This progressive consumption tax just gets better and better, doesn’t it?

In the long term we cannot consume our planet

So tax has to ultimately discourage excessive consumption

As noted in previous comments, consumption = production and either and both are economic activity. He is insisting that we should all be taxed in order to make us poorer. Not, well, yes, but think of the joyous things we can buy with the tax: he is insisting that we must all be poorer.

The charge would be on flows through bank accounts excluding those under common control

It includes corporate bank accounts, of course it does.

I readily admit: this is an idea that I have not modelled as yet. The precise rate is not clear: they would be low.

But we can have a stab at it. He says no tax below £20k in this scheme. Just for ease of calculation call that £25k as we can pretend that that is mean income, close enough for this. All of the economy is income to someone: he’s not differentiating between labour and cap[ital income here.

So, the entire burden of the £100 billion in tax must be carried by the 50% of the economy on more than mean income. Economy is £1.7 trillion, meaning that the £100 billion must be coming from £850 billion in incomes and thus the rate is 12%.

12% on bank transactions, eh?

I could have made some horrible logical error there but I don’t see it if I have.

OK, you can split it out, 6% at the business end paying out and 6% at the receiving end but that’s still 12%.

But that does really have to be the rate. Simply because he’s exempting those below (or about-ish) mean income, and presumably everyone’s first 20k or so. And thus he’s trying to raise £100 billion from something that cannot be larger than £850 billion. Actually, given that his exemption is about mean (or median maybe) income then the rate would have to be higher than that, wouldn’t it?

61 thoughts on “This progressive consumption tax just gets better and better, doesn’t it?”

  1. Not to mention that the assumption that consumption inevitably means ‘consuming the planet’ is ludicrous. Where is it going? Are travel distances therefore getting shorter? Is a Vogon constructor fleet involved?

  2. The good thing about all this is that it is revealing that the neo-puritans really do just want to make everyone poor and miserable, which will ultimately destroy their support as it did last time. If you accept my thesis that post-war liberalism was a direct reaction to Victorian Wave puritanism.

    I’m still not dead by the way.

  3. “So tax has to ultimately discourage excessive consumption”
    HTF’s that work? Unless he’s thinking about just destroying the tax take – reverse QE, anyone? – the tax ends up back in the economy. Even if it’s in stipends to 1/5th university economics professors, it’s still going to end up as consumption.

  4. His plan is meant to deter such consumption. He is also budgeting £100bn from this level of consumption. But deterring ‘excessive consumption’ means less revenue.

    We all know that the base level permitted as tax free will be somewhere around that of the working class in Sunderland in 1934. As a Quaker and closet green he simply won’t permit you any more than that.

  5. Someone called ‘Peak Murphy’ a few weeks ago, and I think they were spot on. First the failure/decision to not be on the Corbyn economic team, now this. Its all over, and he’s back to trawling the Greens for ideas again. Suddenly its consumption and economic activity we need less of, not Soviet style economic plans building roads and infrastructure across the land.

    Thing is I almost feel sorry for him, it must be a terrible feeling when he realised who else was being invited by Corbyn onto his panel, and the realisation that he would have to match up to some real intellects, who knew what they were talking about, and he (deep down) knew he was bull-shitting. That lack of self confidence in ones ability can be ignored most of the time, but being made to face it like that must be a hard pill to swallow.

    I said almost.

  6. Also, how is a tax ‘progressive’ when it hammers a young couple on £35k with two kids more than a single person household on £70k?

  7. Yes. The basic idea is that the State provides you with “needs” like housing, which is “sufficient” (i.e. basic and not at all opulent), a communal wash house, a job, transport to the job, a public library and a park to sit in. You then are allowed a small amount of pocket money which is insufficient to purchase beer or other corrupting luxuries.

  8. He’ll be safe with the Green party then. There’s no level of lunacy or bizarreness they are unable to stomach. The loonier the better.

  9. Luis

    I think the implication is that this is in addition to income tax but might replace National Insurance.

    I’m trying to remember the mainstream economist who advocated such a tax, it might have been Mervyn King or John Kay. However it was clearly a replacement for all other taxes and they had done very little thinking on the difficult implementation issues.

