Ian Bennett left the following comment on Another silly objection to universal benefits:
Are you really claiming that "29 million employees (claiming the personal allowance)" are benefitting from redistribution because part of their gross wage is not taxed? That someone earning, say, £20,000 is effectively receiving money from someone earning £100,000 in the form of a higher allowance than would be the case if the higher earner paid less tax?
"Benefitting from redistribution" means "getting more of other people's money than is taken from you"
Let's imagine we had a referendum on whether to have:
a) A flat income tax of 20% and no personal allowance
b) A flat income tax of 30 % and a personal allowance of £10,000
and in either case, the total tax revenues would be the same and the associated government expenditure would benefit all income groups equally (remembering that you have to look at the spending side as well, and not just the way in which money is raised).
It's not actually clear to me: does Ian Bennett oppose redistribution out of principle (remembering that the state pension is very much redistribution - so politically this would be a bit of a hard sell), in which case he would vote for (a)? Or does he think that a higher personal allowance combined with a higher rate of income tax is not redistribution, and thus he might as well vote for (b)?
On Planet Innumerate (assuming that they also opposed redistribution), everybody who earns or expects to earn more than £10,000 would vote for (a).
However, on Planet Wadsworth, where people have access to calculators and backs of envelopes, and vote out of enlightened self-interest, anybody who earns or expects to earn less than £30,000 would vote for (b); and everybody who expects to earn more than £30,000 for the foreseeable future would vote for (a).
On a philosophical level, it is not clear cut whether you call (b) more redistributive than (a).
On a mathematical level, is pretty clear cut that (b) is more redistributive than (a). Ergo, for a given total tax revenue, a higher personal allowance is redistributive.
Monday, 1 March 2010
Yes, that's exactly what I'm saying.
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15 comments:
Now if only you could make your land value tax as clear cut to argue as this thingy.
Sounds like you have your next post then MW!
To answer your question, "does Ian Bennett oppose redistribution out of principle", yes I do, because I cannot see how the state has the moral right to take what I have earned and give it to someone else. If your referendum options were the only two available, I would vote for A, not because I would be personally better off but because it's the right thing to do, from a moral standpoint. I have no objection to paying for the justified functions of the state (police, judiciary, defence; a much shorter list than yours) given that everyone else does likewise. We all benefit from those functions so we should all pay for them and nothing more, and as we benefit equally, we should all pay equally. The trouble with a tax-free allowance is that it insulates some people from the cost of the state while providing them with the (alleged) benefits of it.
It has been said that the ideal political system is the one that you would choose before knowing where you would fit into it. In this context, redistribution is fine as long as someone else's money is being redistributed to you, but not so good when the shoe is on the other foot.
You appear to be a pragmatist in that you prefer whatever action is most likely to fulfil whatever your aim is at the time. I am a moralist so I prefer the action that can be justified. So if your next question is "But how would we pay for ... ?", my answer would be "By charging those who use it".
Anon, WFW, I'll try, I suppose.
IB, fair points all. However, what about spending that benefits some people far more than others? Who ought to pay for that? Would it be fair to ask landowners to pay for flood defences via a Land Value Tax, for example?
big downside to "charging those who use it" is that often they're the ones who don't have the money...
Consider the NHS. I have private health case through work, so I gain nothing by funding the NHS - why then should I pay for it? I've never claimed any benefits, so can I be excused from funding the welfare system? You'd probably find that those who are truly wealthy would pay next to nothing - which would mean that the system as a whole would have very little money.
Speaking realistically, any system that works will have to be redistributive - otherwise we'd not need a taxation system.
One problem with any plan to reform the system to make it less redistributive is that there are a lot more people on lower incomes than higher incomes. Thus, any political party that wants to change the welfare system risks losing a lot of votes. I'd personally solve that by saying that you only get to vote if you're a net tax payer, rather than receiver...
"Would it be fair to ask landowners to pay for flood defences via a Land Value Tax, for example?"
No; it would not be fair to ask landowners to pay for anything via a Land Value Tax (because LVT is iniquitous). What they should do is pay for flood defences themselves. Why involve tax?
The same argument applies to virtually all current state spending. For example, roads could be funded by tolls on their use. Given that everything you use - apart from utilities - comes by road, suppliers would include their exposure to road tolls in the cost of their goods.
