Out here in the real world we think rather differently. Spending *can* liberate, of course, just as taxation can enslave. Indeed, taxation always involves a certain amoutn of enslavement, while spending *sometimes* leads to liberation, sometimes it doesn’t. Does funding the Potato Marketing Board lead to an increase in liberty? No, clearly not, but the taxation to pay for it equally clearly is enslavement (I’m using the very words you do: no, I’m not equating 1 p in the pound income tax to literal slavery).

Similarly, it is indeed possible to have a bureaucracy which does not do things for their own good: at least, not exclusively. But there will always be a certain amount of featherbedding in the operation of any such: whether public or private.

Which leads to a useful real world rule of thumb: certainly, there are things which only the State, funded by taxation, can do. Those come again in two parts: those things which must be done and those things which could be, but don’t have to be. That first group of course then have to be done by the State. That second we should consider the amount of enslavement we’re going to get for the amount of liberty that is created.

Sticking with the Potato Marketing Board: no increase in liberty, an increase in enslavement, it’s not something that has to be done and it’s not something that only the State can do. Great, a moral case for lower taxation.

Now all we need to do is go through everything the government does and make the same calculation. Me, I’d say that out of the £650 billion spent by hte State there’s perhaps £150-£200 billion that fails this simple test.

Many people receive more in tax credits than they pay in tax, so getting rid of tax credits and not taxing them would leave some worse off, to the point where, e.g. they would be better off not working than continuing to work. It would be hard to describe this as unequivocally ‘moral’.

I think everyone will agree that we need some taxation. The disagreement is how much.

I actually disagree with Matthew above: it’s the redistributive taxation that I find morally objectionable, not the paying for things that State must do (for there are things that only the State can do and therefore must do).

But leave that aside for a moment. All taxes have deadweight costs. A useful rule of thumb is 20% of the sum raised.

OK, so we’re going to have some redistributive taxation: one group loses so that another gains. Given the marginal utility of money (or pretty much anything else) we think that total utility will rise as a result of this transfer. That’s actually the argument in favour of it anyway so I hope everyone will agree.

Now, in those calculations we never actually do consider the costs of those deadweight costs. So, might I make a suggestion for a type of redistributive taxation which would be (or is) immoral?

One where the rise in utility from the redistribution is less than fall in utility from the deadweight costs?

No, I’ve no idea whether such a situation currently exists, will or ever has. It’s simply an unfinished thought trying to work out if there is a level of redistribution that would be immoral.

(My intitial thought would be taxing low income peopleand then offering tax credits. Nothing very much achieved except th deadweight costs themselves.)

http://commentisfree.guardian.co.uk/prem_sikka_/2008/01/how_to_avert_a_recession_cut_taxes.html

To counter that you can’t simply spit your dummy out and spout a fatuous notion that surely things could be more efficient. You have to offer a strong argument for how it can be more efficiently achieved.

I see we are in the ‘if I’m loud enough and rude enough I don’t have to think’ mode of discussion, so I will keep this simple.

No I don’t. I don’t have to offer any argument at all. It is my money and the STATE has to make the case for taking it. That case has to include what it is for and why that is more important than any use I might have in mind for the money. In other words it has to be both moral and economic. Issues of efficiency are irrelevant to making a case for taxation. It should be a given, that the state - and any other organisation using my money, whether from donations or taxation, does so as efficiently as possible. It is possible to argue of course that the state is inherently more inefficient, but that may be the price we have to pay for collective action. I’m not convinced of that, but others are probably better placed to make the analytical case than I am - I just spent 30 years working for them (unfortunately).

After all – if we pay tax to secure universal healthcare because there is a moral case for universal healthcare, what happens when we then fail to secure universal healthcare?

What happens if we make promises that we can’t keep? Just because it is funded from taxation, doesn’t mean that we can immediately meet all demands on the healthcare system. Making unrealistic claims and then assuming we can manage our way out of the mess that creates has put us where we are now. A moral case for universal healthcare is not a case for any treatment at whatever the cost. Choice always have to be made. We are not gods.

I hold an enduring power of attorney for an unmarried 95 year old woman who had worked her entire life and I spent many hours (if not days) working my way through the pension credit form. This involved making many calls to the “helpline” which was almost permanently engaged. She was eventually “rewarded” for having saved £30K; on the other hand these savings were run down to £19K (approx) to pay for the nursing home. The pension credit and state pension (her income) go entirely to pay for the nursing home.

Re, the above discussion on council tax:

“You will not be able to get any Council Tax Benefit if you have capital (savings or property) worth over £16,000. If you have capital over £6,000, you will be assumed to have some income from that capital, and this will reduce the amount of Council Tax Benefit you can get.”

Does all this produce a more “moral” society? No idea.

