A dry point made by Clifford Chance in their analysis of the FTT

The FTT is therefore perhaps the first tax in history which is being proposed in the knowledge it will reduce tax revenues.

There ain\’t gonna be any extra money to spend on anything folks!

13 comments on “A dry point made by Clifford Chance in their analysis of the FTT

  1. Isn’t the main point that its supposed to reduce the trading of all those nasty capitalist bankers or something so that we can live in a land of milk and honey?

    Anyway, we’ve known for a long time that its the good intentions that count and not the outcomes in some left wing circles.

  2. LBC are having a phone-in now on the FTT – hosted by Iain Dale.
    Despite numerous requests they could not get anyone from any of the campaign groups supporting such a tax to defend their position on air.

  3. mmm…maybe the London Congestion Charge! the aim was to reduce vehicular traffic…so it should have resulted in less revenue per annum, if it had worked out as devised.

  4. The FTT has never really been about raising revenue. Nor has it about stabilizing the financial system. At its core, the FTT is extistential: It is an attempt to punish traders for existing.

  5. The FTT is therefore perhaps the first tax in history which is being proposed in the knowledge it will reduce tax revenues.

    I thought this was also the nominal justification for taxing booze and fags?

  6. “nominal justification”

    Sure, as in “name only”. I have, at times, fantasised about having the ability to wave a magic wand and make everyone in the world instantly become a non-smoker. The shrieks of anguish that would issue from every Exchequer on the planet would be marvellous to behold. The second stroke of the wand, however, would be to inflict a nasty and lingering death on all the neo-Puritans since, having achieved their goal, they would have become supernumerary.

  7. A lot of taxes are promoted on the grounds that they will reduce activity of some kind, or for that matter, the prices of the things in question. For example, the land value tax brigade have, in my recall, defended this tax because it will curb land speculation and hence, reduce prices, or at least the rate of price rises for land.

    But as Tim says, when people advocate a tax that will reduce revenues, you have to wonder what universe they inhabit.

  8. It may reduce the overall tax revenue, but what if who collects what proportion of that tax yield changes? Would tbis FTT be collected by the EU? If it reduces economic activity and hence national tax revenues, isn’t that in effect an implicit transfer of revenue from countries to the EU?

  9. “the first tax in history which is being proposed in the knowledge it will reduce tax revenues.”

    Apart from the UK’s 50% income tax band, of course.

  10. I thought this was also the nominal justification for taxing booze and fags?

    Indeed. The stated aim of Pigou Taxes in general is to reduce the doing of Bad Things which generate notional externalities.

    Since, however, most governments don’t like reducing their income, Pigou Taxes are instead pitched at revenue maximising; every Pigovian Tax adjustment is in fact testing the elasticity curve for the sweet spot.

  11. Johnathan-

    For example, the land value tax brigade have, in my recall, defended this tax because it will curb land speculation and hence, reduce prices, or at least the rate of price rises for land.

    I intermittently debate with Mark Wadsworth and his friends, and what comes out of it to me is that Georgists in general never seem to be sure what they’re trying to achieve; sometimes they’re “recapturing externalities”, sometimes they’re trying to reduce land ownership, sometimes they’re attempting to create a bottomless pit of money for “public works”; the latter being the same reasoning as those who want to tax “profits”; in each case the money being taxed is seen as a dead weight on the economy (due to flawed pre-marginalist Ricardian-style) analysis so you can take as much of it as you want with only positive economic effects resulting. As with Ritchie’s reasoning on corporate profits.

  12. diogenes and John B – congestion charge, booze taxes, etc. are not the same as this.

    Yes, they intend to reduce the amount of the taxed thing that is done, but they still expect some of the thing to still be done, so they expect tax to raise more money than not having the tax.

    (OK, perhaps marginal for the congestion charge, because of the high cost of collection and enforcement, but even that’s still positive from the government’s view because it’s more money flowing in for them to spend on employing more supporters. The Tobin Tax actually means less money flowing in to the coffers.)

    It is true that a big increase in the rate of the congestion charge or booze taxes would reduce the overall revenue collected, but that’s just comparing the yield of a particular tax at different rates. The Tobin tax is different – actually introducing an entire new tax that will lose money.

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