Say hello to today’s idiocy

There is no reason on earth why income from work should be taxed more heavily than unearned income.

Optimal tax theory. Nobels have been awarded for it. Tony Atkinson and Joe Stiglitz proved – in a major, major, paper – that the correct taxation rate for capital income among the very rich could in fact be negative. Optimal tax theory generally doesn’t go that far but does insist that yes, there is good reason why capital taxation should be lower than income – deadweight.

In the UK tax rates between income and gains need to be aligned.

And income tax rates, including national insurance, on work and wealth need to be aligned.

At which point we are descending into outright twattery.

The P³ will insist – he did last week – that corporate taxation falls upon the shoulders of shareholders. OK, so, dividends pay corporate income tax before they are distributed. Therefore in order to gain the same – note, the same – income tax rate upon dividends as upon labour income we need to have lower dividend tax rates than upon labour income.

So, both the economics and the maths are wrong here. But then it’s the P³

2 thoughts on “Say hello to today’s idiocy”

  1. Optimal Tax Theory.
    hmmm
    A projection into the future; it’s never been present.
    Best we can come up with, I suspect, is that there is no damage or benefit from opting for one form of tax to another.

  2. “unearned income” is a weasel-word. The neutral term is ‘investment income’, and the positive term ‘income earned from savings’. Then you can ask, “Why do you want to take away people’s savings income?’ and make them look bad.
    (Never accept the enemy’s terminology)

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