Snippa speaks!

Third, we know that when George W Bush permitted such a low tax on repatriations during his time in office it did not promote investment or growth. It did instead let profits flow to shareholders by way of dividends or share buy backs at low rates. I am sure the same thing will happen this time.

And then what happened to the money?

After those investors had paid their taxes (15% income tax on dividends, perhaps 20% on capital gains) what did they do with it?

They either invested it or spent it upon consumption. Those being the only two things that can be done with it.

The tuberous snippa would improve the quality of his economic analysis if he were able to actually work his way through an economic question or example….

Fourth, whatever anyone thinks about the Laffer curve we know that cuts to rates of around 35% reduce revenue.

Which is to think that the US only has the Federal tax system. Which ain’t true of course, whether we are talking individual or corporate income taxes….

Perhaps it’s time to stop using the polite snippa. Already.

Ely Sage basic income

Of course, there are objections to UBI, mainly revolving around how it would be paid for. However, since the financial crisis we know that governments really can create money out of “thin air” so in reality that argument is a non issue. UBI would perhaps lead to problematic inflation but the best guard against this would be to introduce it gradually. Additionally, government creation of money for UBI would be from a non debt source and thus banks’ money and credit creation could be more substantially controlled with much less effect on the economy, with the added advantage of less indebtedness to create the same amount of money overall.

We’ll just print the money and give it to everyone.

Hmm.

Snippa Spud

Two recent conversations gave me the clues I needed to unwrap my own thinking.

The first of those conversations was about the need for change. During it I was reminded that it takes courage to create change. But more than that: it takes courage to see ourselves in a true light, which we have to do if we are to realise that change is required.

The second was about my dog. Someone commented on his apparent obedience. And it is true that he does seem to be remarkably good at obeying my commands. But as I explained, his whole freedom to walk without a lead and so to explore the world as he sniffs it is based on his willingness to accept the constraints I impose. In a strange way that takes courage as well. It requires that he trust me.

Our relationship to the State should be as a spaniel to a Snippa.

You know what, I don’t think that’s an idea I’ll sign up to.

M. Le Professor Pomme de Terre

Simon Saize says:
April 23 2017 at 5:21 pm
The purpose of the Great Repeal Bill is to bring the corpus of EU law under the aegis of the British parliament. The Henry VIII powers are needed to re-word the legislation to make UK agencies responsible for enforcing the legislation.

The next phase (and it may well last a decade or more) will be for Parliament to scrutinise this mountain of regulation item by item and then amend, repeal or continue with each measure.

Reply
Richard Murphy says:
April 23 2017 at 5:57 pm
Simon

Do pigs fly past your window at frequent intervals?

I have to say that if you want to post here it’s best not to use what looks like a very fabricated name that happens to shorten to SS and to then post propaganda

Richard

It’s propaganda to rightly describe something these days.

Spud blight

What, then, is that ‘something’? That is the question that needs to be asked. I think the answer is apparent. It is about advancing the neoliberal cause…….. Like all neoliberals her one goal is to push back the state and increase inequality.

Isn’t it interesting that inequality has been declining these past few years?

The so-called Great Repeal Bill, with its Henry VIII clauses that willdeny accountability, will reduce employee and environmental rights, harm the protection for those with disabilities (as if that could still be imagined), diminish universal rights to health care, harm security in old age, damagingly bias markets in favour of big business and foreign owned companies, remove legal protections, probably claw back against LGBT rights, undermine social stability and encourage the break up of the Union. But none if this will matter to May. She will have fostered the self interest of the few, increased their access to the state as a means for appropriating its common wealth for private gain and will have put in place mechanisms that will be contractually hard for successors to unwind. That is the goal.

And amazingly the Great Repeal Bill does absolutely none of those things. It simply encapsulates all of those protections we currently derive from EU law into British domestic law. Not a single one is repealed.

So how’s that for Spud’s blight upon the body politic?

Spud’s off on one again

He’s realised that developed countries tend to have a higher tax share of GDP than poor ones. And thus:

And, as is clear from the line of best fit that Charles has added, the trend is very obvious: as tax rates increase so does GDP. You could argue it’s the other way round but I would very strongly challenge that because government spending is part of GDP and whilst the link between government spending and tax is not direct, what is apparent is that the spending comes before the tax (as I have argued in The Joy of Tax, for example) and so it is GDP that drives the tax flows and not vice versa.

In which case when you have under employment, low productivity and low inflation why on earth would you want a low tax economy?

There’re a number of things he’s missing. Logically, even he’s not saying that higher tax does it. Rather, he’s saying that higher government spending does. It’s still true that tax is the cost of gaining that.

But of course there’s more. Perhaps richer people desire more public goods? Maybe more social insurance? Could be that tax is low in poor places because taxing the people will kill them through starvation? What if there’s some sort of Laffer Curve, or Kuznets maybe, here? Up to some level of GDP then more government – and thus spending and tax – does make the place richer and above that it doesn’t.

For example, the US and UK are richer than France or Finland. So, who is at the sweet spot?

Correlation, as we know, does not show causality…..

The Sage of Ely speaks out!

And I will say at the outset that this election troubles me.

