Quotulatiousness

June 4, 2019

What do you get for your tax money?

Filed under: Britain, Bureaucracy, Government — Tags: , , — Nicholas @ 05:00

Alex Noble conducts a small experiment:

I suggest we stop thinking about taxes as paying for something useful – this type of thinking paralyses us and causes us to refuse to do that which needs doing. Because our taxes are supposed to pay for it.

We are no longer charitable, because our taxes pay for dole money.
We no longer look after the verge outside our homes, because our taxes are supposed to pay for a council worker with a strimmer.
We don’t repair potholes in our roads, because council workmen are supposed to fill them in.

Just to check that last one, I contacted my local council.

    “I was wondering if I could personally pay a local company to make repairs to the potholes that are causing damage to my car out of my money, and if so, would they be granted permission to close the road while my privately-funded repairs were being carried out?”

And they said…………

    “It would not be possible for you undertake these repairs, and no permission would be given to close the road.”

So I proposed I make a payment to them, to be spent on repairing the road:

    “…could I instead make a voluntary tax contribution on the condition the money is to be spent on these road repairs?”

And they said…

    “…the County Council will not accept payment from members of the public for the provision of highway maintenance over and above that already collected via the Council Tax”

I made one last attempt…

    “I have obtained quotes for the work which are acceptable to me and my neighbours – is there really no way we can as private individuals simply pay for the repairs to our road?”

They responded:

    “…it is not possible to accept any from of funding other than that accepted via the Council Tax and Central Government.”

So I just went out and bought a bag of sand and pounded it into the hole one night. A temporary fix, admittedly.

£5 of sand and five minutes of my time.

No doubt the council are scouring CCTV as we speak in an attempt to bring to justice the criminal that repaired the road.

June 1, 2019

Paying taxes is only for the little people like you and me…

Filed under: Bureaucracy, Business, Cancon — Tags: , , , , — Nicholas @ 03:00

Canada’s tax-gathering bureaucracy is eager to crack down on scams that attempt to hide taxable funds from scrutiny, although they seem to be rather more vigilant when it’s some poor slob who forgets to declare a grand or two from part-time work than multi-national organizations running decades-long scams to benefit deep-pocketed clients:

The Canada Revenue Agency has once again made a secret out-of-court settlement with wealthy KPMG clients caught using what the CRA itself had alleged was a “grossly negligent” offshore “sham” set up to avoid detection by tax authorities, CBC’s The Fifth Estate and Radio-Canada’s Enquête have learned.

This, despite the Liberal government’s vow to crack down on high-net-worth taxpayers who used the now-infamous Isle of Man scheme. The scheme orchestrated by accounting giant KPMG enabled clients to dodge tens of millions of dollars in taxes in Canada by making it look as if multimillionaires had given away their fortunes to anonymous overseas shell companies and get their investment income back as tax-free gifts.

KPMG is a global network of accounting and auditing firms headquartered out of the Netherlands and is one of the top firms in Canada.

“Tax cheats can no longer hide,” National Revenue Minister Diane Lebouthillier promised in 2017.

Now, Tax Court documents obtained by CBC News/Radio-Canada show two members of the Cooper family in Victoria, as well as the estate of the late patriarch Peter Cooper, reached an out-of-court settlement on May 24 over their involvement in the scheme.

Details of the settlement and even minutes of the meetings discussing it are under wraps. A CBC News/Radio-Canada reporter who showed up to one such meeting this spring left after realizing it was closed to the public.

Journalists discovered references to the final settlement agreement in Tax Court documents only by chance.

May 29, 2019

Trudeau’s Liberals consider running on “more taxes” platform for fall election

Filed under: Cancon, Politics — Tags: , , , , — Nicholas @ 03:00

Are you ready for more taxes? Justin Trudeau seems to think you are, and internal Liberal Party documents indicate that several “revenue enhancement” tools are among the ideas being considered for inclusion in the party’s election campaign:

Are you ready for a tax on pop?

That is what some Liberals want to run on in October’s election.

Well, that and a carbon tax, a plastic tax, a tax on selling your home and more.

