Ritchie and progressive taxation

The man is simply incapable of logical thought, isn’t he?

The Conservatives remain wedded to the belief that the richest need tax cuts to encourage them to work whilst the poorest need economic sanctions to achieve the same goal. The evidence is already clear from their actions in the parliament. They have cut the top rate of income tax. They have cut the rate of corporation tax, which benefits those with wealth most. They have increased VAT significantly, which impacts those on lowest earnings most. And they have introduced penal changes to many aspects of the social security system.

This is, of course, economically illiterate. The marginal analysis on which so much conventional economic thinking relies says that the more a person has of something the less they respond to more of it. So, quite logically, the more income someone has the less each additional pound of income is worth to them. Conversely, when someone has very little any change in their income is very significant.

And they’ve also significantly raised the personal allowance thereby reducing marginal tax rates for millions of poorly paid people. On precisely and exactly the grounds that high marginal tax rates on the poor deter them from raising their incomes. And hasn’t this been a policy that Ritchie has fought against tooth and nail?

Damnit: the entire debate about universal benefit is to try to lower the marginal tax and benefit withdrawal rates as people move from no work through some work to full time and supporting themselves. Precisely because everyone does recognise that high marginal rates deter work for both the rich and the poor.

5 comments on “Ritchie and progressive taxation

  1. Precisely because everyone does recognise …

    Well, everybody except Ritchie. And those poor people who take economic and taxation advice from him. Which is actually quite a few people. Including people with significant chances of having their thumbs weighting the scales of justice and power.

    Oh, and most of the media. And people who get economic and taxation advice from the historians, sociologists and film studies graduate who write about finance in newspapers and talk about it on TV.

    So, actually, far from everybody. Not quite “a select few”, but getting there.

  2. And did Ritchie howl when Broon took away the 10p bracket, thus bringing more of the lowest-paid into the 20p bracket?

    If not, why not? (questions to which we have an answer)

  3. As someone whose tax went up back when that happened abacab I was suprised when many others saw it as a good thing. I was on a training course where it was touted as a good thing – and what people would do with their extra money. They had no idea about the poorer workers, those of us working part time or low income.
    They simply could not conceive that a chunk of the working population would be worse off in their pay packet. It simply wasn’t on their radar.

  4. He’s almost deliberating misrepresenting this.
    It’s not “richest need tax cuts to encourage them to work whilst the poorest need economic sanctions to achieve the same goal.”

    It should be:
    “The richest need tax cuts to incentivise them to work, where the poor need economic sanctions to incentivise them NOT to work”

    which is rather different.

    The rich can’t be sanctioned any more because they are net contributors and nothing more can be taken from the nothing they get from the state.

    Conversely, the poor can’t be incentivised by tax cuts because they’re not paying any net tax.

    but that’s an obvious truism so has to be discarded as discredited neo-liberal economics. 🙂

  5. Rats – fouled up my own comment – should be poor need economic sanctions to dis-incentivise not working.

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