Some inequality we can live with. But I agree with Tim Worstall for once; that from rents is intolerable.
So says the Senior Lecturer.
The contribution of Worstall to this debate is to a) make clear there is a rational justification for some inequality that very few would argue with and b) to suggest that over and above that some levels of inequality may be tolerated as well, of which he provided examples. But his failure to note the real causes of rent induced inequality indicates to what extent the likes of the Adam Smith Insititute and other right wing think tanks are part of the problem on this issue by ignoring and even seeking to exacerbate a problem that they know exists.
First, let’s name the rents. These include limited liability, which enables some to make money at cost to others because debts do not always have to be paid. That’s a state provided benefit that should be paid for by higher taxes on income recorded in this way, and on distributions from it.
And standard economics keeps telling us that returns to capital should be taxed more lightly, if at all.
Then there are the rents facilitated by copyrights and patents, which have more than anything else facilitated the rise of new wealth and the increasing divide in society resulting from the tech economy and the growth in intellectual property rights.
And I’ve pointed out a number of times that the system of IP is a solution – a partial one to be sure, one not perfect – to the public goods problem. Something we o need a solution to. And as to the taxation part he really should read that Mirrlees Report he so disdains. The one which has a solution to this – effectively try to tax not the normal return to capital but only excess profits. Excess profits, we might – not must but might – assume coming from collecting an economic rent. But, you know, people who know what they’re talking about concerning the economics of tax aren’t likely to be within the Senior Lecturer’s ken.
After that there’s monopoly power that goes unchallenged by the state even though it is an abuse.
I applauded the US govt hammering the tech companies for trying a monopsony through collusion. I even bemoaned how they weren’t punished enough. All in favour of breaking such monopolies therefore, publicy so.
And there are economic externalities such as pollution and the exploitation of natural resources that create rents when not corrected.
I’ve repeatedly said that externalities should be taxed into the price system. I’ve also repeatedly said that resource rents should be taxed until the pips squeak. I ignore these things how?
Which list also ignores rents resulting from the control of land, and its non-taxation in a great many situations.
Britain gains more of its public revenue from the taxation of land than any other OECD country. I’m also a vocal supporter (as is the ASI) of land value taxation. We really don’t ignore this point.
That also hints at the rent return to lobbying to permit light regulation and low or no tax. This might be at its worst in tax havens but it is commonplace everywhere.
And we also note that strict regulation aids the incumbents given the bureaucratic overhead of complying. You know, creating that moat which allows the collection of economic rents?
That is, Ritchie’s problem is that he simply doesn’t understand, at all, what we’re all saying about things which concern him. Or even, that our solutions are not his means they must be rejected. Despite us, by and large at least, going with the grain of the economics and the real world.