tag:blogger.com,1999:blog-1141932539860553199.post8044420289923171911..comments2024-03-05T10:52:24.691+00:00Comments on Mark Wadsworth: The Laffer Curve, again.Mark Wadsworthhttp://www.blogger.com/profile/07733511175178098449noreply@blogger.comBlogger20125tag:blogger.com,1999:blog-1141932539860553199.post-19161159700203013582014-12-31T10:10:34.606+00:002014-12-31T10:10:34.606+00:00Apologies for being late to this, but only just ha...Apologies for being late to this, but only just had a chance to really study it. <br />To extend the discussions onward a bit, and outside the deadweight costs meme, this analysis, or any analysis like this, should make any free citizens blood boil. Just how far we have been taken - possibly willingly - down the road of dependency by self serving governments is quite appalling.Lolahttps://www.blogger.com/profile/04586735342675041312noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-87906811113366179212014-12-29T12:52:15.445+00:002014-12-29T12:52:15.445+00:00S, first you have to look up excess burden of taxe...<br />S, first you have to look up excess burden of taxes/dead weight costs, as per link above. That is the key to all this.<br /><br />Apologies for my lazy explanation. I meant <i>"GDP is £100 and you attempt to collect £40 in tax by imposing income tax at 40%…"</i>. So GDP shrinks to £90 and revenues are only £36, so you have to increase the tax rate a bit and GDP shrinks a bit more etc.<br /><br />(Collection costs are surprisingly low (it's the welfare system which has ridiculously high admin costs), let's ignore these for now.)<br /><br />Of course LVT will be paid out of income, that's a red herring. Everything is paid out of income. But it is no longer a tax on income and so has no deadweight costs.<br /><br />You say: <i>"It's still money not available to spend on ice cream and DVDs."</i><br /><br />No, it's money which would otherwise be collected in rent by one group at the expense of another group. <br /><br />Total spending on ice cream and DVDs unchanged. Workers can afford more ice cream and DVDs, landlords, unemployed, retired and bankers can afford less ice cream and DVDs. <br /><br />Unless they start working, in which case there is more ice cream and DVD's being created and more being consumed.<br /><br />And whether the ruling class nicks the money or dishes it out as welfare payments or public sector salaries, it is still available for spending on ice cream and DVDs.Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-49659062081908077642014-12-29T12:22:16.781+00:002014-12-29T12:22:16.781+00:00... though I can understand that taxing land/prope...... though I can understand that taxing land/property would make people think about using it more efficiently.Sackersonhttps://www.blogger.com/profile/17284329249862764601noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-18289757404182962372014-12-29T12:20:38.541+00:002014-12-29T12:20:38.541+00:00Educate me, mate. If you can make me get it, anyon...Educate me, mate. If you can make me get it, anyone can get it.<br /><br />(1) Taxes £40, revenue £36. I thought you said costs of collection were much less than 1%.<br /><br />(2) LVT may be levied on property but will be paid nevertheless, presumably from income in most cases, whether the taxpayer is a director or employee. It's still money not available to spend on ice cream and DVDs.Sackersonhttps://www.blogger.com/profile/17284329249862764601noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-53520328023167774702014-12-29T12:07:55.687+00:002014-12-29T12:07:55.687+00:00"But we are in a democracy"
I would cal..."But we are in a democracy"<br /><br />I would call it an elective oligarchy. Democracy is what they have in Switzerland. I expect the government would be a lot less kleptocratic if we had a Swiss-style democracy, but perhaps not.Bayardhttps://www.blogger.com/profile/15211150959757982948noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-79572322832060450422014-12-29T10:06:30.307+00:002014-12-29T10:06:30.307+00:00S, the point is that LVT has no dead-weight costs ...S, the point is that LVT has no dead-weight costs (and possibly even stimulates economic activity).<br /><br />So if we start with hypothetical tax-free GDP of £100 and impose taxes on income and output of total £40, we end up with GDP of £90 and revenues of £36.<br /><br />If, instead, we try to collect £40 in LVT, we end up with GDP of £100 (and growing) and revenues of £40. People on the whole are 10% better off.Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-2036729451549382492014-12-29T10:02:34.875+00:002014-12-29T10:02:34.875+00:00Mark, I must really be thick. Why would it make a ...Mark, I must really be thick. Why would it make a difference paying tax as LVT rather than income tax? It's still tax.Sackersonhttps://www.blogger.com/profile/17284329249862764601noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-40694277446458592852014-12-29T09:01:46.494+00:002014-12-29T09:01:46.494+00:00S, no, because that lost 12% of GDP is lost comple...S, no, because that lost 12% of GDP is lost completely. <br /><br />For the purposes of this discussion, let's put to one side how efficiently the government spends or redistributes what it collects.