The glory of Ritchie’s tax proposals

Taxing investment income at the same level as earned income

Every economist says this is a no no. In fact, the general agreement (on efficiency grounds, if not equity) is that investment income shouldn’t be taxed and even if it is, on equity, at lower rates than income.

Because deadweight costs.

Taxing wealth

Ditto.

A financial transaction tax

Ditto, deadweight costs again.

Much of this we derive from the not right wing at all Nobel Laureate Sir John Mirrlees.

It’s not just that he’s a deluded little fascist it’s that he’s an ignorant one.

22 thoughts on “The glory of Ritchie’s tax proposals”

  1. Tim

    If I were from Neptune I would hazard he’s got the date wrong and actually meant to publish this next Wednesday – Seriously, your post barely scratches the surface of the stupidity – point 4 on Council Tax reform is flawed as well (at least in my conception of how he would apply it)

    He’s what, 56? – thus born in 1958/59 – it’s as though the first 20 years of his life (maybe even the first 30) have passed him by – seriously can ANYONE be that historically ignorant. I’m simply lost for words. Poe’s Law doesn’t even begin to cover it – a deeply misguided individual, and by some margin the most dangerous man in Britain.

  2. He’s not ignorant and he has heard it all, he just doesn’t care. His purpose is to redistribute as an end in itself.
    His rationale on the FTT was quite explicitly to reduce the activity of the City. So he.must know all about the deadweight costs.

  3. Van_Patten

    And in the comments on the post we get it – Carol Wilcox, erstwhile apologist for mass murder if committed on the correct ideological grounds, calls for the revival of the rates, and then Mark Crown (who has shot to the top as the most moronic persistent commentator there), claims that ‘justice’ trumps any concept of disincentive – if you work, you work for everyone else’s benefit – Murphy and his followers are truly the Khmer Rouge of the economic scene – absolutely extraordinary and really the case for franchise reform is now unanswerable…..

  4. Ironman

    I agree that is his purpose – and perhaps I am being charitable in ascribing his motives as springing from ignorance, rather than genuine malice – as you said post his comments on Hodge – Pure. f%^&ing’. Evil.

  5. Sue Queef

    It’s true that there is perhaps a false dichotomy between the concept of ‘good’ and ‘evil’ when considering people’s intentions. We hear a lot on places on this blog, often considered a haven for neoliberalism, Thatcherite doctrines and other creeds which are harmful to the sum of human happiness which has to remain the goal of civil society, about ‘individual liberty’, ‘taxpayers’, and ‘waste in the public sector’.

    It is clear to me that these people are also victims, in a very real sense of this false dichotomy. Indeed by unwittingly being privy to the abolition and reduction of these very taxes designed to promote the overall wellbeing of society, it could be said that these outdated notions of ‘good’ and ‘evil’ are very much our responsibility, and that we have not yet faced up to them. Until we do so, we will remain a Guilty society, bit it is not only our society which is guilty. WE ARE ALL GUILTY!

  6. @ Rob
    “If black is white”.
    The paving of the road to hell comprises the good intentions that are dropped or cast aside as folk progress along it.

  7. In my more charitable moments, I’m pretty sure that Murph actually falls into the same category as Marx and David Irving, and is far too bright to believe the claptrap he sells. Being even more charitable, he deliberately picked Nazism because it’s anathema to the English and so he has no chance of ever persuading enough people to matter – whilst still being able to (very profitably) sell his snake-oil to the wilfully blind.

  8. Tim, have you read the Mirrlees review? It recommends that “Income from all sources should be taxed according to the same rate schedule”.

    (For investment income, there’s the significant detail that it recommends a cost-of-capital allowance, but that’s not at all the same as taxing the income at a different rate.)

  9. Van_Patten, PaulB,

    From the Mirrlees review, chapter 20, “Conclusions and Recommendations for Reform”:

    The combined rates of corporate and shareholder taxation should equal the tax rates levied on employment and other sources of income […] after allowing deductions for the costs incurred in generating income, such as work-related expenses and inputs to production.

    The same document explains that only returns beyond the risk-free rate (i.e. government bonds) should be taxed. Worth a read – or at least search online for “Mirrlees review” and read some of the summaries written by other people.

    The review itself does not appear to be peer reviewed. I’m not sure it’s relevant for a work which doesn’t purport to contain original research, but merely draws on other research. There are extensive citations throughout.

  10. “after allowing deductions for the costs incurred in generating income, such as work-related expenses and inputs to production.”

    Who was it on here who was calling the Continental proclivity to allow deduction of the costs of getting to work a “subsidy”???

  11. It would seem pretty obvious that the statement that the combined corporate and shareholder taxation should be equalled to taxation on salaries is not the same as the statement that the tax on shareholders should be the same as the tax on salaries. But I guess I’m just being a pendant

  12. There is one pretty good reason for taxing all forms of income at the same rate. Different rates are an incentive to turn one form of income into a more favored form, which causes distortions and wastage.

    If the standard rate is low enough, the impact on investment is minimal, I’d think.

  13. after allowing deductions for the costs incurred in generating income

    That would include the interest on buy to let mortgages.

  14. DocBud,

    Yes, but landlords stand to lose out (or not) elsewhere.

    For residential property:

    Replace council tax and stamp duty land tax on housing with a tax proportional to the current value of domestic property

    For commercial property:

    Replace business rates and stamp duty land tax on business property with a land value tax for business and agricultural land, subject to confirming practical feasibility.

    Pretty much any improvement to the tax system that you can think of is in the Mirrlees report. It’s very good.

  15. Mirrlees suggests a road congestion tax over a petrol tax.

    I don’t get why we need a congestion tax. People / companies can deal with that themselves, based upon their own utility with regard to time.

    If the problem with congestion is “fuel used”, then fine, simply tax fuel as we do now, job done?

  16. @ theoldgreenfascist
    This is presumably a definition of “economist” just as putting salt on your porridge is a definition of “Scotsman”

  17. WTF is going on here? TW provides no link to the Murphy piece and Carol Wilcox’s comment but everybody is blathering on in the usual clueless manner and, in the case of VP, libelling Carol Wilcox as an apologist for mass murder.
    TW has thoroughly misrepresented , more like fails to understand, Mirrlees .I should imagine Carol Wilcox who does understand Mirrlees will concentrate on that aspect of his review which answers Worstall’s ill-informed criticism about relative tax rates investment/income.In Chapter 16 of his review Mirrlees describes very convincingly that land and landed property should be taxed differently because the investors in it do fuck all to turn a profit which he illustrates with reference to Henry George whom TW does mention when he is not flattering the vanity of his clientele on here who are frightened by anything the least bit intellectually challenging.He also uses the famous quote by Winston Churchill on unearned wealth from land.No? Well you could do a bit of homework for a change and read Chap 16 from Mirrlees which is available on the Labour Land Campaign website that is curated by Carol Wilcox.
    The TW website used to discuss some interesting ideas but has become just another chat line for chavs who think they can libel people who do know something, on the basis of fuck all knowledge of politics and economics .TW has gone downmarket to an absurd extent with endless maundering about his problems with sex (boring), jealousy of Richard Murphy’s greater influence (don’t care) and recently a Maily Telegraph style discussion about the best ways to execute people.
    This blog is not worth trolling anymore: too common.

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