I am doing a presentation for the Fabian Society this evening as part of a discussion on Tax After Coronavirus. Tickets are available here.
I am quite sure one aspect of this that will be raised will be ‘what taxes should be raised to pay for coronavirus?'
I will make two points. One is that coronavirus is already paid for. It's being paid for by money creation, albeit imperfectly via QE, and by people saving with the government. What that means is that ‘how is this going to be paid for?' debate has to really be about something else, which is ‘how are we going to reverse QE?', the reason for doing which is unknown, and ‘how are we going to force people to save elsewhere?', which, again, is a bizarre question. Why would we want to punish the
economy to achieve that goal?
Second I will be saying that we really do not heed overall tax rises now as that will drain the economy if already scarce demand.
But that does not mean we do not need tax reform now, and that's the real focus of today's video.
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No overall increase in tax revenue – very much agree.
What do you think about removing the cap on NI and maybe incorporating it into IT?
More progressive IT system – many more moveable thresholds at fixed %s – even at every 1% (1,2,3,4…..)? Up to what, top rate of around 80%?
Lifetime tax account to even out capital gains/inheritance? We do it for NI and pensions.
Some businesses/individuals will do very well out of this pandemic (PPE suppliers, screen contractors??) but still get the grants and low interest loans and take advantage in other ways – should there be a ‘windfall’ tax?
Interesting question – how would you define a windfall?
A increase in business profits or individual income over and above what would normally be expected and linked to government action/legislation. So on one hand a business could expect compensation for loss (grants, business rates relief, etc.) on the other an increase in taxation.
https://en.wikipedia.org/wiki/Windfall_Tax_(United_Kingdom)
I’m sure there are people with more expert knowledge than I who could come up with a equitable compromise.
This was done in wartime, I admit
I like the idea bit cannot see it happening
Isn’t the real question :
How can government funds(and implicitly Bank of England credit sources) be best used to ensure the productive and trading economy best grows in the future to ensure a balanced economy that continues to retain the value of its currency and the confidence of market participants?.
Excellent ideas for change in your video, let’s hope they get traction.
I would use up some of your adjustments to introduce a tax to provide public funding for our politics to remove the corrupting influence that donations to parties can and does provide.
In addition to your essential UC changes, I’d add a new tax to provide for the social care of all in need, when unemployed, disabled or ill or too elderly to take care of themselves. We really do need compassion back in our tax system.
Both the above are aimed at restoring trust, in the running of government itself and between governed and governing.
Politics is good….
Noted….
Hello Richard.
On the subject of small company tax rate and large company tax rate, could this be on a sliding scale?
So, a large company group would pay more than a smaller large company group, which would pay more than a medium company …etc?
Or would this not work?
It did…..quite well
There was a transition process that gradually increased the rate
Richard,
I would understand if you considered it outside your remit, but there would be significant gains from increasing the tax on alcohol – as well as reducing availability.
Also with Carbon, while it isnt a tax measure, and again outside your remit possibly, looking at what happened in France reducing – and enforcing the National Speed Limit rather than increasing fuel duties might be seen as a fairer measure
Regulation can work better than taxes in these areas now
Minimum pricing on alcohol works
I am astonished anyone can afford tobacco
And re speeding – cameras pay, but they also save lives
I am amazed when I do drive long distance now how speeds have moderated. But so much in towns as yet
Have to be careful with raising Duty on alcohol and tobacco etc. – makes smuggling more profitable and fuels organised crime.
Maybe…
Although UK voters live in a monetary economy most haven’t got a clue how the country’s fiat currency system works works. This results in the absurdity of most nodding their heads is assent with Margaret Thatcher, who was clueless too, and famously said from a housewife’s perspective “Government doesn’t have any money of its own!”
Of course, Margaret Thatcher, used the resentment of paying taxes to score a facile political point (Cameron and May have also used her cheap rhetoric in later years.). Never at any stage did she go on to explain where money for monetary economy actually comes from. If she’d attempted to explain all money came from borrowing from private sector banker’s it would have been quickly pointed out to her this would be a Ponzi scheme with the infinite regression of bank loans!
Technically MMT explains that getting your head round money creation boils down to understanding only a sovereign government can create “net financial assets.” Here are two articles that attempt to do this:-
http://rogueeconomistrants.blogspot.com/2011/10/what-is-net-financial-asset.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+RogueEconomistRants+%28Rogue+Economist+Rants%29
http://mikenormaneconomics.blogspot.com/2011/10/rogue-economist-net-financial-assets.html
Clearly the difficulty for MMTer’s to help explain the National Debt is not an economic threat has to be finding a way of simplifying the terminology. Easier said than done!