tax (a measure that in itself is, of course, designed, I presume deliberately, to increase the gap between the rich and the poor in this country by introducing a fundamentally regressive differential in the tax base).

Of course this looks fine in their model where there is no opening capital. But when there is opening capital — and massive amount of it — then the reliefs they suggest investment means that the capital of those who start the process with capital accumulates substantially faster than the capital of the person who has to save out of income alone. The differential can never be made up so divisions in society will increase. And I presume that is their intention. Because surely they did not fail to notice this?