  10. Jim: “Thing is I almost feel sorry for him, it must be a terrible feeling when he realised who else was being invited by Corbyn onto his panel, and the realisation that he would have to match up to some real intellects, who knew what they were talking about, and he (deep down) knew he was bull-shitting”

    Who would that be Jim?. Murphy would be an ideal candidate for Jezza’s nuthouse gang except he is not a good enough actor/bullshitter to make his evil sound semi-palatable even to the hard of thinking.

    IanB: Welcome back.

  11. Given that the end purpose of *all* production is consumption, and it is this production that provides employment etc, I guess he’s too thick to realise that he wants to discourage excess employment………

    And reduce GDP.

  12. Tim,

    I don’t understand your calculation.

    If £20K at x million people is exempt, then isn’t it simply the difference between that and total GDP which one has to find the £100 billion from?

    If there was no inequality – everyone earned the same amount (and that was about £20K) – then obviously it would be impossible!

    Even with substantial inequality, it’s still a very big % number from each of us for the part that we consume in excess of £20K. I’m ignoring corporate?

    If he said he hadn’t thought it through, at least he’s got something right.

  13. It’s the progressive bit that is scary. There is enough tax avoidance (legal) and evasion (apparently according to Richard!) that takes place already, and this is when all employers has to do (for the majority) is operate PAYE and deduct tax and NI.

    But for “a progressive consumption tax”, we are surely going to need “annual returns of consumption” for everyone?

    That’s the point where I would start to believe his tax gap figures!

  14. As has been pointed out on the other thread bit bears reapeating, this would be a massive boon for single people who have paid off their mortgage. I’d compare it to the great Alan B’stard’s proposal for assessing VAT on mortgage payments.

    And of course it would be a nightmare for families over the threshold with mortgages or rent.

  15. He wants to introduce this because he thinks it is abzzurd to tax wealth creation, yet he has previously called for swingeing wealth taxes.

    He wants to encourage wealth creation yet discourage consumption. Why create that wealth? Why bother?

  16. This has finally convinced me of something I have long suspected: that he is using voice-recognition software to reply to comments on his blog

    Richard Murphy says:
    October 2 2015 at 8:19 pm
    The withdrawal of the cash would carry a charge

    A person with a low rate of transaction tax in proportion to income could be investing gated and surcharged if they could not prove why

    I really do not see the issues as being insurmountable in any way

  17. In fact, He is suggesting replacing NI, which raises 115 billion, with this, which would raise 100 billion. He may not be aware that even though 100 billion is a lot, 115 is more.

    The difference is that the burden would move quite dramatically.

  18. Professor Richard J Murphy CDM GCSE(Econ)(Failed)

    He may not be aware that even though 100 billion is a lot, 115 is more.

    I am well aware of the difference

    I have calculated it. It is twelvety billion

    That is your last comment here

  19. @Mr Ecks: while you might not agree with the politics of Corbyns economic panel, they are serious people. Stiglitz is a Nobel winner. They may be Lefty twits, but they aren’t in the RM league of stupidity and he’d have been found out pretty sharpish.

  20. “If £20K at x million people is exempt, then isn’t it simply the difference between that and total GDP which one has to find the £100 billion from?”

    Other complications:

    Not all of the £20K allowance at x million people will be taken advantage of.

    Who is chargeable? Everyone (60m) and hence everyone gets the allowance, and can transfer it (so families get some relief to avoid the inequity others have pointed out)? Or just working people (30m)?

    And of course some types of expenditure are bound to be allowable (separate from the £20K).

    Using variations, I can’t see the “in excess of £20K” rate being less than 10% average (on working people) or 20% (if everyone gets an allowance and it is easily transferable).

    Whatever it is, it is certainly not 1.5% max?

  21. Jim:
    Somehow I think we are some way away yet from Peak Murphy; but, sooner or later, he will implode messily, I suspect. He does seem a little crest-fallen recently; but I do not have the slightest sympathy for him because – quite regardless of his foolish views – he is an arrogant, bullying egotist.

  22. Jim,
    There’s also the ludicrous preening.

    By His own admission, he hasn’t yet modeled this. So, it’s really just a nebulous idea.

    It can be summarised as: “it would be good to remove taxes on employment, and to discourage excessive consumption.” This is just pub talk, and there’s nothing new here.

    But Murph can’t resist, “I have created ….. “

  23. @Theophrastus: No, I think he’s done. Even Corbyn is rowing back from PQE now, and this latest idea is utterly insane, even for the Hard Left. And its not an idea he’s just chucked a blog post out about, its something he’s committed to in a published work of (alleged) scholarship, so he can’t just pretend he was thinking out loud. This was a considered (by his standards) economic taxation model, which everyone else will look at and see the equivalent of a child’s creation made out of cornflake packets and toilet rolls.