When it comes to taxes, Liberal like them all.

Lest you think I’m picking on Liberals, this actually comes from an internal party document that was first reported by the Liberal-friendly CBC.

“Ontario Liberal MPs want to pitch voters on a “sugar sweetened beverages levy — more commonly known as a soda tax — in the coming federal election campaign,” reported CBC over the weekend.

The information came from a series of policy proposals put forward by Ontario Liberal MPs that were to be considered for both the budget earlier this year and as potential policies for the upcoming election.

“We have a problem with sugar sweetened beverages being too readily available at too low a price and it is massively contributing to the obesity epidemic,” Liberal MP Mark Holland wrote in support of the proposal.

The Liberals want a tax of 20% on any sugar sweetened beverage believing it could bring in an estimated $1.2 billion a year or $29.6 billion over 25 years and health-care savings of $7.3 billion over 25 years.

May 18, 2019

QotD: “Revenue neutral” tax cuts

Filed under: Economics, Politics, Quotations, USA — Tags: , — Nicholas @ 01:00

Real men (as well as pull-no-punches women) cut taxes. The lesser mortals that tend to inhabit Washington wring their hands and get all weak in the knees when it comes to cutting taxes. Rumors are President Trump will propose a real tax cut. I certainly hope so.

Once upon a time, most Republicans believed in tax cuts. Somewhere along the way, inside the beltway especially, Republicans forgot about the benefits of cutting taxes. Republicans became more concerned with government keeping “its” revenue than letting the people keep their money.

Too many Republican have become timid about tax cuts, often spouting the milquetoast line of “revenue neutral tax cuts.”

Let me translate that little bit of Washington-speak for you. “Revenue neutral” tax cuts aren’t really tax cuts. It’s more like tax shifting. Some will pay more. Some will pay less. And the net effect will be that government will collect the same amount of taxes.

If revenue neutral tax shifting is what Republicans stand for, maybe it’s time we re-evaluated what we really stand for.

What will “revenue neutral” tax cut mean to your business? Well, that may depend on how expensive your lobbyist is. Which side of the “revenue-neutral” ledger you wind up on may depend on how well the skids are greased, hardly, a pleasant scenario to anticipate.

I believe as John F. Kennedy and Ronald Reagan did, that the best way to stimulate our economy, promote job growth, and give our ailing middle class a raise is to cut taxes for all.

Rand Paul, “Real Men Cut Taxes”, Breitbart.com, 2016-04-25.

May 1, 2019

QotD: Standardized measurements, feudalism, and revolution

Filed under: Europe, France, History, Quotations — Tags: , , — Nicholas @ 01:00

The pint in eighteenth-century Paris was equivalent to 0.93 liters, whereas in Seine-en-Montane it was 1.99 liters and in Precy-sous-Thil, an astounding 3.33 liters. The aune, a measure of length used for cloth, varied depending on the material (the unit for silk, for instance, was smaller than that for linen) and across France there were at least seventeen different aunes. […]

Virtually everywhere in early modern Europe were endless micropolitics about how baskets might be adjusted through wear, bulging, tricks of weaving, moisture, the thickness of the rim, and so on. In some areas the local standards for the bushel and other units of measurement were kept in metallic form and placed in the care of a trusted official or else literally carved into the stone of a church or the town hall. Nor did it end there. How the grain was to be poured (from shoulder height, which packed it somewhat, or from waist height?), how damp it could be, whether the container could be shaken down, and finally, if and how it was to be leveled off when full were subjects of long and bitter controversy. […]

Thus far, this account of local measurement practices risks giving the impression that, although local conceptions of distance, area, volume, and so on were different from and more varied than the unitary abstract standards a state might favor, they were nevertheless aiming at objective accuracy. This impression would be false. […]

A good part of the politics of measurement sprang from what a contemporary economist might call the “stickiness” of feudal rents. Noble and clerical claimants often found it difficult to increase feudal dues directly; the levels set for various charges were the result of long struggle, and even a small increase above the customary level was viewed as a threatening breach of tradition. Adjusting the measure, however, represented a roundabout way of achieving the same end.