“don’t mistake ludicrous and outlandish predictions by economists for economic theory. (Not least as inflation in this country has fallen in the last few months, while employment has risen at its fastest rate in ten years, at least making such predictions premature).”

It is still early days. I haven’t been keeping an especially close eye on the macroeconomic indicators, but I’ve been reporting on debt markets for the last few years, and given liquidity prior to last summer, I’d be very surprised if the US subprime mortgage sector isn’t just the tip of the iceberg where bad debt is concerned.

But ultimately this is neither here nor there as my central argument wasn’t that we will see stagflation. Rather, I was trying to make the point that the theory underpinning the argument that low taxation economies have low unemployment and high taxation economies have high unemployment is dubious. You point to France, but I just don’t accept the argument that France has higher unemployment because it is more highly taxed (labour markets are more complex and there is a lot to say on this, but we’d be going off on a tangent). Don’t forget that the unemployment rate in Sweden is fairly close to that of the UK, while in Norway it is quite a bit lower. We also managed to combine much higher rates of taxation with full employment in the 1950s and 1960s, when governments ran Keynesian economic policies.

Or to put it another way, there isn’t one singularly accepted body of economic theory churning out “facts” about how the economy works …

“Free trade for example, increases wealth. This is derived from the principle of comparative advantage which is frankly, beyond question as an economic fact.”

This is just silly. What you say would be true if the world resembled a Heckscher-Ohlin model, but it doesn’t, and once you throw away your textbook, the law of comparative advantage and its relationship to free trade becomes much trickier.

For example, it used to be the case that Britain had a comparative advantage over South Korea in shipbuilding. That changed after South Korea decided that it wanted the comparative advantage and so would get good at building ships — and erected tariff barriers to do just that.

I don’t see how one can even test whether your assertion that free trade increases wealth is even true in the real world. I’m sure you could point to cross-section econometric analyses that show correlations between countries’ GDP and how much they trade. However, all these studies do is highlight the existence of a correlation. But one could equally invert your argument and say that wealth increases free trade.

This latter conclusion is actually probably more accurate. Apart from South Korea, the United States industrialised behind tariff barriers in the nineteenth century, as did Germany and pretty much every other industrialised nation, for that matter.

It seems we’ve gone off on another tangent, and I’m not actually arguing against free trade. I just object to crude reductionism being juxtaposed with the assertion that it is “beyond question an economic fact”.

So when you say …

“What maters is not how you then imagine such things fit into society or ideals, but how you respond to those facts.”

… I don’t disagree, but I do think you could benefit from reassessing whether some of your “facts”, and asking yourself whether some of are in fact just assumptions.

–

I accept that you are right about the need to spell out what a “better society” would look like, I just didn’t especially want to get into it here because of the danger that it would lead to more tangents.

Essentially I see it as a more social democratic society, less materialistic and with a flatter income distribution. It would be structured not around the need to compete in a global market place of free capital flows, but would be harnessed to help the people in the pursuit of happiness.

There isn’t one stop to this — raise taxes sky high, buy a social democracy for £5.99trln — and real world obstacles will have to be negotiated. The biggest complicatioin is that controlling capital flows would require international agreement and coordinated action. But what one mustn’t do is say, “there are obstacles in the way, therefore we’re not going to bother trying”.

There is taxation like there is death, so stop fearing it and start calculating it.

There are many factors involved when proposing a change in taxation levels, but what it all basically entails is that the state is intervening to counterbalance an economic power shift in society and that by doing so is reasserting its position as the ultimate powerbroker between individuals and groups who may never meet or even be aware of each other.

Whether any change is upwards or downwards there will always be some winners and some losers, the real question is whether society as a whole benefits - though whether this is ever actually measurable in any meaningful sense remains an open question in all but the rare exception of cases where changes have been implemented.

That this argument is gaining sway seems to be an indicator in itself that social inequality is becoming more noticable as policy failings are becoming more apparent.

If the tax money gets wasted through bad mangement, union obstruction, or pandering to special interests, liberals are more against the waste than are conservatives wedded to special interests. But that is about waste; not about the level of taxes.

Now you’re back to a socialist argument that state planning is more efficient. I disagree (see taxpayersalliance.com or burningourmoney.blogspot.com for endless evidence) but, regardless, that isn’t relevant to this debate. It’s an efficiency argument. She is more free if she is able to choose how to spend her own money than if the state taxes and then spends it for her.

Dan,

My case is that large amounts of current taxation isn’t redistributive as someone taxes and then receives money back in benefits. I’m not getting at the heart of Gracchi’s post - which is about redistribution - and I accept that. However, I think that the taxation which isn’t redistributive is the most immoral so I wanted to suggest to Gracchi that he make an exception for it. I’m not going to start an argument for/against tax here - it seems a bit broad - but if I can get you guys to concede the illiberalism of non-redistributive tax I think that will be victory enough. :)

Margin4Error,

I hope someone tells this man about your council tax revelation:
http://news.bbc.co.uk/1/hi/england/2738361.stm

I found that one with a quick googling but there are similar cases all over the place.