    No-one who has even the slimmest chance of getting hold of the levers of power will ever give him the time of day from now on, he’s toast. Its the Greens and his toy trains from now on.

  24. From the horse’s mouth:

    “banks assisting those to shift accounts out of the UK would be liable for estimated taxes owing”

    If one doesn’t have an account with a bank, how exactly are they going to be liable for a “non-customer”.

    I’m not that convinced his garden shed is much of an asset to him?

  25. It’s really just the classic neopuritan conundrum. They want everyone to work (as hard as possible) but they don’t want them to produce anything, which is bad for the planet and bad for the soul. Even the communists wanted their tractor factories to produce tractors. The Proggies want a tractor factory that doesn’t actually produce any tractors. So rather than “Good news comrade, tractor production is up!” they want “Fab news Jemima, tractor production is down!”.

  26. Meanwhile the following may help England later:

    1) Take the 3 points if that’s the sensible option, but go for the try if not.
    2) Be parsimonious in defence, expansive in attack (you can fill in the details).

    I have not created this Theory of Total Rugby for personal gain, I might add. Though if a grateful nation insists on being grateful, who am I to resist?

  27. Now I understand.

    His responses to Geoffers are basically along the lines that things like overseas accounts won’t work as HMRC will be able to investigate all those people with a low rate of transaction tax compared to their income.

    “A person with a low rate of transaction tax in proportion to income could be investing gated and surcharged if they could not prove why”

    Translated as HMRC need more staff… That’s that box ticked.

    Note also the fascist “guilty until proven innocent” comment.

    But also, in which case, what’s the point? Why not just tax income if he wants to try and grab money from (or investigate) everyone who isn’t in fact consuming their income?

    He really is not thinking. And he’s had time to work all this through and include it in a book..??

  28. Jim: Not so.

    Yes Jezza’s gang may not sit around amusing themselves by flicking their bottom lip up and down but that does not mean they are intelligent. They may be serious about the evil they plan. So is Murphy. They might be slightly less rash in the shite they talk. That is all.

    Nobel prize? Obama has a fucking Nobel Prize. In science it might mean something–and even then probably only that you know the right crowd.

  29. Tim,

    Have you considered that Murphy was simply not batshit insane enough for Jezzer? Seriously.

    Allegedly, this is Jezzer’s new political adviser:

    http://www.telegraph.co.uk/news/politics/labour/11889394/Ban-sackings-scrap-the-City-create-a-three-day-week-The-world-according-to-Jeremy-Corbyns-new-political-adviser.html

    “Scrap the Channel Islands” [ Arnald, run! ]

    “Scrap the City of London”

    “Put private land in public ownership”

    “Let renters buy property automatically from landlords” [ Make your mind up! ]

    “Let workers take ownership of companies”

    “Let customers buy out companies” [ FFS… ]

  30. “As a Quaker and closet green he simply won’t permit you any more than that.”

    I’ll have to call you out on that, Quakerism is the exact opposite of authoritarian “do as I tell you”-ism.

    Quakerism includes an ethos of: this is how we think a certain lifestyle would improve people’s lives, we hope we can persuade you, but if you don’t, it’s your life to mess up. Green Murphy-style puritanism is an ethos of: we believe this is how you should live, and we’ll destroy your life/livelihood if you don’t do what we tell you is best for you – which is exactly what the American puritans actually did to Quakers.

  31. I cannot help but think that the “mean” value will drop and quiet significantly if this idiotic canard is allowed to escape and contact reality. Of course, certain “protected” groups will be less affected by this foolish notion.

  32. “A person with a low rate of transaction tax in proportion to income could be investing gated and surcharged if they could not prove why”

    Cunt. You have to prove that you don’t spend a lot of money. If you can’t you are fined. Cunt.

  33. @ Rob
    This is a malicious extension of the very effective means of rooting out corruption in Hong Kong when it was undere British rule – any civil servant who was observed to be spending a lot more than his salary had to explain why and how.
    The difference is that anyone in the private sector saving up for his/her old age would get clobbered.

