You have to tax wealth to grow an economy.
I know that might sound perverse and, to most people, even illogical, but it is a straightforward statement of fact. Any economy that wants to grow has to tax the wealthiest in that community quite heavily and then redistribute the proceeds to the lowest earners in that country if it wants to grow.
Now, I stress this is not a statement of opinion. It is a statement of economic fact and the logic is quite straightforward. The wealthy are wealthy because they do not spend all their income. They save. That’s how they accumulate wealth. This really should not be seen as anything very surprising. The trouble is that savings do not boost our economy, whatever our politicians, our Treasury, and those in the Bank of England might think.
Instead, they save. Savings withdraw funds from active use within an economy, and as such, they deflate an economy as a result.
If there is no deferral of consumption – no saving – then where do the resources to invest come from?
No, no, leave money aside, that’s just the accounting. To invest in something means that labour (or cement, or metals, whatever) has to be deployed upon something that cannot be consumed now but can be consumed at some point in the future. Therefore some amount of either resources or consumption must be delayed in order for investment to be possible. There is no way around this. The entire point of investing is that resources are withdrawn from the current economy.
Man’s a twat.
And savings do not fund investment. Bank credit does that.
Isn’t this the bloke insisting that Thames Water is bust because it hsa too much debt and not enough equity?
“You have to tax wealth to grow an economy.”
You do? Prove it.
Unless you want Chinese growth, in which case you have to keep ordinary wages low so the there is money for investment.!
Mixing up wealth and income again. Also the Scrooge Mc Duck fallacy that the rich have a swimming pool full of money to hand over.
“… savings do not boost our economy, whatever our politicians, our Treasury, and those in the Bank of England might think!”
Everybody else in the world is wrong. It’s Captain Rum again.
Even by Murphy’s standards this is staggeringly dumb…
“”For a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.” Winston Churchill . True then, true now.
Probably got carried away here…
You have to tax wealth to grow an economy.
Paradoxically there’s an element of truth in this – as I often say to people like Murphy if there’s no wealth to tax you don’t have any means of spending. 100% of Fuck all is Fuck all.
I know that might sound perverse and, to most people, even illogical, but it is a straightforward statement of fact. Any economy that wants to grow has to tax the wealthiest in that community quite heavily and then redistribute the proceeds to the lowest earners in that country if it wants to grow.
There’s mixed empirical support for that statement – I very much doubt he’s given any thought to how to back that with actual evidence. Presumably it’s some kind of reference to Benelux/ Scandinavia/ Germany but I’d argue it’s at best a partial picture and at worst platitudinous
Now, I stress this is not a statement of opinion. It is a statement of economic fact and the logic is quite straightforward.
Surely a surefire indication that the statement is likely to be wrong
The wealthy are wealthy because they do not spend all their income. They save. That’s how they accumulate wealth. This really should not be seen as anything very surprising. The trouble is that savings do not boost our economy, whatever our politicians, our Treasury, and those in the Bank of England might think.
So we should not be having any savings at all of any type? How could you plan for any eventuality. He often takes classical economics analogies as worthless but this as a statement is neither economic fact nor accurate. It’s absurd and if this is what he’s teaching in his economic class then the QAA needs to investigate whatever institution is employing him.
Instead, they save. Savings withdraw funds from active use within an economy, and as such, they deflate an economy as a result.
Is this ‘Economics 101; – the MMT guide to Bullshit?
And savings do not fund investment. Bank credit does that.
Perhaps both elements have a role to play – but of course a disputed paper from 10 years ago provides complete authority and anyone challenging it is ‘wrong’
Nor do savings fund investment by companies*. Almost no company now issues shares for this reason anymore. They only issue them for merger and acquisition activity.
As deep and complex an understanding of Capital Markets as you’ll ever see
As a result, the wealthy, by saving their income, reduce the level of economic activity in a country. That’s an unavoidable fact.
That’s not much more than a platitude – and is such a gross over simplification it might get pulled up in a GCSE essay.
In contrast, those on the lowest incomes in a country tend to spend everything that they earn. Sometimes, in fact, they do more than that. They borrow to fund their current spending out of future earnings.
And what’s more, as their earnings rise, they are more inclined to borrow to fund their income now out of future earnings because their capacity to borrow has grown.