RA: "big downside to 'charging those who use it' is that often they're the ones who don't have the money". Why is that my problem? And why don't they have the money? And why does the set of "stuff that I have to pay for" include leisure centres, theatres, golf courses, sports halls, etc?
Of course, welfare beneficiaries will oppose any scheme which detaches them from the public teat; the obvious solution is in your last sentence.
RA, let's exclude net tax recipients from voting, super idea, but it won't go down well with pensioners, will it?
IB, we got off the topic a bit. I was merely saying that the personal allowance is inherently redistributive, which you now appear to accept. Whether you think redistribution is a good or a bad thing is a separate topic.
As to LVT being iniquitous...
a) If there's just one landowner, of course he should pay for flood defences himself. If there are two or three, they can no doubt come to some cost-share arrangement, that's fine.
But what about things like the Thames Barrier? What if it can be shown that it stacks up on cost/risk grounds, but a minority of landowners refuse to pay their share? Would you allow them to free ride? Or would you force them to pay, i.e. levy a tax?
b) You also see appear to see The State as iniquitous. Now, as a thought experiment, let's imagine we went further than your propose and The State shut itself down completely. No more taxes, no more old age pensions, no more police or prisons, no more HM Land Registry, no army, nothing.
Who would lose out least from this? The young with few assets and some marketable skills, because they'd go abroad.
Who would lose most...? Ergo, who benefits most from the fact that The State exists? Ergo, who should be paying for it (even if you want a very small state, that is a perfectly sensible choice in many ways)?
Well for a start I certainly don't accept that the personal allowance is inherently redistributive; rather that it's a way of making taxation less redistributive, in that it allows me to keep some of my money instead of having it given to other people (which isredistributive). It's only redistributive if you accept that the state already owns your money; if you accept the legitimacy of redistribution, you obviously accept this anyway.
Regardng the Thames Barrier and such; the provision of a public good (which that is) would be included in what I referred to as the justified functions of the state, although its impact is local thus its funding would be also.
"You also see appear to see The State as iniquitous". Not at all; as I said, there are justified functions of the state which cannot (in my opinion - pure Libertarians will probably disagree) be accomplished by other means.
(In passing, I'd like to clarify some terminology in that I'll call a payment for services which I use a "charge", reserving the term "tax" for "payment for services others use"; after all, your grocery bill is a charge, but benefit payments - other people's grocery bills - is funded by tax.)
So, in a moral society (my morals - YMMV), police and the Army (and the judiciary) are provided by the state, and each citizen pays a charge to fund them. Pensions? No, replaced by some voluntary form of insurance (which is what our state pension system is claimed to be) or savings, just as was the case before the Welfare State. Land Registry? No; all we need is a record - not necessarily centralized - of who owns what, and a judicial system which recognises and enforces contracts.
IB, you have made it quite clear that you don't like redistribution, that's fine, what I am trying to point out is that the personal allowance for tax is a modest form of redistribution - the higher the allowance, the more redistributive the tax system.
This is a maths thing and does not mean that you have to believe 'the state owns all your money', in this example the state quite clearly owns up to 30% of your money.
But you still haven't answered the question: "Regardng the Thames Barrier and such ... its impact is local thus its funding would be also."
So whatever money the state collects to pay it is a charge, not a tax, yes? And if there is to be a charge, should it be based on incomes (which bear no relation to the personal benefit anybody derives from the Thames Barrier) or should it be based on property ownership (and as a property owner, you derive a lot of benefit from the Thames Barrier, in terms of lower insurance premiums if nothing else)?
When I say "Land Registry" I mean the whole system whereby the state creates, records, guarantees and protects title to land, whether there's a central registry or it's dealt with by title deeds is neither here nor there.
Who should pay for the costs of doing all this? Should the "charge" be proportional to the benefits that landowners derive from all this?
On redistribution, I can see that a relatively high personal allowance is more redistibutive than a lower one, but that's a bit like saying that being shot in the back of the head is more humane than being shot in the abdomen.
"the state quite clearly owns up to 30% of your money"
If the state can take your money at a whim, without your permission, it already owns all of it; it simply chooses not to exercise all of that ownership.
I've already said (I think; if not, I'll say it anyway) that a function of the state is to enforce valid contracts, so if I have a valid piece of paper which says that I own my house, then the state should protect that ownership.