  34. So explain it to me if I have it wrong. Transactions are charged on bank payments and receipts. Say at 1% each.
    – Payments in cash will increase exponentially to save the 2% due. Opportunities for tax evasion also increase
    – Barter will increase
    – Low margin and trading businesses will be driven out of business as the transaction charge will be higher than the margin. For example when I worked for a grain merchant we worked on a 2% GROSS (not net) margin and that grain may have been bought and sold several times to mitigate risks. So if it had been bought and sold 5 times paid in and out the transaction charge is 5 times the gross margin
    – Incestuous trading will increase. If you can buy from a customer rather than a third party you can offset debts and reduce costs, this reduces competition especially in low margin businesses
    – Small companies that operate through
    intermediaries will be hit. Tesco can buy direct ingredients from the farmer, pay the processor for the processing, etc. The final price is one receipt and multiple payments that add up to one payment out transaction and profits. A small shop has one receipt, one payment to the wholesaler who in turn has a payment to the their supplier. Each layer in the supply chain adversely affects small suppliers by 2% compared to the large suppliers. WHY DOES MURPH WANT TO SUBSIDISE TESCO V SPAR?

  35. Mike W
    “Payments in cash will increase exponentially to save the 2% due. Opportunities for tax evasion also increase”

    Nonsense – credit cards charge 2% -4% commission, and nobody asks to pay in cash to avoid the commission. In fact, you can even pay your bus fare with your credit card now.

    People do not give a monkeys if ripped off by banks.

    People take out 1000% interest loans at Wonga, how interested are they to save 1% “consumption tax”?

  36. Bloke not in Cymru

    “A person with a low rate of transaction tax in proportion to income could be investing gated and surcharged if they could not prove why”

    If the point is to curb consumption then surely a person with a low rate means you have been successful.

    So either

    It won’t reduce consumption so low rates are cheating
    Or
    It will reduce consumption so there will be lot of false positives, the investigation of which will increase the cost of collecting the tax at the same time the tax take is decreasing

  37. So Murphonomics is based on giving people more money to spend (Peoples Quantitiative Easing) and then punishing them for spending it?

    I’m a bit lost at this point.

  38. Matt Usselmann

    Nonsense – credit cards charge 2% -4% commission, and nobody asks to pay in cash to avoid the commission. In fact, you can even pay your bus fare with your credit card now.

    Errr – that’s because the retailer takes the hit, 99 times out of 100 the consumer doesn’t see any difference whether they pay by cash or card. As a consumer, have you never noticed that?

    And, in any case and as already pointed out above, it cannot be as low as 1% or 2% if it’s going to generate £115 billion.

    As a transaction tax, I can see easy corporate avoidance techniques with say diverting some customer “payments” directly to supplier bank accounts (for example), and lots, lots more. Ie, the theory could only work on “declared expenses” rather than “bank transactions”.

  39. Whichever way one skins this, if this is the best Richard can come up with after years of so called innovative thinking / creating ideas in his sweet little shed, then frankly, should anyone really care?

    Nothing like this is ever going to be implemented, on a “declared progressive basis” rather than as a flat tax like VAT, unless the country is already completely and utterly screwed, and in which case it’s not likely that too many of us are still going to be resident?

    Lord Sugar, a member of the Labour party (until recently resigning), just said that if Corbyn got anywhere near power, people like him would simply bugger off elsewhere.

    Yes, OK, in some cases that might be a feature, but if Labour party members are saying that – about their own party getting into power…

  40. Bloke in Costa Rica

    Rob: “Cunt. You have to prove that you don’t spend a lot of money. If you can’t you are fined. Cunt.”

    Last time that was tried it was called Morton’s Fork. Wasn’t all that popular then, either. This time we could call it Moron’s Fork.

    As you so rightly say: cunt.

    And what the fuck does he mean he hasn’t “modelled” this yet (as if he were capable of doing any modelling more complex than playing with fucking Plasticine)? I thought this shit was out of his Joy of Wanking Myself Comatose In My Shed book. Did he not think to attempt to cost it before committing it to print?

    What a cunt.

  41. I think his modelling technique involves taking GDP, multiplying it by his arbitrary tax percentage, then taking GDP and multiplying it by another arbitrary tax percentage, then he just adds them up into he’s proved that capitalists have avoided 10x GDP which is why he thinks it’s all hidden away in tax havens.

    Then he has a wank in his shed.

  42. Ian B said:
    “It’s really just the classic neopuritan conundrum. They want everyone to work (as hard as possible) but they don’t want them to produce anything, which is bad for the planet and bad for the soul.”