While I’d agree with that to some degree– perhaps the focus ought to be on removing and reducing the tax burden on those who have no resources, rather than recycling funds through a grasping and avaricious state apparatus
So there are two obvious consequences. First, taxing the wealthiest people in the country makes sense.
They’ve got the capacity to pay.
Taxing them more is unlikely to reduce the amount that they spend in the economy because they’re already saving, and taxing them will therefore not harm growth.
That’s presuming that they won’t simply go somewhere else where they might be taxed less or indeed change their behaviour to try and avoid the tax in future.
Then redistributing the proceeds from taxing the wealthiest to those on the lowest incomes also makes sense. This will increase the amount those on the lowest incomes spend, and almost all of any increase that they get will go on increased consumption to meet their needs. And, therefore it follows that they will fuel growth because that’s what their additional spending will do.
So, if you want to grow an economy you have to tax the wealthiest in the community more and redistribute the benefits of the sums raised to those on the lowest incomes. The demand for goods, services, innovation, and investment in that community will always increase as a result of doing so
It’s like a bastardised form of Keynes for morons.
This, as I’ve said before, is a straightforward statement of fact. Now, in that case, why, if every economist knows this, and I think every economist should know this, why doesn’t every politician know this, and why are so many people in denial of this?
It’s neither straightforward, nor a statement of fact. It is a grotesque distortion of reality from someone who masquerades as an authority but is a byword for spite, envy and hatred and who has the temerity to pretend that he gives two figs about the poorest in society while simultaneously calling those who are white ‘racist’ and colluding in their mass extermination through unwavering support of the greatest crime in human history, COVID lockdowns and it’s probable surpasser, ‘Net Zero’
Are they not telling the truth?
Perhaps if as you assess politicians as so dishonest giving them and the state more power mightn’t be the best idea?
Are they only serving the interests of the rich?
And ‘Net Zero’ is a policy designed with the poorest in mind?
Aren’t they interested in helping those on low income?
As one says, if you’re fond of Golden eggs then killing Golden geese might not be the best idea. And it was Keynes who said : ‘better a man should tyrannize over his bank balance than his fellow citizens. Of course Murphy wants to do both.
And aren’t they interested in growth?
Aren’t they supposed to not be if we want the planet to survive – or was that on Monday?
Those are the obvious questions to ask of those politicians who are in denial of this fact.
I’m sure they’ll treat them with the same seriousness as David Cameron viewed ‘The Joy of Tax’ back in 2015.
But, I also want to put all this in context, and I will use the simple example of a situation where politicians are currently getting this horribly wrong.
Labour is saying that it cannot remove the two-child benefit cap at present. This was introduced by George Osborne to supposedly encourage people to return to work rather than have more children, and he wanted to stop the assistance from the state to large families as a consequence.
The policy has not worked. The birth rate has not changed. Those being penalised are very largely already at work. We just have one million more children and their families in poverty as a consequence of this policy.
When you study the actual statistics behind these claims (and I have a relative who is a co-author with Murphy on certain papers) invariably the definition of ‘poverty’ is stretched to include people that are by no means poor.
Now, what should Labour be doing? It should be increasing tax on the wealthiest. There are lots of ways in which I suggest that we can do this in the Taxing Wealth Report.
As numerous commentators have pointed out – the ‘Taxing Wealth Report’ is neither new nor convincing. It’s vaguely demented ramblings from a man whose prominence in media like the BBC is totally out of proportion to any understanding of Finance, Markets and Taxation is well below many a layman writing on blogs like these. In a competitive world with mobile capital, The UK should be looking to reduce the tax burden, currently at a fifty year high substantially. Even at a glance there are innumerable ways spending could be cut.
– Shuttering 40 or so universities peddling intellectually substandard courses and theories that suggest ‘taxing wealth’ is the way to grow an economy
– Clamping down on ‘sockpuppet’ charities such as ‘Tax Justice’ campaign and ‘Sustainable Cost Accounting’ and ‘Fair Tax Mark’ which although nominally independent are usually funded to a large degree by taxpayers
It should be removing the two-child benefit cap. And it should be considering what other benefit changes it could make.
How much would removing the benefit cap cost? The highest figure that I’ve been able to find is £1.8 billion. That’s a figure provided by Save the Children.
