The IPPR Commission on Economic Justice reported yesterday. There has already been some reaction. There is much to like in the report. I highlight this on corporation tax:
And this on alternative minimum corporation taxes, an idea lifted from me:
This I broadly support too:
I would charge CGT on final disposal of a property at the end of life, but the rest I can endorse, wholeheartedly.
As I would this:
And this:
And this, which is green quantitative easing by any other name:
There is then much to like. But I retain my concerns. The macroeconomics of this report remain wrong. I can't beat about that. This is Labour's fiscal rule being endorsed:
I can only groan with despair.
Whilst the section on the MPC targetting is something I have also taken issue with before.
In its micro detail this report makes good progress.
I just wish the left got macro. Until it does we will not make real progress.
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“I would charge CGT on final disposal of a property at the end of life,”
A lot of people would be very unhappy about this…they refuse to accept the extent to which their property wealth is the result of state interventions and tax breaks.
I’d go further. I’d cap PPR relief (e.g. gains of up to £100k plus a further £10k for each year of ownership escape tax but anything above that is taxable). This would not hurt most people but would impose some burden on those best able to bear it.
I’d also completely scrap the CGT uplift on death.
“I just wish the left got macro. Until it does we will not make real progress.”
Well as long as they rely on the smart-arses in the City to advise them on financial and economic policies this is about as good as it’s going to get.
Imagine butchers and abattoir operators in control of farm animal welfare standards and the picture becomes clear.
”property wealth is the result of state interventions and tax breaks”
Please elucidate. I think the average person paying a huge proportion of their income over many years to pay off their mortgage will find it hard to believe that it is anything other than all their own graft that ultimately gains them ‘a piece of their own’.
https://www.youtube.com/watch?v=-DCAo7ViL6g
Most with property wealth now net of their mortgage got the vast majority of it from price inflation due to tax breaks
Me included
It’s your narrative that is the fairy tale
I imagine that most are less exercised by notional ‘property wealth net of mortgage’ than the ‘grip of death’ of the latter as they face X years of X (large) percentage of their earnings paying it off. That’s no fairy tale!
How much do you think you house would be worth without all the public goods and services provided locally, eh? No roads, no NHS, no schools, no rail, no policing.
Carol, like you I’m strongly in favour of LVT. I’ve said on this forum before that, properly done, it could be the single most radical reform with the most long-lasting, progressive consequences that a Labour government could make. I just don’t agree with CGT on final disposal of property at death. If land value is properly taxed with LVT I don’t see the need for alienating every Tom, Dick and Harriet with a universal property wealth tax. Not because it is a bad idea in itself, but for a similar reason that you would prefer that Labour keep quiet about LVT: a serious prospect of such a proposal would likely go down like a lead balloon, and not just with the Daily Mail brigade and the rich. We’re talking about almost everyone who owns property, North and South, well-off, just managing or poor, and voters of every political persuasion.
I’ve just been told by someone trying to sell me a tax reform without LVT that his sister in Australia doesn’t think much of their land tax. I asked him if he knew of anyone who liked a tax which they were paying.
It’s as though they’ve just discovered antibiotics but still think that bloodletting works as well!!
Oh dear – you have to laugh cos’ you’d just cry otherwise.
“I would charge CGT on final disposal of a property at the end of life,”
At which point it is no longer anybody’s first home…
More generally, I would distinguish between ‘gifts of use’ (a home for living in, a book for reading, etc.), whose value for tax I would make zero (both for tax then, and as future CGT base), and ‘gifts of value’, taxable at their value.
Too hard to differentiate, I think
Jeremy says:
“I would charge CGT on final disposal of a property at the end of life,”
At which point it is no longer anybody’s first home…
Interesting point. It’s just a part of the deceased party’s estate.
More influentially, perhaps, it’s a part of somebody’s inheritance and they may have been making googly eyes at it for some time, looking forward to the wealth ‘cascading down’ a generation to them.
Given the terms of State provision for elderly care I think there’s considerable discussion long overdue about this topic. Think of it as the State subsidising inheritance (at ordinary taxpayers expense as the thinking goes) and it takes on a different appearance.
I should pick up the tab for your parents elderly care so you can inherit their house? I don’t think that plays too well.
“….All we need to do is tax the rich more, and close the loopholes.”
I am fed up of progressives telling me this. Sectoral balances tells me this is impossible.