The local lord might, for example, lend grain to peasants in smaller baskets and insist on repayment in larger baskets. He might surreptitiously or even boldly enlarge the size of the grain sacks accepted for milling (a monopoly of the domain lord) and reduce the size of the sacks used for measuring out flour; he might also collect feudal dues in larger baskets and pay wages in kind in smaller baskets. While the formal custom governing feudal dues and wages would thus remain intact (requiring, for example, the same number of sacks of wheat from the harvest of a given holding), the actual transaction might increasingly favor the lord. The results of such fiddling were far from trivial. Kula estimates that the size of the bushel (boisseau) used to collect the main feudal rent (taille) increased by one-third between 1674 and 1716 as part of what was called the reaction feodale. […]

This sense of victimization [over changing units of measure] was evident in the cahiers of grievances prepared for the meeting of the Estates General just before the Revolution. […] In an unprecedented revolutionary context where an entirely new political system was being created from first principles, it was surely no great matter to legislate uniform weights and measures. As the revolutionary decree read “The centuries old dream of the masses of only one just measure has come true! The Revolution has given the people the meter!”

James C. Scott, Seeing Like A State: How Certain Schemes to Improve the Human Condition Have Failed, 1998.

April 28, 2019

QotD: Innovations in taxation

Filed under: Europe, France, Health, History, Quotations — Tags: , — Nicholas @ 01:00

The door-and-window tax established in France [in the 18th century] is a striking case in point. Its originator must have reasoned that the number of windows and doors in a dwelling was proportional to the dwelling’s size. Thus a tax assessor need not enter the house or measure it, but merely count the doors and windows.

As a simple, workable formula, it was a brilliant stroke, but it was not without consequences. Peasant dwellings were subsequently designed or renovated with the formula in mind so as to have as few openings as possible. While the fiscal losses could be recouped by raising the tax per opening, the long-term effects on the health of the population lasted for more than a century.

James C. Scott, Seeing Like A State: How Certain Schemes to Improve the Human Condition Have Failed, 1998.

April 24, 2019

QotD: The Utopia of Damned Fools

Filed under: Government, History, Politics, Quotations, USA — Tags: , , , , — Nicholas @ 01:00

The money began to pour out on November 16, 1933, to the tune of a deafening hullabaloo. By December 1 more than 1,000,000 were on the CWA [Civil Works Administration] pay roll; by January, 1934, the number reached 4,100,000. Press agents in eight-hour shifts worked day and night to tell a panting country what it was all about. The Depression, it was explained, was being given a series of adroit and fatal blows, above, below and athwart the belt. In six months there would be no more unemployment, the wheels of industry would be spinning, and the More Abundant Life would be on us. Brains had at last conquered the fear of fear.

What actually happened belongs to history. By the opening of Spring [Harry] Hopkins had got rid of his billion, and the whole thing had blown up with a bang. More people were out of work than ever before. The wheels of industry resolutely refused to spin. The More Abundant Life continued to linger over the sky line. There ensued a pause for taking breath, and then another stupendous assault was launched upon the taxpayer. This time the amount demanded was $4,880,000,000. It is now in hand, and plans are under way to lay it out where it will do the most good in next year’s campaign.

Go back to the clippings and read them again. Consider well what they say. Four preposterous nonentities, all of them professional uplifters, returning from a junket at the taxpayer’s expense, sit in a smoking car munching peanuts and talking shop. Their sole business in life is spending other people’s money. In the past they have always had to put in four-fifths of their time cadging it, but now the New Deal has admitted them to the vaults of the public treasury, and just beyond the public treasury, shackled in a gigantic lemon-squeezer worked by steam, groans the taxpayer. They feel their oats, and are busting with ideals. For them, at least, the More Abundant Life has surely come.

Suddenly one of them, biting down hard on a peanut, has an inspiration. He leapt to his feet exultant, palpitating like a crusader shinning up the walls of Antioch. How, now, comrade, have you bitten into a worm? Nay, gents, I have thought of a good one, a swell one, the damndest you will ever heard tell of. Why not put everyone to work? Why not shovel it out in a really Large Way. Why higgle and temporize? We won’t be here forever, and when we are gone we’ll be gone a long while.

