Tax Justice Network: still ignorant

….but like other too-good-to-be-true patent remedies, the idea that tax cuts for business stimulate investment and growth just won\’t die.

Sure, the reason it won\’t die is because it is true.

From the OECD:

The results of the analysis suggest that income taxes are generally associated with lower economic growth than taxes on consumption and property … These findings suggest that a revenue-neutral growth-oriented tax reform would be to shift part of the revenue base towards recurrent property and consumption taxes and away from income taxes, especially corporate taxes.

Note that this is nothing to do with tax levels: it\’s to do with the tax mix. The more you bias your tax collections to the corporate income tax and the less towards consumption (ie, VAT) and property taxes, the lower will be the growth rate for any given level of total revenue collection.

It\’s one thing to argue about higher tax levels, greater public services and so on, I might disagree with the TJN but that\’s just fine. But for them to continue lying about the basic economics of taxation is really just not on.

10 comments on “Tax Justice Network: still ignorant

  1. You have to consider the fundamental political dynamic that gave rise to the TJN, UK Uncut, et al.

    Most of the organised left in the UK is utterly statist in its thinking. It believes that state intervention is the solution to nearly all social and economic problems, so the best way to improve the general well-being is to increase the size of the state as rapidly as possible.

    But every increase must be paid for. Old Labour tried to do it by taxing the rich until the pips squeaked. New Labour realised that this was no longer politically viable so they borrowed money instead. As a result we now have such huge levels of debt and deficit that we have to urgently reduce the rate at which the government is borrowing to avoid disaster.

    So the growth of the state has suddenly slowed down. It may stop or even go into reverse. To the statist left, that is equivalent to a sudden halt in the progress of human civilisation. They will fight tooth and nail to prevent it, but doing so means finding vast new reserves of wealth to tap.

    Therefore they are engaged in an increasingly desperate struggle to find new things to tax, and to demonise “the rich” so that their wealth can be expropriated. There will be years of this stuff before the statist true believers finally fade into political irrelevance.

  2. To accuse TJN of lying seems a bit harsh. Odds are they’re just too stupid to understand the economics of taxation. After all, have you ever seen anything by TJN that suggests they understand taxation? Or economics?

    No, lying is a bit harsh.

    I mean, who are we really talking about when we say “Tax Justice Network”, eh?

  3. one of the amazing things about some people is their ability to base political beliefs on obviously false premises.

    How can this statement be even remotely controversial?

    …..tax cuts for business stimulate investment and growth……

    Its fine and respectable to say, “I prefer government spending on increasing equality rather than higher growth”, but claiming that decreasing business costs will not increase growth is just loopy.

    Take any other business cost, eg the price of energy. Imagine writing the above sentence thus:

    …. energy cost reductions for business stimulate investment and growth….

    Nobody would bat an eyelid. Why is tax any different to any other cost?

  4. For the Left pissing away tens of billions in welfare is ‘investment’, in fact to them all government spending is ‘investment’. So you can see why they’d be confused by real ‘investment’

  5. How about:

    energy cost increases for business will stimulate investment and growth in the green energy sector“.

    That’s a perfectly normally lefty trope. So, certainly, eyelids would be batted. Why expect them to get hard questions of tax incidence correct when they are quite clearly blithering idiots?

  6. Left-leaning doublethink:

    a) An increase in tobacco tax will discourage smoking and lead to fewer deaths.
    b) An increase in alcohol tax will discourage drinking and lead to less antisocial behaviour.
    c) An increase in petrol tax will discourage driving and reduce air pollution.
    d) An increase in income tax will not cause people to work less and will not change economic performance.

  7. @Don – nice try, but you might be wrong.
    The thing is, in the case of tobacco, alcohol and petrol taxes, the income and substitution effects work in the same direction. Higher tobacco taxes both encourage us to switch spending to other things, and reduce our income, thus giving us less to spend on everything, including tobacco.
    However, with income taxes, the income and substitution effects might work in opposite directions. As work becomes more expensive because it is taxed more heavily, we might be inclined to do less of it. But on the other hand, if our income falls, we might work more or longer in order to recoup our losses; for example, if I hadn’t had to pay tax in the last 25 years, I’d be retired by now.
    Whether the income effect overcomes the substitution effect or not is a tricky empirical question. The left might not be guilty of doublethink here.

  8. if only local councils worked out that by raising local rates they empty the high streets leaving only charity shops (who are exempt) and pushing everyone to retail parks and the internet

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