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Ragging on Ritchie

Ritchie still doesn’t understand tax, does he?

Let me ask you the more interesting question Frances

The BoE thinks there is a 10% shadow economy

HMRC say they lose at least 10% of VAT

How come in that case HMRC can say the maximum loss to evasion is £21 bn (of their gap about £9 bn is avoidance and £4 bn bad debt)?

Total tax yield exceeds £600 billion on 90% of the economy (about 35%)

How come the remaining 10% (£180 billion +) yields 11%

Would ypu like to explain that?

I’m not called Frances but this is easy enough to explain.

If you tax something you get less of it. No ifs, no buts, simple fact.

Some amount of those grey and black economies simply will not happen if people are taxed on those grey or black economies. Thus we can’t say that tax is being avoided if the thing would never happen if tax were applied.

Simples.

So, that kills Peoples’ QE, doesn’t it?

Britain’s skilled worker shortage is hamstringing developers and construction companies attempting to boost production and tackle the UK housing crisis, a new report claims.
From a survey of more than 100 companies, 87 per cent of respondents said they hoped to create new jobs in the next 12 months – an estimated 100,000 new positions.
However, one in four of these also said a ‘skills shortage’ in roles such as carpenters, electricians, plumbers, bricklayers and kitchen fitters was their biggest impediment.

For PQE is, now at least, only that emergency stimulus that the economy needs in order to stymie deflation.

And we just ain’t got the people to do it. Shouting about training people doesn’t provide the emergency bit, does it?

So, back to standard economics then, eh?

Bwahahahahaha

Murphaloon’s argument that we need stimulus now because inflation is below target also means that he should have been arguing against stimulus in 2011 when inflation was above target.

Y’kno’, there’s heterodox economics and heterodox economics…..

Or, of course, he’s just making it up as he goes along, your choice.

Ritchie denies that a profits tax is a profits tax.

Because that is what he’s doing here:

Ironman says:
September 18 2015 at 10:51 am
Capital allowances in the CT regime are not a ‘subsidy’. That is really very simple. Since they make up the lion’s share of the £93m it isn’t “just fine”; it’s a misnomer.

Reply
Richard Murphy says:
September 18 2015 at 11:30 am
They are a subsidy

There is no universal principle of tax relief on capital spending

It is a choice made by parliament to give them

And one capable of review as to rates and assets they relate to

Shall we therefore discuss the real world – not your make believe?

And:

Ironman says:
September 18 2015 at 12:18 pm
“There is no universal principle of tax relief on capital spending”
Oh really. Try s2 CTA 2009: “Corporation Tax is charged on profits of companies for an financial year…” Those profits are based upon the accounts. Accounting profit includes depreciation and amortisation. Capital Allowances are the codified tax alternative to that. You do know this don’t you?

Reply
Richard Murphy says:
September 18 2015 at 12:22 pm
In other words there is no allowance for depreciation

And CAs are granted on occasion instead

Exactly as I said

Now stop wasting my time

Depreciation, capital allowances, are just ways of deducting the costs of doing business from the revenues so as to work out what the profits are. And by stating that they’re not a necessary part of a profits tax system Ritchie is really betraying….well, what? solidarity with a misled fellow traveller like Farnsworth? Not thinkin? Not actually understanding in hte first place?

Deciding about PQE

But almost everything about ‘QE for the people’ is silly

Hmm. By:

Tony Yates is Professor of Economics at the University of Birmingham and a former Bank of England macroeconomist.

As against the retired accountant from Wandsworth (one who specialised in tax accounts for luvvies), now 0.2 of a Professor, who says:

You’re a neoliberal troll for disagreeing with my idea, an idea which is mine and I thought it up and me and this is your last comment here.

It’s a toughie that one, isn’t it?

It is indeed true that they laughed at Einstein but then they also laughed at Bozo the Clown.

Blimey, Murphaloon also doesn’t know his monetary history

When asked what respectable government had used QE in the past, could it not be argued that the US federal reserve used a form of it in the 30’s/40’s to get out of the great depression?

