Ritchie’s on about QE again:

This is the FTSE 100 this morning, at an 11 month high:

Why is that? Three things.

Record low interest rates.

An expectation that rates will fall again, soon.

And the hope that there is more QE to come.

In other words some are gaining in the short-term because the government is having to deal with a looming economic crisis.

What is the solution?

The solution is to celebrate that QE works.

What is QE trying to do? Raise the price of safe assets so that people go out along the risk curve in search of yield. A rising stock market is proof that people are dointg just what we want them to do. QE works.

Ritchie, of course, thinks this is a problem to be solved:

The first is to increase the capital gains tax rate, which is now, quite ludicrously, as low as 10% for those who are basic rate taxpayers and only 20% on gains arising on shares for those who are higher rate income tax payers. I prefer alignment with income tax rates. If that is unacceptable the rate must be at least 75% of that due on equivalent income.

Nope, optimal taxation theory, capital returns should not be taxed or if they must be then at preferential rates.

Second, short-term share-trading should be deemed to be just that i.e. trading, and therefore be subject to income tax in full.

Third, all income from unearned sources should be subject to an investment income surcharge. I suggest that this should be charged at the rate of at least 15% on all unearned income exceeding £2,000 in a year unless the person was retired when rather more finessing would be required.

Nope and nope for the same reason.

This charge is needed because at present the UK tax system is extremely unjust. Those who work for a living do, because of the imposition of national insurance, pay much higher overall rates of tax than those who can live off unearned income. An investment income surcharge would help create a level playing field to correct this anomaly. And, because those paying it would, by definition, have savings it is very unlikely that the additional tax due would have any impact on the overall level of consumption in the UK economy, meaning there would be very few economic downsides at this time.

The reason for lower capital taxation rates is because we like people investing. It’s what makes the future richer, you see?

And it’s simply gorgeous that Ritchie shouts so loudly for more investment to be done and at the same time shouts for higher taxation of those who invest.

14 thoughts on “Oh Dear Gawd”

  1. I don’t expect much from Murphy, as his every utterance since the 2015 General election has confirmed my prior opinion of him as one of the most stupid, as well as one of the most evil people in Public life – but this is a doozy even by his very low standards.

    Wasn’t the surcharge on investment income tried in the 1970s? Hardly the kind of ‘Radical new thinking’ he is constantly touting.

    Additionally won’t this simply suppress Private Sector investment at the same time he is loudly calling for more investment in infrastructure spending?

    But best of all we have this pearl of wisdom:

    ‘And, because those paying it would, by definition, have savings it is very unlikely that the additional tax due would have any impact on the overall level of consumption in the UK economy, meaning there would be very few economic downsides at this time.’

    So with the savings ratio at an all time low and a coming pension crisis this guy’s whizz is to disincentivise savings yet further? To call him stupid is frankly being generous – unquestionably the most moronic commentator in the contemporary era.

  2. As a supplemental: For anyone unfamiliar with the Late Lord Peter Bauer, probably the greatest contemporary economist of the last 5 decades, I would thoroughly recommend him as almost the ‘Anti-Murphy’ – a man right on almost every issue of substance, and with a deep and complex understanding of both history, taxation and economics – subjects on which Murphy wears his ignorance as almost a badge of honour. For Bauer the very term ‘unearned income’ was almost an oxymoron – The Income accrued to resources possessed was as valid as any other form of income – The idea that, those, for example, who had the foresight to save money, or had invested in shares or bought a house to rent out, should be penalised is profoundly depressing and reveals much about its advocates priorities as well as their poverty of spirit and aspiration.

  3. Above all, Lord Bauer argued, there would be no concept of the third world at all were it not for the invention of foreign aid. Aid politicised economies, directing money into the hands of governments rather than towards profitable business. Interest groups then fought to control this money rather than engage in productive activity. Aid increased the patronage and power of the recipient governments, which often pursued policies that stifled entrepreneurship and market forces. Indeed, aid had proved “an excellent method for transferring money from poor people in rich countries to rich people in poor countries.”
    Peter Tamas Bauer (1915-2002), quoted in The Economist

  4. because the government is having to deal with a looming economic crisis.