It troubles me because it shows contempt for a decision of parliament to hold elections every five years.

And it troubles me because it is intended to reinforce a decision to Brexit that parliament did not take and which a majority of parliamentarians, we know, do not want.

Umm, the majority of Parliament does not support a referendum decision. That’s a pretty good reason to have a parliamentary election, isn’t it?

Finally, it troubles me because, like Erdogan’s ‘success’ in Turkey, this election is designed to reinforce the imposition of the view of a minority in this country on the majority. That’s of massive concern for the stability of the whole of society.

52% is a minority these days, is it?

Bless eh, Bless

The budget had just one message: there will be no general election in 2017

There is still no beginning to Spud’s talents. This was written 6 weeks ago:

What the white spaces say is that there will be no early election. The giveaways would have been much bigger if there were to be, and the pain on the self employed would have been deferred.

Next, note the growth downgrades: they don’t signal anything like enough confidence to justify going to the country as yet.

And so take it as read as a result that the decision is to wait until 2020. Then May thinks that post Brexit all will be well and she will be swept to victory.

I suspect that’s also how Gordon Brown felt in 2007, on balance, when he too proved shy of the electorate. And look what happened. He, of course, did not discuss recession in 2007. And Hammond did not discuss Brexit today. But the recession was the end for Brown as Brexit will be for May, I suspect. An election postponed is all too often one lost. Today, without anything being said, an election was postponed. And I can’t see it being won as a result.

City really did make such a wise choice, didn’t they?

Oh

He concluded

  • “[the economic debate could be improved] if GERS and all the nonsense that goes with it is dismissed as another example of Westminster’s contemptible attitude to all things Scottish
It seems Richard still hadn’t grasped that GERS has nothing to do with “Westminster’s attitude” to anything, because it’s the sole responsibility of the devolved Scottish Government.

In an effort to put this misunderstanding to bed once and for all, I made a Freedom of Information request. The Scottish Government replied with the following (full Q&A in notes below7)

The Scottish Government statisticians and economists who produce the report are responsible for the methodologies and assumptions it contains. [..] The revenue and expenditure statistics in GERS are produced in the Office of the Chief Economic Adviser, in St Andrews House, Edinburgh.” – Scottish Government

The most charitable interpretation I can offer is that Richard waded in without doing his homework. Like a late arrival to a bar-room brawl, he charged in swinging blindly and didn’t realise he was actually punching the Scottish Government’s own economists and statisticians. In the face. Repeatedly.

Out bidding Spud

Shadow chancellor John McDonnell said if Labour wins the next general election it would “close the loopholes through which large corporations swindle the public”. He said the “tax gap” between what companies should be paying and what is actually received by the exchequer amounts to some £36bn.

Where in buggery does that number come from? That’s even larger than Spud’s fantasy about corporation tax receipts.

But wouldn’t it be fun if such returns were published? For the past? We’d see that there was no Vodafone bill nor deal, Starbucks, Boots, none of them did anything even odd.

From the book

He’s missed what we mean by markets being efficient:

If markets are to be efficient in the way that economists have described — and as those who suggest they provide optimal solutions profess to believe they operate — then there must be the highest-quality information available to all market participants so that they can act rationally, allocating resources to the person who is best able to use them to maximize return, and who exposes the provider of capital to the lowest risk in that process. Very obviously, tax havens undermine these principles. They are in fact designed to deny market participants the information they need to act rationally, allocate resources efficiently and minimize risk. … If risk is increased, then the required rate of return within marketplaces also increases. This means that the number of projects that can be invested in is reduced, so that the amount of capital committed is diminished. As a consequence, productivity declines, and along with it growth, output, wages and profits

But that’s not what we mean by market efficiency. Rather, we mean that markets are efficient at processing information. It’s entirely opposite. It’s not that markets are efficient thus we must make sure markets have lots of information. It’s that because markets are efficient everything that people know will be efficiently incorporated into prices.

For people trade on what they know. Thus some people knowing something means they trade, that knowledge is then in post-trade prices.

He’s simply got the idea of efficiency entirely the wrong way around.

Aviation’s another thing he doesn’t understand then

The FT quite appropriately notes the big issues facing airlines after Brexit this morning. Put bluntly, no one knows whether UK based aircraft will be permitted to fly into EU airports after 30 March 2019, and if they are on what routes they will be permitted to fly.

Err, no, not really.

Some of us have noted that before the EU, before the EC and even before the EEC, planes would take off from British airports and land at continental ones smelling funnily of garlic and boiled sausage. Even, that flights depart from the UK each and every day to places which are not part of the EU.

But there is another much more relevant and immediate question to also address. If any restrictions are likely, and I think they are, then why is it that we still need a new runway at Heathrow? It seems to me that Brexit has completely shot the case for that. We are not going to be the gateway to Europe now, and never will be again. And what is more, we may not even have the flights to make the links.

I would seriously suggest it’s time to scrap plans for Heathrow’s expansion. We’re just not going to need it.

Well done, leap to unwarranted conclusion based on not understanding reality.