Reply
Richard Murphy says:
September 17 2015 at 7:51 pm
Yes

And Japan in the 30s

No, the complaint is that the Fed didn’t loosen monetary policy in the 30s.

And Japan used helicopter money, not infrastructure investment.

Sigh.

Despite AEP, PQE still doesn’t work

So, Ambrose says that PQE isn’t entirely mad:

Jeremy Lawson, from Standard Life, gave his blessing to radical action this week, arguing central banks should be willing to fund fiscal stimulus directly, and even inject money “directly into household bank accounts” if need be.
Mr Corbyn’s ideas are a variant of “helicopter money”, the term coined by Milton Friedman, the doyen of monetary orthodoxy, lest we forget.
Friedman did not, of course, mean that banknotes should be dropped from the sky, though they could be in extremis, but rather that central banks have the means to create money to fund tax cuts, or to cover state spending, until the economy comes back to life.

So, let us assume that we do end up in extremis. We need urgent expansion of the money supply, as in the scenario where Friedman suggests helicopter money.

OK, does PQE make sense?

No, even here it doesn’t. Because of that “urgent” bit.

PQE is to be spent upon building things. Great, how long does it take to start building things? How long does planning permission take? Environmental permits? Wading through the morass of challenges by hippies, Nimbys and Bananas?

Two years? For a large project, a decade?

That’s not urgent then, is it? Meaning that if we do have an urgent need then we’ll have to do something else: like, say, helicopter money.

That is, even when we’ve a need to expand M0 in order to prevent falls in M4, it’s still not true that PQE does what we need. There’s therefore no circumstances under which it would be useful.

Ritchie visits Parliament

I thought you might be bemused to hear that I had the joy of finding myself behind a particularly pompous man in the queue for parliamentary security this afternoon. I thought he looked vaguely familiar but couldnt quite place him.

As I stood there listening to his ‘banter’ with the guards, which was boring them to tears, I realised that it was Ritchie himself.

I then sat next to him in the waiting room and overheard his side of a conversation with – I assume – a booker for the Andrew Marr show or similar.

‘yes well Andrew can give me a quizzing if he wants too. I’ve done Paxo. I’ve done all of them. I give as good as I receive’. ‘yes well I was behind most of Corbynomics. Between you and me there has not always been quite the credit given that is deserved, but nevermind….’ ‘well to put it in context I know a lot of politicians. I just had a chat with Natalie Bennett, who I know’ (oh the namedropping!) ‘to be clear I would be speaking on my behalf, not Jeremy’s’.

All with the most extraordinary air of pomposity, the like of which I’ve rarely heard.

Via email…..

Ritchie gains more media coverage

Richard Murphy is seen as the “brains” behind Corbynomics.

But until recently many leading economists had not even heard of him.

The chartered accountant and tax expert, from Downham Market, Norfolk, is set to become one of Team Corbyn’s key advisers on policy in the coming years.

Dad-of-two Murphy, 57, works mainly from home, but was a fixture on Corbyn’s campaign trail, often warming up audiences with fiery speeches attacking tax avoidance and high executive pay.

The former Southampton University economics graduate claims “People’s QE” is just “part of an armoury” of policies aimed at creating new jobs.

But last night economists cast doubt on his standing.

Prof den Haan admitted: “I’ve heard very little of him.”

When asked if he was a big name among leading economists, he replied: “No, definitely not.”

Prof Yates said: “He’s well known now, extremely well-known in the last few weeks and months because of his blogs and Twitter posts.

“But I think on the issues of ‘People’s QE’ and renationalisation, he’s potty.”

Welcome to the big leagues…..

The Murphaloon

Richard Murphy says:
September 15 2015 at 7:00 am
Gilt holdings by banks have increased

So, err, how have the banks got money by selling gilts to the BoE then?

No, seriously, walk through this. Before QE the banks held pretty much no gilts at all. During QE bank holdings of gilts rose. Now, with QE maintained but not expanding, banks hold lots of gilts.

So, how have banks got money by selling gilts into QE?

Answer:

Bank gains from QE were due to reinvestment of proceeds, not direct gain

What fucking proceeds?