I don’t have time to respond to your post right now, but I shall do so later.

The moral argument for higher tax is indeed simply the moral argument for tax. But if a moral argument for tax can be made then in that there can be a moral argument for higher tax.

After all – if we pay tax to secure universal healthcare because there is a moral case for universal healthcare, what happens when we then fail to secure universal healthcare?

Well in the case of waiting lists in the 1990s the moral case was made by Labour for higher taxes to pay for more doctors, nurses, hospitals, etc. And that in turn reduced waiting lists and so boosted universal healthcare.

To counter that you can’t simply spit your dummy out and spout a fatuous notion that surely things could be more efficient. You have to offer a strong argument for how it can be more efficiently achieved.

In doing that you can make a moral case for lower tax, or at least mitigate the moral case for higher tax (since if higher tax is moral because universal healthcare is moral – then by achieving universal healthcare without higher tax you undermine the moral case.

But again – that doesn’t mean a case for higher tax can’t be made.

It’s stuff like this that is where the grey area forms though. On the one hand you have the argument you put forward Sunny, and it’s absolutely correct, but then on the other hand you have local governments completely failing to have any power as a mediator, let alone a buyer, in local markets. Take Bristol where I live for example, public transport is as woeful as it is anywhere else in the country and expensive to boot. Nothing the council does with regards to the public transport market makes it affordable to anyone but the over 65’s (I believe Lib Dem’s managed to set that up before being ousted, otherwise over 65’s still don’t have bus travel for free here), and I’d have to question just how much the extra we’re paying through our council tax on the latest budget is really going towards sorting this problem out for us.

But, of course, the above isn’t because of bad taxation plan’s, it’s about poor implementation, it’s about bad policy and individuals not getting the job done. But people won’t sit down and think that way, the first thing that’ll spring to mind is that it’s a tax we’re not getting anything from and so it is the tax that is the problem. The tories are certainly upping the talk about taxation that is for sure so they obviously think the time is right to make this another issue of theirs, and if this government wants to weather that particular storm they have to start ironing out the various many anecdotal stories like mine from happening.

And then there is the case that perhaps Matthew is a bit more referring to and that is the examples of those in the bottom two fifths of our income earners paying tax that ultimately gets redistributed back to them after paying people to do all the admin.

I’m not advocating that we turn back the clock to the 1970s, but in those areas where the world has changed for the worse, the left should be trying to change it back. One example of this is the dogma that private is intrinsically more efficient than public.

why does she almost certainly pay council tax? poor pensioners don’t pay council tax - just like poor non-pensioners.

The council tax benefit pays it for them.

don’t mistake ludicrous and outlandish predictions by economists for economic theory. (Not least as inflation in this country has fallen in the last few months, while employment has risen at its fastest rate in ten years, at least making such predictions premature).

There are some absolute basics to economics that don’t change. Free trade for example, increases wealth. This is derived from the principle of comparative advantage which is frankly, beyond question as an economic fact.

What maters is not how you then imagine such things fit into society or ideals, but how you respond to those facts.

The UK for example has a comparative advantage in financial services and high-tech engineering.

As such it makes sense to educate our population well as those sectors require high skills. That in turn requires taxation to overcome the market failure that people can’t adequately value their own education at the time the acquire it.

–

I hope this illustrates why we must define what our ‘better society’ is - in that without doing so we can’t make a cogent argument for the changes needed for it.

Note as well that in arguing for 50% attendence at university - the labour government had grasped this well and made that coherrant economic argument.

“That old lady almost certainly pays far more in council tax than she receives in tokens towards buses or taxis. Why not, instead of giving her a bus or taxi token, cut her council tax and then let her manage her own budget?”

The fundamental point is whether you redistribute wealth downwards or not. If you cut the old lady’s council tax, do you ask her to pay directly for the services that council tax bill pays for or not? If so, then you’re not actually saving her money, you’re probably costing her more money. If not, then that money has to come from somewhere, and that somewhere has to be another taxpayer. There’s no magic solution, just a decision about whether or not to redistribute downwards or not.

The exact mechanism for this redistribution is up for grabs though. Do we redistribute by providing services that are free for all, like the NHS, or do we redistribute simply by passing money from the rich to the poor directly? At the moment we have a horrifically complicated mixture of the two, and it’s not at all clear how redistributive the tax system as a whole is, although it is probably a bit redistributive on average. I think there’s a good liberal left case for simplifying this by having a citizens basic income scheme, although I’d still say keeping state health and education is probably sensible.