The concern is actually over cabotage rights. The ability for a British airline to pick up a passenger in, say, Leipzig and deliver them to Faro without going anywhere near the UK. And we already know how they’re going to deal with this, set up within EU subsidiaries.

Spud still doesn’t understand the word rational, does he?

The error was in basic economics and is telling. It tells us that the Treasury still clings to pure market theory. This says that people are rational and perfectly predict the consequences of the future in their current behaviour.

No, if people could perfectly predict then Keynesian stimulus would not work because Ricardian Equivalence (no Professor, go and look it up, you’ll learn something that way). That Ricardian Equivalence only partially works some of the time means that we don’t think that people do perfectly predict.

And that’s not what we mean by rational anyway. All we do mean is consistent. And that really is explained in he entry level text books. You should try reading one one day.

But what happens when the Curajus State is incompetent?

Concerns over HMRC’s IT ability should be growing rapidly. Recently it was revealed that some taxpayers are being asked to submit paper tax returns this year because HMRC’s IT systems cannot be programmed to correctly calculate the tax that they owe.

Today there are reports that brewers cannot submit their monthly duty returns for March online because the system cannot handle the change in rates during the month. Paper returns will be required instead.

That is, we’re ruled by fuckwits therefore they should have more power.

Not convinced myself, not convinced

Simon Saize says:
April 12 2017 at 9:19 pm
By the way, I thought this retort of yours to Hague was classic:

“I don’t care if anyone agrees with me. I’ve changed the World; I’m sorry for you if you haven’t”

Well said!

Richard Murphy says:
April 12 2017 at 9:35 pm
Let’s be quite clear: I was referring to the world of data, where I think I can justify that claim

I rather think we’ve had people making shit up for centuries now.

Good Lord, he’s demanding Professor even in the headlines!

Professor Richard Murphy: Kevin Hague thinks Scotland should know its place – I don’t

Sigh.

You know, like Paul Krugman and Joe Stiglitz both insist upon headlines which read “The Nobel Laureate, Professor…..”

I’m the very model of a modern professor sorta stuff, eh?

As in backfilling and fluffing:

I would have thought anyone who values good government would agree with what I said. What I offered was my professional opinion as a chartered accountant and professor of political economy (which is a pretty rare combination) on what might make for the best decision-making for the benefit of the people of Scotland. The result may show a deficit, or not. That was not my point. That point was we need to know using the best data available and we need to know what can best be done about it – GERS does not permit that.

Well, no, that’s not actually what he said.

But, as I stressed, I’m qualified to offer opinion on this issue, and have not been frightened to challenge vested interests on data issues over the last 15 years or so.

Snigger.

All I am interested in is getting that information so life in Scotland is better for everyone. I hope all politicians who are committed to the future of the country share that view and demand better data now.

The original complaint was rather that better data did not and could not exist….

And back to the beginning here. Our professor of practice of international political economy does not know that there are three ways of determining GDP. He is demanding information about taxation and spending which is indeed difficult to work out at the sub-national level. Which is why the GVA figures, for regions and smaller statistical areas, relies on the other two possible ways of measuring GDP, incomes and production. Both of which are very much easier to locate geographically. That’s why ONS uses these two methods to work out GVA down to something like local authority level.

He’s wrong, as we know he must be, our task at any one time only being that we’ve got to work out why he’s wrong in this specific instance.

Umm, yeah Spud, umm, yeah

There are three ways they do this. All should be obvious to anyone who has studied economics. First, those who have done so will know that effective markets that allocate resources efficiently require what economists call ‘perfect information’. That means (absurd as it sounds) that everyone has to know everything about everyone else’s intentions in the market. Now, I admit, that perfect information never exists, simply because it is obviously impossible that it can. But what is true is that the closer markets get to fulfilling this assumption the more likely it is that business risk will be low. That’s because businesses will know who can, and cannot pay them for what is sold, and so avoid bad debt. And investors will also have the information they need on which corporations are good at using their capital, and which aren’t. What tax haven secrecy does is deny businesses and investors that essential information. The result is that risk goes up, and so the rate of return required on investments increases, which reduces the amount of investment that actually takes place, which in turn cuts productivity, and that reduces real wage rates, and so GDP, and the result is we all suffer as a result.

But that’s only the first cost that tax havens impose on us. The second is that tax havens create unfair competition between businesses. That is because some business will, as a result of their inability to access tax havens, pay tax and whilst their competitors who can use tax havens will not. This matters because to work properly markets require that all businesses compete on a level playing field. With tax havens in the mix that clearly does not happen. And that means that those that do not pay tax have an unfair competitive advantage over those that do. This means that they can either undercut their tax paying competitors on price or they can invest more out of their after tax profits, which will of course be bigger because little or no tax will be paid. The result is that the taxpaying businesses tend to disappear: they simply can’t compete. But that’s not how markets are meant to work.

Tax havens decrease investment because of risk, lower returns meaning less investment. But tax paying, which reduces returns on investment so much that only tax haven based businesses can complete, does not reduce investment, no sirree!

At which point economists are rolling in the graves they’re not in yet. Because the standard analysis, something which escapes Spud, is that taxes upon investment reduce the amount of it, to our general detriment.

Sheesh.