Entirely stunning

Second, this is economically appropriate. As is being widely noted, the savings ratio is rising rapidly as the coronavirus crisis develops. In other words, people are saving higher proportions of their income. That is a natural reaction to economic stress, but only exacerbates the problems that we face because there will be less available to be spent on consumption as a consequence. This, then, means that wealth should be taxed more to encourage the redistribution of income and wealth from those who are saving to those who will spend, and that necessarily means that the wealthy pay more tax so that those on low income, who have the lowest savings ratios, have more income available to them. This will speed economic recovery and alleviate poverty at the same time.

He’s advocating wealth taxation. And yet seems entirely unaware of – certainly hasn’t addressed – the standard economic conclusion from optimal tax theory that wealth shouldn’t be taxed at all.

7 thoughts on “Entirely stunning”

  1. The Meissen Bison

    In other words, people are saving higher proportions of their income.

    But are they? They are simply constrained from consumption by the lockdown and may in all likelihood be reducing some of their borrowing, paying off their credit cards and so on. In any event, a relatively short-term phenomenon.

  2. @ TMB
    +1
    In reality, there will be *more* to spend on consumption because, firstly, there is now more headroom between their credit card balances and their credit card limits and, secondly, less will be deducted from their incomes in the form of interest payments on their loans (including but not limited to credit cards – ONS says people have been paying down other loans as well).

  3. Mr. Bison beat me to it. People can’t spend their money because all of the pubs and restaurants, and half of the shops are closed. Where is the evidence that these people won’t start splashing out as soon as the lockdown ends? Socialists have a different definition of fair than the one normal people have too. Save your money, only to have it stolen by the state and handed over to less frugal people so that they can splurge it and stimulate the economy. That’s only fair surely?

  4. Dennis, CPA to the Gods

    In other words, people are saving higher proportions of their income. That is a natural reaction to economic stress, but only exacerbates the problems that we face because there will be less available to be spent on consumption as a consequence.

    Correct me if I’m wrong, but wasn’t unfettered consumer consumption one of Spud’s BIG PROBLEMS back in January? Shouldn’t he be welcoming lower of levels of consumption?

  5. How, in Spud’s world, will taxing the wealth of the wealthy lead to more income for low earners? Surely he is not suggesting tax cuts for low earners, is he?

  6. @ Diogenes
    Of course not. Hand-outs to favoured categories of lower-income people such as public sector workers – oh, wait: public sector workers are paid more than private-sector workers on a like-for-like basis (which is the rationale for outsourcing).
    Well, then, make it hand-outs to favoured categories of union members.

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