So who hasn’t read the report then, eh?

To pontificate:

IPPR has issued a report this morning calling for the alignment of tax rates on capital gains tax with the equivalent income tax rate applicable to the taxpayer making the gain. In effect, they are arguing that gains should be taxed as income. This is a policy proposal I entirely agree with, as I noted recently. It is virtually inexplicable that when we are worried about increasing income and wealth inequality in the UK, which organisations as left-wing as the IMF argue is harmful to society, the tax system is designed to exacerbate this trend. I say virtually because for some this is entirely explicable: that increase in inequality is their aim.

The Guardian report on the IPPR proposals is supportive.

Worth actually reading the report really:

The first two are significant: it is a deeply economically orthodox view of tax to think that it is simply a tool for raising revenue that must be maximised in a microeconomic sense as if a government is the same as any other entity subject to the rules of the market, which that microeconomic approach would suggest to be the case. This view, best summarised of late in the IFS’s own Mirrlees Review, is profoundly wrong. It fails to recognise the importance of tax as an instrument of social and economic policy in its own right. I would suggest that the IFS is repeating its own error in endorsing the Mirrlees view in making these comments on the IPPR proposal.

The IPPR proposal discusses, at length, the Mirrlees view and suggests that it’s an entirely viable method of structuring matters. Someone who had read the report before pontificating would know that.

In that case the IFS objection on the grounds of whether or not this policy might raise significant revenue is irrelevant. The whole purpose of equalising tax rates would be to change behaviour. The object would be to remove the incentive to re-categorise income as gains and to as a result minimise the tax avoidance activity that takes place around this rate differential to the benefit of society at large. It really is time that the Institute for Fiscal Studies understood these most basic issues with regard to text design, which their blinkered adherence to orthodox neoclassical economics prevents them doing.

I applaud IPPR’s approach. This change needs to happen.

Well quite. The IPPR models both an inflation allowance and the Mirrlees risk free return allowance. Pointing out that one of the two is – probably – needed in order not to tax illusory capital gains.

But, you know, why bother to read before commenting, eh?

15 comments on “So who hasn’t read the report then, eh?

  1. “a tool for raising revenue that must be maximised”
    Why? Why this obsession with finding the tool to extract the maximum amount of money from taxpayers? They should be extracting *the* *amount* *they* *need*, not the maximum possible.

    We could double our parish precept and double our income – we looked at the figures and at this point there’s little drop-off – but we don’t need that money. We’re currently actually looking at a provision in local government finance regs that let us drop the local tax but still collect the same amount.

  2. Dear Mr Worstall

    Roll on inequality. It is the driver for economic progress and greater wealth for all.

    If we didn’t have wealth inequality, we would not have all of the good things in life that are rolling out of basements and garages and growing into the largest companies the planet has ever seen. We wouldn’t have individuals with drive reaching for the stars, running their own space programmes. The next generation can aspire to their own spaceship, much as the current generation can aspire to their own super yachts and private jets.

    We all become equal when we are dead. Socialism and tyranny in all its flavours delivers that like no other system.

    DP

  3. Correct, jgh. Academics don’t view taxing as the necessary evil that it is.

    ‘The whole purpose of equalising tax rates would be to change behaviour.’

    The authority to tax comes from need for government. Government using taxing authority to change behavior is a sign of fascist control of the people.

    ‘we are worried about increasing income and wealth inequality in the UK’

    “We, the cultural marxists, . . . .” FIFY

  4. But, you know, why bother to read before commenting, eh?

    Why bother indeed. We’re talking about Richard Murphy here. If he bothered to read it he’d end up misunderstanding it anyway.

  5. Of course the usual incoherence from the potato. Article one – i understand MMT better than anyone and as he blathered on endlessly Govts don’t need taxes to pay for spending. Article two we need to raise capital gains to maximise government revenue. Of course article two might be because of his jealousy that others have more money than him, so we need to punish those better off than him. He’s so confused I imagine he tries to put on his underpants by pulling them over his head in the morning.

  6. You should see which orifice he tried to fill first when we brought in the girl donkey on the last shoot

  7. I read through the section on taxation of wealth but did *not* find the inflation-adjustment bit that Gordon Brown abolished; the bit about differentiating “economic rent” from a minimum return on investment did not mention that the minimum return on investment was currently negative. What did I miss?
    Another website claims that it proposes taxation on wealth (not just the income from wealth) at the same rate as income.

    What Tim missed is that it proposes an *increased* subsidy to Council Tenants by replacing Council Tax with a tax on the value of houses, paid by the owner, not the occupier, to the Council and assumes that private landlords will pass on the cost to their tenants by increasing rents (assuming, again, that this will be permitted – it wasn’t by the Lloyd George rules that lasted for more than his lifetime in Opposition).

  8. Ah! Tim has a link to a report that Google does not!!
    Tim’s version *does* include indexation – my apologies to Tim, but imprecations at Google

  9. “In effect, they are arguing that gains should be taxed as income. This is a policy proposal I entirely agree with, as I noted recently. ”

    Well, they should be taxed as income – though that also means capital *losses* would count against income if you want to go that way Murphy.

    “The object would be to remove the incentive to re-categorise income as gains”

    However, he needs to polish up his argument as to why capital gains should be taxed at the same rate as income rather than income being taxed at the same rate as capital gains.

  10. @ Agammamon
    Because if we taxed income at the same rate as capital gains the budget would fail – and in the UK vast amounts of capital losses are not offsettable against income for tax purposes (nor are income losses offsettable against capital gains) and losses on property income are not offsettable against property capital gains or other income. I own a small flat let at nil rent to a charity, as does each sister, and we get no tax break thereby.

  11. “I own a small flat let at nil rent to a charity”

    In other words, you are engaged in heinous tax avoidance on the rent you could be charging

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