Sounds sensible

President Francois Hollande is pushing through legislation to increase taxes on beer by 160pc to help fund struggling social programmes as France tries to contain a budget deficit hit hard by the economic crisis.

Tax consumption, not incomes. And tax the consumption with the least elasticity of demand to price.

Blimey. Has a Frenchman actually done something economically sensible?

16 thoughts on “Sounds sensible”

  1. I hope, for his sake, he’s not considering visiting Flanders any time soon. Very intense views on beer, les Flamands

  2. There’s raising tax and there’s raising tax. He might have read something about economics, but he’s not heard about the Laffer curve. At that increase tax income will drop like a stone as everyone starts making moonshine or just not drinking at all. Either way the social programmes are going to suffer.

  3. Tim bangs the drum for evil, once again.

    See, I’ve been slagged off for this before- including being denounced as some kind of leftie, lolz- but this is why I distinguish a “right wing” economics from a real “free market” economics.

    The Old Left want to tax the rich and give it to the poor.

    The New Left want to tax everybody, and give it to themselves.

    Libertarians want low taxes.

    And the “Right” use free market arguments for low taxes on rich people, and their companies, and their houses, and so on, and high, regressive taxes on… the poor, for whom a tin of beer or pack of baccy is a much higher proportion of their income.

    In this, the Right and the New Left are united. Poor peoples’ pleasures need to be taxed away from them.

    And really, this is pretty despicable. Especially when they then ferret around in economic history to try and prove that this attitude is “classical liberal” or the like. It might be Joseph Chamberlain Liberal Party liberal, but liberal in the true sense of the word it sure ain’t.

    There is the inescapable fact that the marginal utility of a single currency unit to Bill Gates is microscopic compared to that of a poor person. It is mind-bogglingly unjust to argue for the transference of the tax burden onto those latter high marginal utility currency units.

    I politely suggest that those arguing for “taxing consumption” send the Treasury a tenner every time they have a beer, and leave the rest of us with our hard earned cash.

  4. I agree with IanB. One of the nice things about France has been that the cost of living is very low compared with Britain, because they take the egalitarian view. Living well should be cheap because there are poor people about. If you are doing well you pay at source, i.e. high income taxes.

    Clearly they’ve spent too much and income taxes are far too high but the solution to that is not to make the cost of living higher, it’s to cut spending.

  5. Fortunately, the alcohol from wine has no harmful effects while that from beer is nearly always fatal, so this is obviously a good and sound idea.

  6. Nothing of the sort – this merely shifts the usage. People will switch to drinking wine (much lower tax) which of course the idiot Hollande knows he can’t tax for fear of popular unrest.

    It is consumption of alcohol that is inelastic not consumption of beer. Non?

  7. i>Libertarians want low taxes. And the “Right” use free market arguments for low taxes on rich people, and their companies, and their houses, and so on, and high, regressive taxes on… the poor, for whom a tin of beer or pack of baccy is a much higher proportion of their income./i>

    Well, I’m a libertarian. BUT, surely there’s a point at which if you want to maximise your returns you incentivise things that create value (eg companies) and tax things that don’t (consumption)? It’s regressive, sure, but the alternative is disincentising value creation.

    In any case, baccy is available from your friendly neighbourhood smuggler tax free, so I don’t think anyone cares. As, if the whinging government is to be believed, is a lot of tins of beer. Because if you insist on artificially inflating the price of things well above their market value then people find ways around it, like smuggling.

    Poor peoples’ pleasures need to be taxed away from them.

    This is pretty despicable, I agree. Where we would part company is that I would suggest that people getting beered off their faces in a town centre, vomiting, and smashing in the face of a passerby is also pretty despicable, whereas people getting smashed in the privacy of their own homes and having a long and boring argument about, oh, I don’t know, house prices or economics may be tedium made manifest but it’s at least an elective vice. So if you proposed a taxation system that reduced the former but allowed the latter I’d be all for it.

  8. So Much for Subtlety

    Ian B – “And the “Right” use free market arguments for low taxes on rich people, and their companies, and their houses, and so on, and high, regressive taxes on… the poor, for whom a tin of beer or pack of baccy is a much higher proportion of their income.”

    Well as someone who is pretty comfortable on the Right, I am unconvinced by that. I do think taxes are too high, but if taxes we must have, then I have no problems with taxing the rich. It is better than taxing the poor. I loath VAT for just that reason. The problem is the rich just don’t have enough money.

    “There is the inescapable fact that the marginal utility of a single currency unit to Bill Gates is microscopic compared to that of a poor person.”

    But that is not the right question. The right question is what would Gates do with that single currency unit and are we better off if he does. The more we tax people like Gates, the less investment we will get. Thus lower growth. The poor may be worse off. Even if he didn’t invest it, he is funding malaria research which is probably the single best thing anyone can do with a single currency unit these days.

    But I strongly defend the right of the poor to have a cheap beer if they want. Even two. And a smoke. The problem is not really taxation. The problem is fiscal incontinence that cannot spot spurting our money all over the place without the slightest effort at an aim.

    The non-LT;DR version – if we are to have taxes they should come directly from income. Even if that means higher rates. They should be targeted to people who need them. But they should leave their targets better off. That is, the welfare state as it is now is an abomination not because it takes from the middle class and gives to the poor but because it destroys lives and creates fecklessness.

  9. “Taxing consumption” is a popular error amongst people of a libertarian bent.

    It ties in with the error committed by Tim of wanting to reduce the interest rate to below a free-market rate. To incentivise investment, you see.

    Consumption taxes are worse than income taxes (both corporate and personal) because companies pay them even if they’re not making a profit. Companies don’t pay tax on investment anyway (the money for it comes out of pre-tax profits), so you don’t need to tax consumption separately to incentivise investment.

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