    What economic crisis?

    There has been a very short term drop in the value of various stock trackers. And most of these are now back up. Even the FTSE 250 (this is the most I’ve ever heard this being talked about) is a mere 700 points below peak, rather than the 2,300 points it had dropped. Of course, it also dropped to nearly the post Brexit slump in Feb this year. But that can’t be explained by over-entitled whining, therefore can’t have actually happened.

    Oh, and, yes, we’ve had a drop in the value of Sterling. Which has been noted passim and Forbes, is actually a medium to long term boost to the economy.

  5. Hold on, I worked bloody hard to build up that pile of money to life off when nobody is any longer prepared to pay me to work. How the **** is that “unearned”?

  6. jgh

    Very good question – apparently ‘Civil society’ (translated as ‘Ritchie and his mates’ ) decide you ‘have to give it to the poor’ – and forget any notion of just desserts or ‘working hard’ – the ‘Curajus state’ has decreed it must confiscate assets to achieve ‘Justice’ and that is that. No appeal, no recourse. If you don’t like it it’s either the gulag or the rope

  7. Not sure about the economical side of optimal taxation, but I do know that life would be a heck of a lot simpler for tax advisors if income and capital were taxed at the same rates.

    With 38% on dividends and 10% of the shares the dividends come from, there is a massive incentive to shift income into capital form and, absent anti-avoidance rules, it’s very easy to do: roll revenue up for a while and it becomes capital.

    Tax the lot at the same rate and no-one cares which it is. At that point the rules get a lot simpler and I get far fewer headaches 🙂

    Oh, and business gets done with less grit in the wheels, which is probably a good thing too.

  8. Pellinor,

    The drawback to making life simpler for tax advisors is that becomes far easier to be a tax advisor. Since the job is easier a much larger portion of the population will be qualified to do it. At the same time the actual work that tax advisors have to do drops. If we simplify tax laws too much then everyone can just do their own damn taxes and an entire industry is destroyed.

    Of course this relies on the assumption that tax advisors are rational actors. Perhaps tax advisors enter the field purely to improve the greater good however. Either way it doesn’t hurt to examine the motivation before we accept their advice on the tax structure.

  9. That was brilliant top order bowling by Van Patten and Miller on a difficult wicket prepared by a mad self-righteous grounds man to favour lefty batters. Direct and fast to begin with, then took out the openers with a couple of unplayable bauer deliveries from either end. If only the other famous Ritchie ( Benaud ) could have seen it. Excellent gentlemen.

  10. Bloke in Costa Rica

    If ever there were income that could accurately be described as ‘unearned’, it’s anything that fat cunt Murphy manages to trouser.

  11. Meanwhile, over on TRUK, this little beaut from Murphy:

    “I am going to be embarrassed if another of my ideas is taken by the right

    The General Anti-Abuse Rule was

    As was country-by-country reporting.”

    Is he stating that the GAAR was his idea? Odd that his name doesn’t appear either in the 1998 Consultative Document document:

    or the Tax Law Review Committee’s response in 1999 to the Inland Revenue’s Consultative document: http://www.ifs.org.uk/comms/comm77.pdf

    Funny that.

  12. I invest in the stock market. But I don’t trade in it. I buy shares to keep.

    Short term traders aren’t investing, they’re gambling.

    I can see that a low tax rate on shares that are only owned for a short term would calm down volatility without actually hurting anyone who was actually investing in a company.

  13. Bloke in Costa Rica

    You’re still taking liquidity out of the market. That is a Bad Thing. And why is it any business of the government’s if a market is volatile? Caveat emptor and all that.

  14. “Second, short-term share-trading should be deemed to be just that i.e. trading, and therefore be subject to income tax in full.”

    HMRC usually try to resist that you can ‘trade’ in shares if you are not a stock-broker (I think Salt v Chamberlain is the case).

    The point being that whenever someone tries to claim they are trading in shares they have invariably made a loss – which they try to set against other income.

    Every one of Murphy’s ideas on tax is presented as a panacea which will bring in oodles of cash with no downside. He is without the wit to really think things through.

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