But the Leader? Wasn’t he babbling again, only the other day, of balancing the budget? Isn’t it a fact that he shows some sign of wobbling of late – that the flop of the NRA [National Recovery Administration] has given him to think? Well, we can only try. We have fetched him before, and maybe we can fetch him again. So the train reaches Washington, the porter gets his tip from the taxpayer’s pocket, and the next day the four brethren meet to figure out the details. But they never get further than a few scratches, for The Leader is in one of his intuitive moods, and his Christian Science smile is in high gear. Say no more, Harry, it is done! The next morning the money begins to gush and billow out of the Treasury. Six months later a billion is gone, and plans are under way to collar five times as much more.

Such is government by the Brain Trust. Such is the fate of the taxpayer under a Planned Economy. Such is the Utopia of Damned Fools.

H.L. Mencken, “The New Deal”, The Mencken Chrestomathy, 1982 (article originally published 1935-05).

April 23, 2019

QotD: Cities and the Laffer Curve

Filed under: Economics, Government, Quotations — Tags: , , — Nicholas @ 01:00

… government finances are ultimately constrained by the much-maligned Laffer Curve. There is some point, however high the percentage, beyond which raising the tax rate not only doesn’t bring in more revenue, but actually lowers government income. And the smaller the level of government, the lower the tax rate at which Laffer effects kick in. If your block had the ability to levy a 25 percent tax on your income, and actually did so, you’d sell your house pretty quick. It’s much harder to pick up and move to another country. We also have to factor in the fact that, in a democracy, voters can go to the polls and say “no more,” which is a sort of secondary Laffer point that people planning in decades have to reckon with.

Cities tend to declare bankruptcy precisely because they’re near one of those points, through some combination of financial mismanagement and local economic decline. When they have exhausted their ability to borrow, or wheedle bailouts out of some larger government entity, they end up with an unpalatable choice between cutting municipal services or failing their creditors …

Megan McArdle, Bloomberg View, 2017-04-11.

April 18, 2019

QotD: Roadblocks to deregulating the US healthcare market

Filed under: Bureaucracy, Government, Health, Quotations, USA — Tags: , , , — Nicholas @ 01:00

One problem America has is simply that our government administration isn’t very good. That’s not true across the board — our government statistics are, IMHO, the finest in the world. But there’s stuff that other countries can do that we can’t, either because our government is more decentralized, or because our civil service just isn’t as prestigious (and therefore as full of competent, motivated people) as those in other countries. And our regulatory approach — rules rather than principles based, and highly adversarial — is also suboptimal, and hard to change.

Given how much the government now interferes in health care, that’s a big problem. Given our lack of administrative competency, our first step should be pulling back where we can — trying to push more ordinary expenses onto consumers, for example, who can manage those the same way they manage their aspirin and antacid purchases now. And eliminating the tax deduction for employer sponsored health care would be major. But I fear, politically impossible.

Megan McArdle, “Ask Me Anything”, Reddit, 2017-04-10.

April 8, 2019

QotD: Why does US healthcare cost so much?

Filed under: Bureaucracy, Business, Economics, Health, Quotations, USA — Tags: , , — Nicholas @ 01:00

This is a hotly debated question in health care policy. Here’s my rough stab at it: the 1970s inflation interacted particularly badly with two pre-existing policy choices: the tax deduction for employer-sponsored health insurance, and Medicare.

Start with employer-sponsored health insurance, which is, as everyone knows, tax advantaged relative to salary, because your employer can deduct it as an expense, but you don’t have to show it as income on your taxes.

This was an incredibly dumb decision, but in the defense of the folks who made it in the 1940s, at the time, health insurance wasn’t very expensive, because the health care system couldn’t do all that much (and the female labor that ran hospitals was cheap due to discrimination, or in the case of nuns, basically free).