How much would removing higher rate tax relief on pensions raise a year? £14.5 billion in my estimate.
In other words, simply by reducing the state’s subsidy to the savings of the wealthy, we could fund the removal of the two-child benefit cap almost eight times over in my quick mental arithmetic.
Arithmetic which is extremely dubious and which criticisms and comments on have been greeted by blocks on commenting and reflex use of the term ‘troll’ to argue against them. These figures are not a serious contention and quite rightly the government and indeed the opposition take no more cognisance of them than they do claims the Earth is flat.
However, Labour thinks it’s more important to subsidise the savings of the wealthy than it is to take children out of poverty. I don’t know why, but it’s time they changed their minds. And if they did, they’d also get the growth that they crave.
Always strange to see a video based on a song one remembers – in this case ‘The King of Wishful Thinking’ by ‘Go West;
Truly there is no end to his knowledge. And no beginning.
For this to be the case the rich would have to change all their savings to gold and put all of it under the mattress.
Mind you, this is what ends up happening in any communist country – under the mattress, to end up shipped out. E.g. South Africa, Palestine, Cuba, etc. So perhaps that’s what he thinks always happens.
VP should get some sort of public service medal for wading through all the nonsense. Isn’t there a spare MBE going that Venals had to hand back?
Interesting theory. I wonder how he explains the dozen or so wealthy states like Monaco that don’t levy income tax.
“Savings withdraw funds from active use within an economy,”
Nurse! Why hasn’t Mr. Ritchie been given his meds today?
I was told that Singapore doesn’t tax capital gains or interest or dividends.
“Oh” says I “so it’s a giant ISA, is it?”
How about HK in the time of Cowperthwaite? A low tax sort of a place was it not?
“The wealthy are wealthy because they do not spend all their income. They save”.
Not all of them.
In September 2019 William Henry Gates 111 bought $55m stock in BioNtech, who go on to develop then sell mRNA Covid ‘vaccines to Pfizer. The share price at the time was approx. $34, meaning Gates bought about 1.6million shares.
In late 2021, Gates sells 890,000 shares. The share price was around $360 – $383.
Cost to buy 890,000 shares = $30M. Sale price = $333,750,000. Profit = $303M.
But Murphy probably doesn’t have a problem with people like Gates gaining all that moola ‘cos he’s a ‘good guy’.
Good for whom is debatable…..
To invest in something means that labour (or cement, or metals, whatever) has to be deployed upon something that cannot be consumed now but can be consumed at some point in the future.
Something I think I’ve pointed out before. The creation of assets is consumption not production. Assets only have their utility value in the present. Generally far smaller than the consumption needed to create them. They’re certainly not an answer to current problems. Oh & “investing” is just spending by another name.
And savings do not fund investment. Bank credit does that
Savings are deferred consumption, the product of past production by the saver. Something real & deployable. Question for the professor³. What production underlies “bank credit”? What would be deployed?
You have to tax wealth to grow an economy.
How does the potato explain the industrial revolution?
As the soon to be Venerable Milei explained in a tv interview, if the rich take their money as cash and stuff it in soft furnishings or in the cellar, then the value of the disposable incomes of everybody else including the poorest who hide nothing under the mattress rises.
Less pesos in circulation means more value in the ones that are.
@ van Patten
Yesterday National Grid announced a £7billion Rights Issue to finance spending on ways to stop us freezing to death and/or facing a 100-mile long queue of stalled Tesla’s when the wid doesn’t blow.
You are too polite to Murphy
It’s really time this Student Grant * caricature masquerading as an expert in all fields of human endeavour was, like Student Grant himself, given repeated and severe kickings.
* Viz character – real name Grant Wankshaft, studying at Spunkbridge University
It is a simple piece of logic that you cannot have investment without saving as it is the two sides of the same coin, choosing to forego immediate consumption in order to enhance future consumption. lt is also a simple fact (albeit in may not be simple enough for Murphy to understand) that any economic entity, such as the UK, needs to invest (and more than enough to merely replace the things that physically fall to pieces) in order to *grow* (as distinct from merely recovering from a cyclical downturn) the economy.
So if you want economic growth confiscating the wealth of would-be investors is not a good idea – it is the modern marxist equivalent of eating the seed corn.
Is Murphy *really* that stupid?