    Which is why they like jobs that don’t actually produce anything; 5-a-day co-ordinators and diversity training managers.

  43. Matt Usselmann said:
    “Nonsense – credit cards charge 2% -4% commission, and nobody asks to pay in cash to avoid the commission. In fact, you can even pay your bus fare with your credit card now.”

    As has been pointed out, the commission charge is paid by the business, not the consumer, so of course consumers don’t “ask to pay in cash”. In fact credit cards often give some sort of payback (in cash or points) when you use them, sharing that commission paid by the business, so for the customer there is an incentive to use them.

    But the business, which does pay the commission charge, often does ask the customer to pay in cash, and sometimes gives the customer an incentive to pay cash (or a disincentive to pay with a card). No, big companies don’t, because they don’t use cash and the costs of securing and banking lots of cash is not much less than the credit card fees, but small businesses do.

  44. Let’s see how this will work.

    I do a cash in hand job, and use the cash to pay cash to a small tradesman, who spends it. No Murphy Tax and lots of opportunity for us both to evade income tax as well.

    My salary gets paid into my bank account, I draw out cash and use it to pay cash to a small tradesman. Two lots of Murphy Tax (the salary transfer into my bank account and the withdrawal from it) and some opportunity for the tradesman to evade income tax.

    My salary gets paid into my bank account, I go shopping in Tesco with a debit card. Two lots of Murphy Tax (the salary transfer into my bank account, the transfer from it to Tesco’s).

    My salary gets paid into my bank account, I draw out cash and use it to pay cash to Tesco; Tesco banks it. Three lots of Murphy Tax (the salary transfer into my bank account, the cash withdrawal from it and Tesco banking the money).

    My salary gets paid into my bank account, I go shopping in Tesco with a credit card, which I then pay off by bank transfer. Three lots of Murphy Tax (the salary transfer into my bank account, the transfer from the credit card company to Tesco, and the transfer from my bank to the credit card company).

    My salary gets paid into my bank account, I go shopping in Tesco with a credit card; I then draw out cash to pay off my credit card. Four lots of Murphy Tax (the salary transfer into my bank account, the transfer from the credit card company to Tesco, the cash withdrawal from my bank, the payment to the credit card company).

    Instead of a salary, my employer gives me Tesco vouchers, which I spend. Only one lot of Murphy tax (a transfer from my employer to Tesco to buy the voucher).

    So what justification does he have for the different tax levels for those different ways of paying for the same transaction?

  45. Nonsense – credit cards charge 2% -4% commission, and nobody asks to pay in cash to avoid the commission. In fact, you can even pay your bus fare with your credit card now.

    Errr – that’s because the retailer takes the hit, 99 times out of 100 the consumer doesn’t see any difference whether they pay by cash or card. As a consumer, have you never noticed that?

    Hence many small retailers refusing to take cards for small transactions (“Minimum £5 spend on credit card” etc.)

  46. “A person with a low rate of transaction tax in proportion to income could be investing gated and surcharged if they could not prove why”

    So….it’s a transaction tax and anyone with a low rate of transactions would be investigated?

    Interesting conversation that….

    Inspector – Can you prove you have a low rate of transactions?

    Me – yes, here’s a copy of my bank statement, showing a low rate of transactions.

    Inspector – OK.

  47. Matt

    “People do not give a monkeys if ripped off by banks.

    People take out 1000% interest loans at Wonga, how interested are they to save 1% “consumption tax”?”

    This comment comes into the “not even wrong” category. Who are these people? The ones who are suing banks for PPI? The ones who switch bank accounts, utility suppliers, insurance companies, credit cards etc in pursuit of better deals? Or simply your abstract idea of how people behave?

    And your comment about Wonga suggests that you have zero knowledge or understanding of why certain people take out payday loans. How about sparing us your wisdom until you you open your front door, or even look out of the window, and confront reality.

  48. “The charge would be on flows through bank accounts excluding those under common control”.

    No one else seems to have picked this up. Almost every company above a single individual has a bank account controlled by a secretary and at least one director.

    (“what do you mean it’s a legal requirement? It’s tax eveasion, pure and simple!”)

    Married individuals have joint accounts, and there’s nothing to stop groups of individuals pooling cash to save money.

    Or did I misunderstand “common control”? Should I have read that as “state control”?

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