Come the 1970s, inflation started causing a problem called “bracket creep”. Back then tax brackets weren’t indexed for inflation, so as inflation went up, folks got pushed into higher and higher tax brackets, even though the buying power of their salary had stayed the same, or [had] gone down. This was great for the government (and is a big reason our deficits were not disastrous in the 1970s), but it was terrible for people, and led to the tax revolts that helped put Reagan in office.

But I digress. The point is that bracket creep made non-taxed benefits much more attractive relative to salary, so insurance started getting more generous. That process has continued for decades. Insurance used to be “major medical” that covered big ticket items like hospital stays. Now we expect it to cover the cost of going to the doctor for the sniffles. Well, if you insulate people from those costs, they will incur more of them.

Effectively, this raises demand for health care services. But the US system, decentralized and litigation-happy, is very bad at controlling the supply side. End result: high costs.

The other thing that happened is Medicare. The original legislation called for reimbursing services at “reasonable and customary rates”. This was a gold mine for doctors and hospitals. In New York, for example, doctors used to be forced to do charity care as the price of their admitting privileges at prestigious city hospitals. Once Medicare came into the picture, there was no need for that! Or to economize on beds; you could always find someone to fill them. Eventually, Medicare tried to crack down (http://reason.com/archives/2011/12/13/medicare-whac-a-mole), but by then, it was damned hard to cut physician and hospital incomes, in part because they had made decisions based on their — like building new hospitals with all private rooms — that couldn’t be undone. Our cost base is permanently higher, and politically, we have shown no will to slash provider incomes. So even though our growth rate is about average for the OECD, we’re growing from a much higher level.

Megan McArdle, “Ask Me Anything”, Reddit, 2017-04-10.

March 30, 2019

The EU’s copyright regulation is a stalking horse for online censorship and control

Filed under: Business, Europe, Government, Liberty, Media, Technology — Tags: , , , , , , — Nicholas @ 03:00

To the amazement of many non-EU observers, the European Parliament passed blatantly authoritarian and corporatist changes to the rules on copyrights that will have potentially vast impact on the internet across the world, not just inside the EU. At City A.M., Kate Andrews explains why this is such bad news for all internet users:

The two most controversial points in the law – Article 11 and Article 13 – are almost certain to stifle digital activity, and interfere with the free way that people currently use online platforms.

Article 11, known as the “link tax”, would make online platforms compensate press publishers for links and article content posted on their sites.

As my colleague Victoria Hewson highlighted in her latest briefing, this approach has been “widely criticised as a distortive measure that seeks to prop up a declining industry”.

As many local and national newspapers decline in readership and revenue, governments have become increasingly protectionist in their attempts to “rebalance” the sector, by cracking down on online platforms.

The link tax has little merit, even if rebalancing is the goal. News outlets which require payment for readership already have logins and paywalls to protect their content from free access.

[…]

Article 13 will also be distortive to the market, as it makes online platforms increasingly liable for copyright infringement.

As Hewson’s briefing notes, major online platforms already have routine screening processes for content that violates copyright law or their own rules. But the new regulations “remove the protection for platforms previously available if they removed violating content promptly on receiving notice of it, and contravene fundamental rights such as free expression and freedom from monitoring”.

The Directive claims that safeguards – including pastiche, parody, and quotations – will be protected, and that meme content has been excluded.

But the algorithms which these platforms will have to implement to adhere to Article 13 are going to struggle to see the difference between infringement and fair use when comparing uploads to content that is registered as copyrighted.

March 25, 2019

The Boston Massacre – Snow and Gunpowder – Extra History

Filed under: Britain, History, Military, USA — Tags: , , , , , — Nicholas @ 04:00

Extra Credits
Published on 23 Mar 2019

Boston, 1770. A frigid winter night. A British sentry strikes a local citizen. Civilians begins to gather. Reinforcements arrive to back up the young sentry. Insults and snowballs escalate. Then out of the darkness comes a shout: “FIRE!”

