With economics so to the fore front and the idea that the way to solve the problem is to tax the rich more, or maybe tax the “banks” on every thing they do I thought maybe it was time to dig through the pile of open tabs to try and pull together a few thoughts. So do forgive the incoherence as I’m trying to work this all out for myself.
As I may have mentioned before I really don’t get this whole economics stuff, as clever people assure me that it all works very differently for countries and large companies than it does for us mere mortals – though it would seem they can go bust just as well as we can. As Douglas Carswell has observed we do seem to have tested public spending to death, and maybe it’s time to look at the supply side. On the supply side we’re told that we have to stay within Europe to be able to survive, yet we’re a net contributor to the EU, so in theory they’d miss us more than we’d miss them – and more than that it seems an awful lot of our trade doesn’t involve the EU anyway. So how to encourage that supply side further, well traditionally what’s worked has been to have lower taxes, so that more businesses can set up and employ more people for more profit. Oddly for reasons I can’t fathom the idea of generally having low and simple taxes is disliked by politicians and protesters. Yet surely more industry means more work, means fewer benefits, means it’s more profitable to invest in industry than it is in debt and well everyone wins. With 20% vat, and more on fuel and booze the Government might even make more money. Rather than throwing all that money at the banks and such they could have cut tax, taking those on minimum wage and on tax credits out of tax entirely would have stimulated the economy as they bought more and had less debt and also reduced costs of the paper work invovled in administering that lot – really how could you object? The other plus of a simpler tax system is it makes tax evasion harder. Whilst those trying to occupy various financial centers are focussing on the banks estimates suggest that “half the workers of the world — close to 1.8 billion people — were working in System D: off the books, in jobs that were neither registered nor regulated, getting paid in cash, and, most often, avoiding income taxes.” (H/T Samizdata). So it’s no where near 1% that are evading taxes, and that number is for out right evasion not avoidance, surely it would make more sense to get rid of taxes we’re not collecting anyway decriminalise that activity and make up the revenue on sales tax which is effectively an elective tax, and if basics aren’t taxed it’s even progressive*.
As other people have observed when we talk about taxing businesses we’re taxing a fiction. Businesses are just people organised to work together, so we’re taxing people – even banks are just ultimately groups of people. A transaction tax (tobin, or employment tax) will just become factored in as part of the cost of business and passed onto the customer. So as we’re ultimately just taxing people why not remove the fallacy of that businesses are some how not people, and skip the middle man to just tax people directly, after all evidence suggests lower business tax means more business. A simple flat rate of income tax (if we want to keep that) would cost less to administer and be far less worthwhile avoiding, raising the base rate of tax so that people on minimum wage didn’t pay it would allow for a lower minimum wage (leaving take home income unaffected), making it cheaper to employ people and thus more people are likely to be employed. OK getting from here to there may not be simple, but really if we moved far more of the tax collection into sales tax, it’d be harder to avoid, have less impact on the less well off – how’d it be a bad thing exactly?
* Whatever “progressive” means this week, but a higher rate of tax on larger TV’s would surely impact the better off more than those at the lower end which is we’re told a good thing.