If 1,000 people have property which is protected by the Thames Barrier, they each pay 1/1,000 of the cost of it, and they accept that this charge is simply a function of choosing to have property there. You don't pay more than I do to have electricity delivered to your house just because it's worth more than mine, even if you have a more expensive stuff in your freezer.
You appear to have a fixation, if I may use the term, on charging according to the "value" of one's property. Let's assume that, hanging on my wall, is a painting that I bought for £2 at a flea market. A friend visits and tells me that it's a Gainsborough. Am I suddenly liable for higher charges for the Police because they are protecting me from theft of a greater value than before? What if it turns out not to be a Gainsborough. Do I get a refund?
MW, I cannot but help remarking the phrase 'Gordon Bennet' springs to mind!
IB, "I can see that a relatively high personal allowance is more redistibutive than a lower one"
Thank you, that was the whole point of the post.
"if I have a valid piece of paper which says that I own my house, then the state should protect that ownership."
The only piece of paper which can say you own a house is one that the state recognises (by definition).
All land ownership is dependent on the state being there to register and protect legal title. See also "Falkland Islands".
Your 'contract' is not with the previous owner, your 'contract' is with the state. What you buy from the previous owner is the benefit of that contract with the state.
It is not like paintings, which are created and changed hands without any state involvement; exist without contracts, registration or legal protection; can cross borders; whose intrinsic value has bugger all to do with local transport infrastructure or how good the local state schools areetxc etc.
You couldn't have chosen something less like land if you tried :)
"If 1,000 people have property which is protected by the Thames Barrier, they each pay 1/1,000 of the cost of it, and they accept that this charge is simply a function of choosing to have property there."
Thank you, also agreed. But what if some of the plots are three times as big as the others, would it not be fair to make them pay 3/1000?
"You don't pay more than I do to have electricity delivered to your house just because it's worth more than mine, even if you have a more expensive stuff in your freezer."
Correct. Where have I ever said otherwise?
"You appear to have a fixation, if I may use the term, on charging according to the "value" of one's property"
Completely untrue. I speak only of taxes on land values (or land and buildings as a reasonable approximation).
"Let's assume that, hanging on my wall, is a painting that I bought for £2 at a flea market. A friend visits and tells me that it's a Gainsborough..."
Stop right there. How on earth would Land Value Tax apply to a painting? Is a painting land? Nope. See above.
However, on the topic of paintings, if you chose to insure it, would you declare its value as £2 or whatever a Gainsborough is worth?
Mark, you're taking some of my comments out of context, which may well be my fault.
I'm not suggesting that LVT would apply to a painting, but you want to levy a charge for local services on the basis of what someone else thinks my property is worth. That person's valuation may not be the same as mine; for example, the SureStart nursery near my home - which would be an attraction for some buyers - is a nuisance for me, but you want to charge me more because of it. I just don't understand how you can justify that.
This could go on forever. I appreciate your patience.
Witterings From Witney, if you're going to insult me on the basis of my name, at least spell it correctly.
Ian Bennett,
Sincere apologies dear chap - did not realise you were another Gordon!
And in defference to our host, who's hospitality I am sure neither of us wish to abuse, perhaps we should adjourn to my blog?
IB, I may well be taking some of your comments in isolation (but certainly not out of context).
"...you want to levy a charge for local services on the basis of what someone else thinks my property is worth."
Your property is worth what it is worth, there is a market value for it, which we can establish by looking at sales of other homes in the same area.
It is unlikely that the SureStart centre is the only reason that your house is worth what it's worth; but the only reason that the LAND element is worth what it is is because it is where it is.
Were your house airlifted to a similar sized plot in the middle of Kazakhstan, you'll find it would be worth a lot less, but were they to shut down the SureStart centre, it would make little difference to its value.
But what if they shut down the rail station, bus services, sacked the local police and fire brigade, stopped servicing the roads and deleted your record at HM Land Registry and asked you to stay at home with a shotgun if you wanted to keep exclusive possession? What if they abandoned planning restrictions so that everybody could build what they wanted in your area?
What would your house or land be worth then?
Ergo, the value of your house is a function of the value of local services, and as long as the value exceeds the cost (and it must do) then it is only fair to see the government as a 'mutually owned service provider' which apportions its costs between those who receive the value.
And if you think you are being overcharged, then sell it to somebody else who is happy to pay for it.
What you are saying is like saying "I don't like The Rolling Stones, why should I pay £100 for a concert ticket to see them?" If you don't like them, then don't buy a ticket!
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