In which Ritchie argues against Corporation Tax and the Robin Hood Tax

This is just terribly, terribly, amusing.

Several people have already referred in comments to Simon Jenkins’ article in the Guardian on tax today – which is very good (everyone has their day). I recommend it.

As he concludes:

Property taxes cannot be evaded, and properly imposed are a fair generator of government revenue. Better, they are traditionally paid in anger. Any tax paid in anger is a good tax – the opposite of a stealth tax, because the payer demands to know how it is spent. Property taxes are thus a spur to democratic interest and activity. That, of course, is why politicians detest them.

Two things: this is not a plea for an increase in council tax, it is a plea for property land value taxation to capture wealth as a tax base.

Second, Jenkins’ point on tax and democracy is a good one. I have argued there are five reasons to tax:

  1. Raise revenue;
  2. Reprice goods and services considered to be incorrectly priced by the market such as tobacco, alcohol, carbon emissions etc.;
  3. Redistribute income and wealth;
  4. Raise representation within the democratic process because it has been found that only when an electorate and a government are bound by the common interest of tax does democratic accountability really work; and finally to facilitate:
  5. Reorganisation of the economy through fiscal policy.

Jenkins is specifically endorsing point 4 – one that few people seem to understand but which seems increasingly important.

Ritchie\’s (and Sir Simon\’s) argument here is that taxes must be visible. Those who are paying it have to know that they are in fact paying it. Only then will the peasantry rise up and demand acountability.

It\’s a very good point and one which I heartily endorse. For of course that very point is the killer blow to corporate taxation and to the Robin Hood Tax.

In both cases the claim is made that it is the company, or the banks, that will pay the tax. Yet we know absolutely that this is not so: corporations and banks do not, cannot, pay tax. As even the new economics foundation has realised, such taxes are paid by some combination of suppliers, consumers, workers or shareholders.

Such taxes are thus invisible to those who are really paying them: which means, by Ritchie\’s own reasoning, that they are bad taxes and should be abolished, to be replaced with taxes that are visible and which thus create that democratic vigour which is so desired.

Excellent, I look forward to him campaigning on the point.

12 thoughts on “In which Ritchie argues against Corporation Tax and the Robin Hood Tax”

  1. I occasionally think we should abolish PAYE for precisely this reason. If we had a tax system more like the US’, we’d probably have lower taxes.

    Of course, the fact that I have to do this anyway is entirely beside the point. 😉

  2. I think that’s pretty weak Tim, you know very well that tax incidence etc. is an argument relative to how things would be otherwise, including consequences of levels of investment relative to counter factual, and you also know that at any point in time those who run companies certainly feel like taxes reduce the money they have at their disposal to invest, pay dividends, pay salaries etc. that’s why they like lower taxes. The political economy argument works perfectly well with firms rather than individuals: in return for paying taxes, the corporate sector may demand decent services from government, hold government accountable etc.

  3. @Luis Enrique: how exactly is the corporate sector supposed to hold the government accountable then? Last time I went to the polling station I didn’t see any limited companies waddling in to vote.

  4. Jim, it might be a good idea if they did. Businesses can vote for the City of London council elections, and that seems to be much better run than most local governments.

  5. ” The political economy argument works perfectly well with firms rather than individuals: in return for paying taxes, the corporate sector may demand decent services from government, hold government accountable etc.”

    I thought the left didn’t like it when companies lobbied the government

  6. Although land value taxes, for example, are visible to the landowners who pay them, they would not, presumably, be immediately visible to the renters of property that is hit with a LVT. It is that “tax incidence” thing again.

  7. “Although land value taxes, for example, are visible to the landowners who pay them, they would not, presumably, be immediately visible to the renters of property that is hit with a LVT. It is that “tax incidence” thing again.”

    Quite, although if the tax is attributable to the land, and identifiable as such, then the share that the renter is paying could be disclosed. Where the tax element of a transaction is attributable it is often given (e.g. VAT, IPT, taxes on flights – though I don’t know which of these require the disclosure by law, as VAT does) because, one presumes, ‘sellers’ like to be able to point out which bits of their charges are down to the nasty taxman.

  8. On the pain and visibility test, poll tax is surely even better. History suggests that people notice it.

    By the way, I apologise for being a dumdum but I have never quite understood how a land value tax works in the absence of transactions. Would every property/plot in the country have to be valued individually each year ( if not quarterly)? As there is no market value in most cases, should a selection of valuers be used each time to mimic a market value? Would rebuilding costs have to be calculated each year to deduce land values of built property? Or would there just be set of half a dozen rough and ready bands with valuations every 20 years or so and not at the same time, like council tax? Would that meet any equity test, let alone be acceptable, let alone survive legal action if LVT was many times higher than Council Tax? Or have I missed the point?

  9. The “taxes on flights” thing is just the airlines trying to make sure that the passengers know how much of the cost is govt attributable. IIRC, the only thing that they have been required to disclose are their fuel surcharges.

    BTW – VAT disclosure isn’t required until the amount is (IIRC) several hundred pounds. Causes me endless Excel when I am trying to do (cook?) the books.

  10. Sweden has a property tax. It is hugely unpopular, totally skewed in application, (revaluation of property value doesn’t happen) and is the main reason that high earning Swedish nationals live in Monte Carlo. A study of property tax in practice by proponents would not go amiss.

  11. “property land value taxation to capture wealth”

    For “capture”, of course, read “confiscate”.

    I’ve spent half my life (the productive half) accumulating enough capital that I’ve now built a nice house and don’t owe anyone a penny.

    I now approach the time (aka “old age”) when I won’t have any income stream except enough to cover the bare essentials of heat, light, and food.

    But it’s OK, because I don’t owe anyone a penny, and my home is my own which nobody can turn me out of. I’ll just stay here and mind my own business, causing no trouble to anyone.

    Ah, but now these unspeakable bastards, having already helped themselves to about half of what I produced, when I was able to produce anything, are going to take that away the other half as well.

    I’m almost tempted to cancel the insurance, burn the bloody place down, and apply for a council house.

    Is there any point in being provident, prudent, and paying one’s way? Any at all?

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