The Boston Massacre didn’t come out of nowhere — resentment between the early US colonies and the British army had been brewing for some time over the Stamp Act. A propaganda war ensued between the loyalists and the radicals. John Adams would get his revolutionary start as he worked to resolve this injustice…

Join us on Patreon! http://bit.ly/EHPatreon

March 20, 2019

A Supreme Court case that created huge sales tax problems for online firms

Filed under: Business, Government, Law, USA — Tags: , , — Nicholas @ 03:00

Eric Boehm explains why an obscure US Supreme Court ruling is making life extremely complicated for thousands and thousands of online businesses:

… Until last year, that meant Heitman was responsible for collecting and paying sales taxes to exactly one place: the Wisconsin Department of Revenue. But thanks to an under-the-radar ruling from the U.S. Supreme Court in June, he’s now receiving letters, phone calls, and emails from revenue officials across the country, each wanting a piece of his business.

The source of Heitman’s frustrations is Wayfair v. South Dakota, which allowed states to collect sales taxes from online businesses located beyond their borders. Many states view the Wayfair ruling as a potential tax revenue windfall in which the taxes are paid by non-residents who can’t vote against them. That’s why businesses like Heitman’s are now facing the chilling prospect of owing taxes in dozens, and possibly hundreds, of different jurisdictions — while being hounded by out-of-state tax collectors.

Since the Supreme Court issued its ruling in June, Heitman has been scrambling to become compliant with tax commissions and revenue departments from coast to coast. He’s spent thousands of dollars on new software to help navigate the complexities of state sales tax law, but that’s only been so much help. “It almost seems like I have another full time job dumped on me with this sales tax thing,” he says. “It’s burning me out.”

As the 2019 tax season begins, states are ramping up efforts to squeeze extra revenue out of remote retailers like Heitman, putting an expensive new burden on businesses that have found broad customer bases online. The burden is particularly large in the five U.S. states that charge no sales tax, where entrepreneurs could now be charged with paying a tax they have never had to pay before, to a government over which they have no voice. And while Congress could clean up the Supreme Court’s mess, it’s far from certain that it will.

Warren Meyer points out that it’s not just the individual states who are taking advantage of this windfall opportunity to collect taxes from non-residents:

Like most writers, Mr. Boehm actually understates the problem. Because the potential exists not to have 50 new taxing authorities for every sales, but thousands. I have to deal with this every day. I wrote a while back:

    Take Arizona, which seems from my experience to be roughly average. The sales tax rate table is 18 pages long in a small font. There are 29 separate rate categories which each have different rates in each of Arizona’s 15 counties. My business is in 6 counties and we have 3 rate categories that apply, or 4 if you consider items with no tax as another rate category. This is 24 different state/county sales tax rates we charge. But that is the easy part. Because then there are, in addition to county taxes, 92 different towns and cities that have their own rate tables with up to 29 different rate categories that add to the base state/county rate. Other states such as Washington (rule of thumb — if the state has no income tax then it has a LABYRINTHIAN sales and business tax systems) have additional overlay taxes such as for transit and stadium districts.

    When my company opens a new location, we have to spend hours on the Internet and with maps trying to figure out what sales taxes to collect, and even with good due diligence we sometimes get it wrong and find in an audit we are actually just inside or outside some line where the rate changes (we once had a location 30 miles outside of Seattle on a long dirt road where we found we had to collect the Seattle Rapid Transit tax). Thatcher, AZ is a town of like 4000 people but has its own special sales tax rates — do you know where the town line is? Well neither do they, because last time I checked they did not have any sort of online lookup system to tell one automatically if the address is inside or outside the town and its sales tax district…

    But even after registering in all 50 states, you are STILL not done, because many states don’t have a fully unified sales tax collection system. In Arizona, for example, the larger cities require their own registration and monthly reporting.

Meyer is operating a company that has physical assets and employees in each of the states and lesser jurisdictions to which taxes are due. Internet businesses generally only have physical assets in a single state, yet an expansive reading of the Wayfair ruling (the type of reading most jurisdictions will prefer) makes them liable for taxes almost everywhere.

