I always like to look at both sides of the equation; for every income there is an expense; for every asset there is a liability; for every benefit there is a burden, and so on. But the Righteous, only one side exists:
Smoking myth
It is often said that smoking is a filthy and expensive habit. Whether you count is as filthy or not is a subjective thing, but smoking is not expensive at all. It costs maybe 20p to make half an ounce of rolling tobacco and 50p to make a packet of twenty cigarettes, so in the absence of taxes, we'd expect them to cost something like 50p and £1 respectively in the shops.
The reason they cost £4 and £6 respectively is the taxes on top, which is why a lot of people buy smuggled tobacco and cigarettes. So a smoker (like me) who is too lazy or too honest to buy smuggled tobacco, is really only spending 50p pence a day on smoking and is paying a massive voluntary tax of £3.50 a day on top.
So from the point of view of the individual smoker, yes, smoking is expensive (even the smuggled stuff costs far more than cost price) but for society as a whole, smoking is a zero-sum game, and for non-smokers, smoking is a huge subsidy of several hundred pounds a year each.
Banking myth
The vested interests, such as The City of London Corporation like to say things like this:
The City makes a huge contribution to the UK economy: £53.4bn in tax revenues in 2009/10, 10% of national income, and employing over one million people across the UK.
Woah! Whether that's a contribution or not depends on how they earned that money in the first place. If a skilled and frugal burglar manages to amass £1 million in ill-gotten gains before the police finally catch up with him, and his £1 million is confiscated as proceeds of crime (i.e. a 100% tax rate applied), would the burglar stand up in court and claim that he had made a £1 million "contribution to the economy"?
Yes, financial services generates income from abroad and helps the balance of payments; and yes, there are lots of things which banks do which increase our earnings capacity, by relieving businesses of the risks of non-payment and oiling the wheels of commerce generally, and if they pay tax on those profits as well, then great.
But the bulk of banks' income is merely land rents collected as mortgage interest payments. Total residential and commercial mortgages secured on land and buildings in the UK are in the order of £1,600 billion, and mathematically, about three quarters (£1,200 billion) of that is secured on land alone, so banks are collecting nearly half of all land rent in the UK (total value of UK bare land at current selling prices is in the region of £2,500 billion)*. At an average mortgage interest rate of 4%, that means they are collecting about £50 billion in land rent (some of which they pass on to savers and depositors - but tax deducted from interest paid out is included in the £53.4 billion).
The bulk of that £53.4 billion tax which the banks claim to be paying is not tax on wealth which they have created and is neither a net contribution either to the economy as a whole nor the Exchequer in particular, all the banks are doing is soaking up national wealth and then 'generously' giving back half of it as tax. The government could just as easily collect land rents directly through the tax system and cut out the middleman, leaving banks to concentrate on activities which do add value.
* I hesitate to recommend the government running banks, but in theory, the government could simply make it illegal for private banks to advance mortgages secured on land any more (HM Land Registry could simply refuse to register them) and allow the Bank of England to dish out mortgages. It would then be the national bank collecting nearly half of all land rents, a cool £50 billion a year in revenues, without anybody even noticing that it was Land Value Tax by the back door.
Saturday 10 March 2012
Smoking and banking myths
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2 comments:
Quite. All that cr*p about "wealth creators".
Re smoking, remember Peter Cook's line: I risk my life for my country on a daily basis.
Yeah but more importantly nicotine is a drug, that keeps one happy about being a slave. Present company excluded. You are a rebel trying hard not to be.
Good one on the banks. But they only get away with it because voters keep demanding mortgages.
Also this not a zero sum game. Its a positive sum game. The product of the contributions add up to more than the sum. That is the magic of social organisation. Granted it could be even better, but. Stop being an accountant for a bit
rs
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