To ask the new Professor a question

There is a particular tax way in that difference is also very obvious: most banking activity is not subject to VAT. The result is that banking is currently undertaxed, and the benefit largely goes to the wealthiest who make use of its services the most by value (inevitably).

And there is the now near universally acknowledged fact that banks outsource their risk to the world ta large, for which I think they underpay.

The result is a need for taxes on banks that reduce risk, are progressive and which compensate society for the costs banks can impose, of which 2008 was just an example.

It’s not left wing to demand a financial transaction tax in that case. It’s a key tax in rebalancing some of the presently seriously unbalanced elements in our economy as well as many of the economies in the EU and the world at large.

This is a move that has to be welcomed.

It may or may not be left wing to demand an FTT, it is most certainly stupid.

Because when economists measure the effect of an FTT they end up concluding that it brings in less revenue overall than not having an FTT. As even the EU itself pointed out. And as is the basis of my one and only peer reviewed paper in the literature, something which the new Professor will no doubt have extensively searched and cited, the literature that is, to reach his conclusion?

You know, this sort of talk about what economists measure and how? Referring to reality?

The second question of course is if the banking sector is undertaxed as a result of not being subject to VAT then why not adopt the solution from the Nobel Laureate who has actually studied this question? An FAT instead of an FTT?

Or is the new Professor simply ignorant of the difference, indeed of the proposal?

My word, that didn’t take long!

The piece was written last week, although minorly updated last night, and is my first comment as Professor of Practice in International Political Economy at City University on The Conversation site, which was reserved exclusively for academics.

I can hear the ego expanding from a thousand miles away. I is an academic, don’cha kno’?

Interesting:

City University London provides funding as a founding partner of The Conversation UK.

Ie, we’ve paid to have this gubbins put up here.

And it is quite lovely too. The opening line:

As the creator of what has come to be known as Corbynomics, my ideas on what is now known as People’s Quantitative Easing, progressive taxation, tackling the tax gap and other matters caused quite a stir in the Labour leadership race.

Can ermine be far behind?

In the real world of political economy that I wish to explore with my students in due course, there are three big themes.

What economists choose to measure and how useful it is to measure these things.

The way those measures are constructed and what they are intended to communicate.

The role of economists in this process: what is their background or ideology that may influence their behaviour, and what might they have chosen to omit from consideration as a result?

Given that he doesn’t know anything at all about 1) and 2) my guess is the course will be heavy on 3).

Recall, for instance, his insistence that economists predict income maximisation, rather than what they do predict, utility maximisation.

It is my belief that there is no form of measurement, whether economic or (as importantly) in accounting, that is value-free. The choice of what we measure frames the debates we have. And the tools we use and the options they accept or reject are entirely subjective.

So no need to have any foot or base in objective reality then. This is all very PoMo, isn’t it?

My point is that it is clear that the economist is not an objective observer. His or her decisions necessarily affect the real world: the very act of measurement itself has an impact.

Very quantum.

What astonishes me, in that case, is how little work by so many UK academics in the fields of economics, accounting and tax has any chance of achieving that impact. It is not, it seems, ever designed to reach out to those who might have the chance to effect change by making use of it.

It is my hope that this is an issue that a new Labour leader might address. If the Labour leadership campaign has proved anything it is that there is need for a change in economic thinking if those policies to be offered in 2020 by all parties – but most especially those on the left – are to resonate with people anxious for change.

What also seems very obvious, is that politics is not, at present, either the source or repository for that thinking. In that case, the chance for meaningful dialogue between academia and Labour does at this moment appear to be high, and with it the prospect of real, impactful, engagement.

That is why I hope a new Labour leader will reach out to academia and positively invite new ideas, research, thinking, dialogue and so policy formulation. Now is the time for this. The politicians and academics involved all have until 2020 to achieve a result. There is a desperate need for an economics of the real world that is quite deliberately intended to change not just measurement, but reality.

Gissa job Jezza!

And he wants economics to be normative now, does he? How cute of the little Ritchie that is! Might we not ask that he grasps the positive aspects first?