March 16, 2019

MMT – Magic Money Theory

Filed under: Economics, Government, Politics — Tags: , , , , , , , — Nicholas @ 05:00

Antony Davies and James R. Harrigan explain just why so many progressives are so excited about MMT:

Modern Monetary Theory, or MMT, is all the rage in the halls of Congress lately.

To hear the Progressive left tell it, MMT is not unlike a goose that keeps laying golden eggs. All we have to do is pick up all the free money. This is music to politicians’ ears, but Fed Chairman Jerome Powell is singing a decidedly different tune. Said Powell recently on MMT, “The idea that deficits don’t matter for countries that can borrow in their own currency … is just wrong.”

MMT advocates see this as outdated thinking. We can, they claim, spend as much as we want on whatever we want, unencumbered by trivialities like how much we have. But MMT is a bait-and-switch wrapped in a sleight-of-hand. It focuses on debt and dollars rather than resources and products. Debt and dollars are merely tools we use to transfer ownership of resources and products. It’s the resources and products that matter. Shuffling debt and dollars merely changes the ownership of resources and products. It doesn’t create more.

[…]

So here’s the sleight of hand. MMT advocates say that we won’t experience inflation because the U.S. dollar is a reserve currency — foreigners hold lots of U.S. dollars. First, increasing the money supply, other things constant, does create inflation. But when a reserve currency inflates, the pain gets spread around the world instead of being concentrated within one country. In short, MMT advocates believe our government should print money and let foreigners bear some of the inflation pain. Second, there’s no law that says that the U.S. dollar must be a reserve currency. The British Pound was one, but as its value declined, foreigners stopped holding it. Foreigners will stop holding U.S. dollars too as their value declines.

And here’s the bait-and-switch. MMTers say that if inflation does become a problem, the government can simply raise tax rates to soak up excess dollars. In short, the government would print money with one hand, buying whatever it wants and causing inflation. It would then tax with the other, thereby removing dollars from the economy and counteracting the inflation. In the end, all that’s happened is that the government has replaced goods and services that people want with goods and services politicians want.

After a bout of MMT, we might have the same GDP and zero inflation, but what constitutes that GDP would have changed dramatically. Instead of having more cars and houses, we might have more tanks and border walls.

March 12, 2019

A choice between a (small) UBI and not taxing the poor at all

Filed under: Britain, Economics — Tags: , , — Nicholas @ 03:00

Tim Worstall responds to an article advocating abolishing Britain’s tax-free personal allowance and replacing it with a form of universal basic income (UBI):

Sure, we need to have government, even if not quite as much as we do have. Thus we need tax revenues to pay for it. But that tax should be, where it is derived from income, paid by the better off among us. As Adam Smith pointed out, people should be paying more than in proportion to their income. I would actually argue that income tax should only kick in at median income but agree that would require a smaller state than we’ve got now. Actually, that’s why I would propose it.

Still, that does mean that this suggestion fails at that first hurdle:

    The tax-free personal allowance, which rises to £12,500 in April, should be scrapped and replaced with a flat payment of £48 a week for every adult, according to radical proposals welcomed by shadow chancellor John McDonnell. The proposal, from the New Economics Foundation thinktank, is for a £48.08 “weekly national allowance,” amounting to £2,500.16 a year from the state, paid to every adult over the age of 18 earning less than £125,000 a year. The cash would not replace benefits and would not depend on employment.

It’s a universal basic income. Excellent stuff therefore. But the error is to think that this should replace that personal allowance. Assume that they’re including NI in that no allowance thing – if they’re doing it for income tax then they probably will for NI. What that means is that anyone earning more than £50 a week is facing a 40% marginal tax rate (yes, 40%, employers’ NI is incident upon the workers’ wages).

Do we think that’s a just way to pay for diversity advisers? That someone on £50 a week gives up 40% of any income over that? No, we don’t, we think that’s an entirely unjust taxation system. Actually, it’s a really stercore* taxation system.

* Someone’s been at his Latin texts again … I had to look this word up myself. It’s the ablative singular form of stercus, which means “manure, dung; to sully, soil, decay”, according to Wiktionary.

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