It would be really nice if a expert in macroeconomics (wink!) could blog about how much more the rich would actually need to be taxed in order to balance the governments books, and at the same time, end austerity…. something that these progressives kind of want and are adamant that if the rich paid their fair share, then the countries finances would be fixed.
What is the rich’s ‘fair share’…. and would this actually fix everything?
My guess is that everyone would need to be taxed so highly they are unable to save – the government would need to impose maximum savings limits on everyone and tax heavily those who went over these limits. The limits would gradually reduce in order to pay down the governments existing debt, and fund the foreign surplus.
This is not an economy I wish to be part of. But, I have yet to find any online text that put this reality into words.
I’m working on new tax gap estimates for the UK right now
Let’s just use two numbers
Evasion is never less than £60bn
And we tax 10% less than seven more successful states in the EU
How much is that? Maybe £200bn pa
An you say we haven’t got the capacity to transform things?
I disagree
£260bn is a big number, and I am sure many good things could indeed be done with it – and yes, while we still have unemployed/ underemployed, we have lots of spare capacity to transform everything.
However, this is not the point I am making, which is If an additional £260bn was collected, will the government then be able to balance the books, and austerity ended?
Sectoral balances suggests not. The economy will start to go south as the private sector is forced into deficit, to pay for the foreign surplus.
What the right would then claim is that the huge tax burden of £260bn would be slowing the economy – and its labours fault that companies are now going bankrupt, or moving elsewhere. And sooner or later taxes would need to rise, or the government goes back into deficit with more people becoming unemployed. And an election will come along and the Tories will be back in power again. And a million right wingers will now claim ‘told you so – socialism doesn’t work’ 🙁
So, its really important to demonstrate now that even if these tax’s are collected, loopholes are closed, it would still never be enough to balance the governments budget.
And, maybe the best way of demonstrating the futility of trying to do the impossible, is to create a thought experiment that shows exactly how much is actually is needed to be taxed to balance the governments books. Then maybe progressives, including Labours existing economic advisers, might sit up and take notice and stop pushing this stupid ‘Fiscal Rule’ idea.
I regret I just do not have the time or energy to address this now
Tony Weston asks:
“…how much more the rich would actually need to be taxed in order to balance the governments books, and at the same time, end austerity…. something that these progressives kind of want and are adamant that if the rich paid their fair share, then the countries finances would be fixed.”
‘these progressives’ are not accepting the logic of MMT. They are still clinging to the obsolete notion of tax and spend. If the wrong question is asked the wrong answer will result and not solve the problem. (?)
Tony, with a better grasp of macro you would understand that you really have micro concerns. You assume impossible/unbearable tax burdens are required to provide what? – the standards of equitable distribution we had a few short decades ago. That you leap to ‘balanced budgets’ to demonstrate both your own knowledge and how ridiculous you perceive a progressive alternative to be – well that just yells out argument from ignorance fallacy. Progressives hold a variety of views but if I may detail three of them, which I feel are generally held here, for clarity:-
1. we would like reality honestly described and, on the macro level, that means an acknowledgement of how money is created and how a sovereign currency operates. A lot of us would go further and query why the banks should be allowed to create, with an interest burden, most of the operational money our society requires.
2. most of us would like to retain capitalism and the marketplace as the best, to date, engine for innovation and growth. However we would like to see our macro societal driver being general well being as the highest priority.
3. most of us believe in the maximisation of individual freedoms having allowed for the above.
Finally your biggest macro misunderstanding is that you think we tax to spend when the exact opposite is true – if you can’t understand that then all of your subsequent thinking will be flawed.
“You assume impossible/unbearable tax burdens are required to provide what? ”
To balance the governments fiscal budget. That is all.
And, my understanding of sectoral balances suggest this.
My post was about those progressives who believe that the budget can be balanced by taxing the rich more, and closing tax loopholes. Balancing the budget is their goal.
We need to prove that balancing the budget is a false goal, pushed by the media, the neoliberals, in order to justify austerity. Any progressive who wishes to balances the budget needs to be awoken to the reality of what it would take, and the economic destruction that would happen, if policies were introducted to balance the budget.
Policies akin to labours Fiscal Rule.
http://www.taxresearch.org.uk/Blog/2018/08/14/labours-fiscal-rule-is-much-worse-than-the-headlines-suggest/