Polly\’s tax ideas

You can tell that this isn\’t going to work out well, can\’t you?

Compass, the centre-left pressure group, has again come up with the new thinking that Labour\’s high command seems to lack. <a href=\”http://www.compassonline.org.uk/news/item.asp?n=5924\” title=\”In Place of Cuts – whose authors include Howard Reed, the former chief economist of the Institute for Public Policy Research, and Richard Murphy, of Tax Research UK – offers a plan to rebalance the tax system so that the rich pay a fairer share, and enough cash is raised to avoid frontline cuts.

Polly and Ritchie designing our tax system. Ho hum.

A curious paralysis has gripped the country where the mostly idle threats of a few high-fliers to flap off to Zug or St Helier send a frisson of panic down the spines of the nervous. Research by the Work Foundation shows how few would go: most are born and bred here, with families, children in school and elderly parents. Tightening the non-dom rules would mean they\’d have to stay well away or pay tax like everyone else.

Sigh, if you\’re born and bred here then you\’re not going to be a non dom, are you? If you\’re born and bred here, except in very exceptional circumstances, you\’re going to be a dom.

It does hit top-rate taxpayers hard – the cumulative effect of these changes will add 12.6% to their tax bills, most of that paid by the top few per cent.

Well, a little more than just \”hard\” actually. 50% income tax, both sets of NI (yes, they want to lift the limit on NI) and we\’re at marginal tax rates of 75% before you\’ve got out of bed in hte morning. Anyone think that this might put us on the other side of the Laffer Curve? Possibly that this might just be counter productive in the amount of tax raised?

Not read the report yet (later!) but there is one thing that puzzles. Raising the tax rate so that we can keep the public spending engine roaring…..umm, isn\’t that just as fiscally contractionary as cutting spending to the level supportable by current taxation*?

* Please note that while I\’m willing to entertain the idea that there are different multipliers I really do not think that the end result as measured in growth of having Richard Murphy, Neal Lawson and Ed Balls spending our money is going to be higher than if we spend our money. I just cannot imagine a version of the universe in which this could be true.

One comment on “Polly\’s tax ideas

  1. I think the point being missed here is that there are other means of tax avoidaance apart from leaving the country. Since, Compass asserts, no legislature to date has ever managed to say clearly and unmistakably what it meant (and if you believe Carl Popper it is impossible to speak so that you cannot be misunderstood) then there will allways be loopholes, and these will always be found. Failing that people might decide to spend more time with their family, enjoy themseelves more- and leave the thicko’s to actually run things.
    The only way round this is to have some all knowing Angel running things- trouble is I’m the only one I know.

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