Depends

Which benefits?

The chancellor is preparing to channel cash to poorer families in his budget as part of a mini-fiscal stimulus to kick-start the economy and protect the vulnerable. Senior cabinet figures are backing a campaign by more than 110 Labour MPs, including some ministerial aides, to top up benefits or the tax credits paid to low-income parents.

If it\’s any of the means tested ones then it\’ll just increase the marginal tax benefit withdrawal rates faced. Thus worsening the overall situation.

5 comments on “Depends

  1. Does he not realise that government is a (inefficient) transfer agency?

    Kick-starting the economy by punishing those creating economic growth is truly an idiotic idea.

  2. Exactly Tim. And meanwhile commentators (e.g. on today’s Politics Show) are blaming the “free-market system” (as though they know what that means) for limiting social mobility and increasing the gap between rich and poor.

    Basic Income and Flat Tax – the only solution to this problem if we are going to have state-funded welfare.

  3. state-funded welfare is the problem.

    A citizens dividend funded out of an LVT is much more sensible and puts the government below the people rather than as their owners as taxes on income suggest.

  4. ACO,

    Basic Income = Citizens Dividend = Universal Benefit = (sort of) Negative Income Tax. So we agree on that bit.

    But, as I posted to the Sounds in the Hickory Wind website (http://wordsinthehickorywind.blogspot.com/2009/03/timmy-has-this-post-which-directs-to.html) after you posted a similar comment on there:

    Land Value Tax is more pernicious than any of our existing taxes. It disincentivises improvement. It makes the false assumption that most increases in land values are attributable to public-sector actions, when most increases are actually to do with (a) availability of credit and (b) supply and demand. It provides an incentive for planning authorities not to give permission, to drive up prices in the area and therefore increase revenues. It threatens to turn out on the streets widows who are unlucky enough to live in an area of rising prices whose pensions cannot cover the increasing values. In Spain, of all places, [that’s relevant to the other blog, but it’s true here too] you should understand that land values move in a way that is not necessarily related to real wealth or ability to pay. There is a reason why sensible policy-makers have ignored this since the days of Henry George, but I fear that in these particularly stupid times, there is a bandwagon of irrationality gathering behind this idea.

    And can you explain this thing about how one type of tax versus another puts the people above or below the government? I’m not being sarcastic, I really don’t get it. If anything, a LVT being based on something bureaucratic and subjective like an assessor’s opinion, rather than on something objective like how much you pay or are paid, gives the government more arbitrary power over us, not less.

    To be fair, I should imagine both our priorities would be lower government expenditure and lower taxes in the round. And I am no fan of taxes on employment (e.g. income tax) either. I would like to see the balance move more towards taxes on consumption and away from taxes on employment. But this being an exercise in choosing the least bad option, to me the right balance of taxes on consumption, income and profits is better than trying to replace any significant proportion of that revenue with a LVT.

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