Glory be!

Some inequality we can live with. But I agree with Tim Worstall for once; that from rents is intolerable.

So says the Senior Lecturer.

The contribution of Worstall to this debate is to a) make clear there is a rational justification for some inequality that very few would argue with and b) to suggest that over and above that some levels of inequality may be tolerated as well, of which he provided examples. But his failure to note the real causes of rent induced inequality indicates to what extent the likes of the Adam Smith Insititute and other right wing think tanks are part of the problem on this issue by ignoring and even seeking to exacerbate a problem that they know exists.

Fail, eh?

First, let’s name the rents. These include limited liability, which enables some to make money at cost to others because debts do not always have to be paid. That’s a state provided benefit that should be paid for by higher taxes on income recorded in this way, and on distributions from it.

And standard economics keeps telling us that returns to capital should be taxed more lightly, if at all.

Then there are the rents facilitated by copyrights and patents, which have more than anything else facilitated the rise of new wealth and the increasing divide in society resulting from the tech economy and the growth in intellectual property rights.

And I’ve pointed out a number of times that the system of IP is a solution – a partial one to be sure, one not perfect – to the public goods problem. Something we o need a solution to. And as to the taxation part he really should read that Mirrlees Report he so disdains. The one which has a solution to this – effectively try to tax not the normal return to capital but only excess profits. Excess profits, we might – not must but might – assume coming from collecting an economic rent. But, you know, people who know what they’re talking about concerning the economics of tax aren’t likely to be within the Senior Lecturer’s ken.

After that there’s monopoly power that goes unchallenged by the state even though it is an abuse.

I applauded the US govt hammering the tech companies for trying a monopsony through collusion. I even bemoaned how they weren’t punished enough. All in favour of breaking such monopolies therefore, publicy so.

And there are economic externalities such as pollution and the exploitation of natural resources that create rents when not corrected.

I’ve repeatedly said that externalities should be taxed into the price system. I’ve also repeatedly said that resource rents should be taxed until the pips squeak. I ignore these things how?

Which list also ignores rents resulting from the control of land, and its non-taxation in a great many situations.

Britain gains more of its public revenue from the taxation of land than any other OECD country. I’m also a vocal supporter (as is the ASI) of land value taxation. We really don’t ignore this point.

That also hints at the rent return to lobbying to permit light regulation and low or no tax. This might be at its worst in tax havens but it is commonplace everywhere.

And we also note that strict regulation aids the incumbents given the bureaucratic overhead of complying. You know, creating that moat which allows the collection of economic rents?

That is, Ritchie’s problem is that he simply doesn’t understand, at all, what we’re all saying about things which concern him. Or even, that our solutions are not his means they must be rejected. Despite us, by and large at least, going with the grain of the economics and the real world.

19 comments on “Glory be!

  1. “First, let’s name the rents. These include limited liability, which enables some to make money at cost to others because debts do not always have to be paid. That’s a state provided benefit that should be paid for by higher taxes on income recorded in this way, and on distributions from it.”

    Tax Research is an LLP, so why is that?

    “And I have an LLP because the professional indemnity insurers of my accountancy practice asked me to sue a different (non self employed) structure from it – and an LLP was the best and most transparent option available. I never sought limited liability

    But have I actually campaigned against limited liability anyway? Pragmatically we have it. I campaign against abuse of it – again, something quite different”

    http://www.t*xresearch.org.uk/Blog/2010/08/06/ireland-undermines-investment-in-south-africa/

  2. Noel

    Of course having an inactive spouse (from whom one is now separated) who knows eff all about tax as a member of a tax LLP with a tiny profit share to enable the LLP structure is not abuse, candidly, in Mr fvcking Humpty Dumpty land.

  3. “effectively try to tax not the normal return to capital but only excess profits. Excess profits, we might – not must but might – assume coming from collecting an economic rent.”

    Hmm. Haven’t read the reports from the review (which volume is it in Tim?) but this looks deceptively simple.

    First off, how to define the “normal” return to capital? Looks a bit like trying to define the natural rate of interest. Then how do you determine “excess profit”, and who gets to do it? It looks to me like you’d end up with a system of corporation tax which is easily gamed.

  4. My point was that this is something which has been considered, a possible solution offered. But Ritchie of course doesn’t know that.

  5. There may have been a justification for Ritchie using a LLP while running his accountancy practice but didn’t he sell it about 15 years ago? The man is a liar and a hypocrite.

  6. > Britain gains more of its public revenue from the taxation of land than any other OECD country.

    On aggregate, yes. But we over-tax business and under-tax housing (compared to the theoretical amount that could be taxed without unduly disturbing the underlying economy). As a result we have fewer businesses than we could; with all the downstream effects on employment that that implies.

  7. And he’s mostly wrong about copyrights and patents.

    Most of Google’s innovation in search is trade secrets. Doesn’t leave their offices. Same with Facebook. Not sure Amazon have patents of any value, but again, the value is behind closed doors.

    In fact, the likes of Google and Facebook open source most of their public facing stuff (like the React and Angular frameworks).

  8. Limited liability is a government benefit attracting a corresponding tax?

    So does Directors liability attract a tax break?

    Also, let’s have a limited liability tax on individuals too because they have various bankruptcy and insolvency protections.

    But even so, he seems to make a very good living out of his nonsense, so he is still an excellent con-man. Please note that none of his cons entail any risks of legal liability, criminal or civil.

    I continue to praise him, for it is immoral to let a sucker keep his money, and his relationship with the left proves again, as if it were needed, that the left are suckers.

  9. Noel

    How is a company which pays no tax due to losses b/f eligible for a Fair Tax Mark?

    Murphy was apoplectic about banks being able to use losses to set against profits

  10. Noel,

    Fresh Eyes encourages its travellers to consider the impact of their travel on the environment and to do what they can to reduce their carbon footprint whilst educating themselves about the world they live in. We encourage fairly traded travel within Europe, where using public transport options often assists in arriving at or exploring a region. We also encourage our travellers to show solidarity with these rural areas who will benefit from responsible travellers and the income that they bring.”

    Fuck me, the company should be rebranded to “Lefties on Tour”.

  11. “But we over-tax business and under-tax housing”.

    I tend to think that we over tax everything. Actually, when you have wateraid’s advertising message which says “your donation will be matched by the UK government at no extra cost to you”, you know we’re paying too much tax. Aside from the sheer stupidity of that phrase.

  12. Didn’t Spud make a big song and dance about shareholders not really being owners of the company a couple of years ago based on the fact that they can’t walk and and demand to see the books or exert operational control?

    The flip side of that is limited liability, when the managers do something illegal the shareholders can’;t be sued.

  13. A rare acknowledgement that TW supports Land Value Taxation.He can now keep quiet about it for another couple of years on this blog. And who sees the ASI as the leading proponents of LVT? They are best known for moaning about all tax on business not for insisting ,as Adam Smith makes clear, that the government has a perfect right to tax land value uplift.

  14. ‘Some inequality we can live with.’

    Inequality is the only possible state. We must live with COMPLETE inequality.

    Inequality is a Lefturd weapon against humanity, a reification fallacy in their usage.

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