Richard Murphy\’s economic argument of the day.

And as for what to do on April 22 – lest we forget it, budget day – the answer is simple. We do need a fiscal stimulus. Not less than £25 billion.

Mebbe, mebbe not. But that\’s not the intense joy to be found in his argument.

But I accept not all should be paid for by debt. Minimum tax rate of 32% on those earning more than £100,000 – removing all allowances to achieve this is a start. Make it 40% minimum tax on all earnings at £200,000. Charge NIC at 11% on all investment income over £5,000 pre annum (pensioners apart). Abolish the domicile rule.

He, err, wants to pay for a fiscal stimulus by raising taxes.

No, not got it yet?

A fiscal stimulus is when we increase the gap between the money being spent by government and the money raised by government in taxation. That\’s actually what it means.

So if you decide to raise government spending and fund it by raising taxes then you\’re not in fact increasing that gap. So you\’re not having a fiscal stimulus at all.

So, Richard Murphy\’s considered economic opinion is that we should fund our oh so necessary fiscal stimulus by making sure that it isn\’t a fiscal stimulus.

Genius!

 

 

16 comments on “Richard Murphy\’s economic argument of the day.

  1. If tax and spend could ever be thought of as a fiscal stimulus Labour would have been shouting it from the rooftop for decades.

  2. Even if raising tax was a good idea, why such complicated ways of doing it? Allowances that are adjusted according to income, adding an income and age related NIC to investment income. (NIC is a bad joke these days anyway, thanks to the introduction of the MIG/Pension credit. Might as well rename it as Second Income Tax).

    This is a fiscal stimulus package, but only for his accountancy and HMRC bureaucrat mates.

  3. This is idiotarian. I suggest you look up the ‘balance budget multiplier’.

    Tim adds: If I thought Murphy was that sophisticated I’m sure I’d have to shoot myself.

    However, the problem with that balanced budget multiplier is that it depends upon household savings to work. As such savings are down to 1.1% of GDP (http://www.guardian.co.uk/money/2008/jun/28/savings.creditcrunch)
    then it’s really not going to be much of a multiplier now, is it? I could certainly make the argument, indeed, so could you, that the inefficiencies of government over private spending are greater than 1.1%. Meaning that this action would lead toa reduction in aggregate wealth, not an increase.

  4. Mmm, your post gives the impression that you’d not heard of it. Anyhow, it’s also it’s pretty idiotarian to use data from June 2008, we’re now in March 2009 and guess what…

    Household savings leapt from 1.7 per cent as a proportion of disposable income in the third quarter of 2008 to 4.8 per cent in the final three months of last year, the Office for National Statistics reported on Friday.

  5. I took a look at the world according to Richard Murphy and think it is a good advert for avoiding hallucingenic drugs.

  6. I have left a few comments on Richard Murphy’s rantblog over the last few days. I agree with some of what he says but some of it is pure pie in the sky.

    He left a couple of comments having a go at me for not being able to argue and calling me limited etc. I left a comment that I wasn’t interested in an argument and stopped the playground stuff when I was about 12. Not surprisingly he didn’t let that one passed the censorship but did e-mail saying it was you doing the playground stuff.

    My point was proven…he didn’t say my dad is bigger than your dad but I could tell he was thinking it!

  7. What Murphy is saying *is* consistent with Keynesian ideas.

    Rich households spend less and save more. Poorer households spend more and save less. So a “stimulus” can be obtained by redistributing taxes. This applies even if the average savings rate is low, that doesn’t matter, what matter is the difference between the groups redistribution is occurring between.

    This is of-course all Keynesian nonsense and only works if you think “stimulus” is a good idea.

    As Tim says I’m sure Murphy isn’t educated enough to know this.

  8. Dennis

    The phrase “Dick” Murphy used which I took exception to was “And directly as a result of what tax havens do 1,000 children die every day.” I then made a sweeping statement based on his time at KPMG and their connection to tax evasion in Bermuda. He took my light hearted comment quite badly!

  9. John-

    I understand completely. He got quite huffy with me after I spent a bit of time at his blog attempting to (a) correct a number of errors he had made involving basic accounting principles and their application, (b) educate him on U.S. GAAP and financial statement presentation and (c) get him to clarify a number of sweeping and unsubstantiated statements regarding the conduct of various multinational corporations and Big Four accounting firms.

    I’ve since moved on to bird-dogging his sorry ass over at my blog.

  10. Dennis

    After having a go back, he won’t let me respond! The silly thing is, if he had said in his opinion the activities of offshore tax havens indirectly contributed to the death of children every day, I could accept that…but he is clearly saying that tax havens (I don’t care whether anyone thinks they are good or bad) are directly killing 1,000 kids a day…it’s absolute tosh. He’s supposedly a Chartered Accountant and has a code of ethics to uphold (as I do as a qualified professional) and I’d be interested to know what the ICAEW would say about this and indeed the ICAEW members who operate in “tax havens”.

    Anyway, what’s your blog called?

    Cheers

    John

  11. Kit, of course there are criticism of the BBM. But if, as Tim does, you take a patronising tone of weary regret in teaching someone something, you’d think you mention it, wouldn’t you?

  12. It look’s Murphy’s is making up comments on his own blog to keep his theories going. Take a look at his Jersey tax evasion story from today…it’s full of holes and doesn’t stack up…it can’t be true and certainly wouldn’t make it past any respecting paper’s inhouse legals. Of course, I did comment pointing out the inaccuracies and how the activity described is public knowledged etc; I would have expected a secrecy jurisdiction not to publicise the sort of activity he has drawn attention to but they do…they’re called private trust companies and they exist all over the world. Anyway, it looks as if within a few days of posting on his rantblog that I am no longer permitted to post!

  13. I wonder if you should take Richard Murphy seriously. The Republic of Ireland transformed their economy by attracting multi-national companies like DELL, Microsoft by competing on tax. On the front page of the IDA website is a link to Irish Tax. Fig 1. Corporation Tax rates. Ireland 12.5%. Singapore 18%, Switzerland 21% China 25%, Netherlands 25.5% UK 28% Germany 30%. I quote “Almost 1,000 Multinational Corporations have chosen Ireland as their strategic European base, attracted by our pro-business, low corporate tax environment. The Irish Government is committed to retaining the 12.5% corporate tax rate on trading income until at least 2025. Irish legislation now provides that an Irish resident parent company may offset against its profits any losses of a foreign subsidiary resident for tax purposes in the EU. This is provided that the losses cannot be used in the local jurisdiction.”

    The UK mainland has a population 20 times that of Ireland, with more resources of every kind. If the UK offered similar tax incentives the so called Celtic Tiger would be extinct.

    Now Richard Murphy is Irish. I believe he is a patriot and it is strongly in Ireland’s interest for the UK to maintain or even worse increase tax rates. This is exactly what Mr Murphy campaigns for. All those who approve of Richard Murphy’s rants against wealth creators would do well to examine his motives and backers carefully.

Leave a Reply

Name and email are required. Your email address will not be published.