Ritchie should learn more economics

We\’re told why we cannot just abolish corporation tax and tax money when people receive it instead.

Yet there\’s something missing from the analysis. A very basic piece of economics actually.

The entire economy, every single little bit of it, ends up in the pockets of an individual someone, somewhere.

Ineed, this is one of the ways in which we can measure the economy: we can (and in fact do for certain reasons) add up all the incomes of everyone everywhere and that is GDP.

This method measures GDP by adding incomes that firms pay households for the factors of production they hire- wages for labour, interest for capital, rent for land and profits for entrepreneurship.

So now we know that the entirety of all eonomic activity ends up in someone\’s pocket, somewhere.

So, if we wish to tax economic activity we know that we can do so simply by taxing what ends up in peoples\’ pockets.

We may not desire to do so, this is very true, we may desire to do other things with taxes and tax other things than incomes.

But there absolutely is not the sort of problem that Ritchie insists there is, that we must tax companies because we must tax the intermediary, the intermediate bit, because, as we can see from the above, all company profits end up in the pockets of someone, somewhere, and can thus be taxed at that level.

6 thoughts on “Ritchie should learn more economics”

  1. He says in a recent report that there are 500,000 companies not paying £16 billion in tax due (£32,000 each).

    This means that 1 household in 46 is hiding about £100,000 in profits.

    So if you live in a village of 300 households you will know, or know of, 6 of these types.

    Seems unlikely to me.

  2. But if you leavy all tax at the individuals pocket, then eveyone would become aware of exactly how much they are being taxed. Richie isn’t too keen on that I would think.

  3. So would the profits of sole traders be untaxed until spent? That would be the logical conclusion of your argument that taxes can’t fall on capital (i.e. your claim that corporation tax falls on wages, which as an empirical claim I’m not in a position to deny).

    Better I think to have a corporation tax at the same level as a flat rate income tax and not tax dividends.

    If you don’t tax corporate profits, you are providing a big subsidy to incorporation (as we do now): effectively a subsidy to limited liability. But if anything limited liability creates negative externality.

    With your idea of flat rate personal taxation and no corporate taxation, you going to have even worse IR35-like issues than we have now.

  4. @fjfjfj “So would the profits of sole traders be untaxed until spent?” No, because by that point they are in the hands of the individual. Undrawn profit *then* becomes capital that has been left / reinvested in the business.

  5. Well, I’ve been arguing for a long time that we need to abolish corporate personality (and all other imaginary personality). Then it becomes obvious that only individuals can ever bear the tax burden.

    So, make every person a “business”, which is what every person is. Abolish state recognition of employment. Abolosh income tax. Have every individual pay a profit tax. If you have money left at the end of the year, you pay tax on it. If not, you don’t. Therefore, no excessive virtual marginal tax rates on switching from benefits to employment. No taxing of the poor and paying it back in credits. No disputes over whether “companies” can or do or should or shouldn’t pay tax. No more Ritchie.

    Whole economy and taxation issue solved. Utopia attained. Every day the first day of Spring!

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