<br /><br />The point is, collect the same £££ amount in LVT to replace that 15% of GDP collected in taxes on income and output and GDP grows by 12% and tax revenues remain constant.Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-9039291974295237012014-12-29T08:41:40.417+00:002014-12-29T08:41:40.417+00:00If cutting 15% only raises GDP by 12% then wouldn&...If cutting 15% only raises GDP by 12% then wouldn't it be better for the government to spend 15% directly on goods & services? Isn't this about getting value for money - educating the "government shopper" as Burning Your Money called it?Sackersonhttps://www.blogger.com/profile/17284329249862764601noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-73606308894921524722014-12-28T22:38:03.067+00:002014-12-28T22:38:03.067+00:00MW. Very nice piece of logic and analysis. Thank...MW. Very nice piece of logic and analysis. Thanks.Lolahttps://www.blogger.com/profile/04586735342675041312noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-46410825638529988862014-12-28T21:44:11.812+00:002014-12-28T21:44:11.812+00:00B, yes, fair summary. But we are in a democracy an...B, yes, fair summary. But we are in a democracy and some governments are clearly far more kleptocratic than others. If the ruling classes only nick a few per cent of GDP for themselves, that is tolerable, but the current UK government/ruling class nicks more like ten or fifteen per cent.Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-74988896128823693482014-12-28T20:59:44.658+00:002014-12-28T20:59:44.658+00:00"Since when has it been the government's ..."Since when has it been the government's mission to take as much off me as they can."<br /><br />Since, oh, the time of Hammurabi, I suspect. That's how it's always been, since the idea of " the state" was invented: the state takes from its citizens the maximum they will put up with, then spends the minimum it can on things that it know the citizens will not tolerate not being provided with and wastes the rest, or in the old days, spent the rest on fighting their neighbours.Bayardhttps://www.blogger.com/profile/15211150959757982948noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-32951982909175591802014-12-28T20:32:17.527+00:002014-12-28T20:32:17.527+00:00S, no, what the government should or should be doi...S, no, what the government should or should be doing is a separate topic. <br /><br />Sh, yes 'revenue maximisation' is of course bollocks, not least because it ignores the deadweight cost, which is the narrow focus of this post.<br /><br />Clearly, whatever level of actual government spending you want in £'s, LVT is always better than taxes on income, because it has no dead-weight costs, so required LVT as % of total economy is smaller.<br /><br />As to 'bare minimum of government spending', I've done that one, and you can make up your own mind, but clearly the true core functions of the state (defence, law and order, roads, refuse collection and fire brigade) costs less than ten per cent of GDP, probably nearer five per cent.<br /><br />The point is that the "bare minimum of taxation" is an irreducible figure equivalent to land rents. If the government doesn't collect it (and dish it out again per person) then it will be collected privately, and allowing that to happen in itself has dead-weight costs.<br /><br />SL, OK, with a 100% tax rate there would still be economic activity but it would all be black market, so what it means is "with 100% tax and totally honest but economically rational citizens…"Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-8742201129922585682014-12-28T18:47:09.492+00:002014-12-28T18:47:09.492+00:00obviously, with a 100% tax rate, revenues are nil ...<i>obviously, with a 100% tax rate, revenues are nil and the size of the economy is zero</i><br /><br />I'd always imagined that the 0% end represented anarchy and the 100% end slavery. One would be a power vacuum and possibly result in the other. But you can't have 0 economic activity unless there are 0 people surely?Steven_Lhttps://www.blogger.com/profile/05029437876479574883noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-12759547984000372382014-12-28T18:45:34.031+00:002014-12-28T18:45:34.031+00:00Mark
Apologies in advance for the profanity!
Yes...Mark<br /><br />Apologies in advance for the profanity!<br /><br />Yes, yes but all this laffer curve 'revenue maximisation' bollocks really pisses me off.<br /><br />Since when has it been the government's mission to take as much off me as they can. The b'stards should do the minimum necessary for the least cost and let me spend the rest how I see fit.<br /><br />So what I'd really like to know is how much that is, and what the LVT would be if that was the case. You are an accountant and you even have a name for it.... its called Zero Based Budgeting.Shineyhttps://www.blogger.com/profile/13281261419328886986noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-80979689663701512632014-12-28T18:17:25.978+00:002014-12-28T18:17:25.978+00:00So instead of dropping tax by 15% to get 12% GDP b...So instead of dropping tax by 15% to get 12% GDP boost, better to spend the 15% on goods and services directly?Sackersonhttps://www.blogger.com/profile/17284329249862764601noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-48388954852122328322014-12-28T18:11:21.226+00:002014-12-28T18:11:21.226+00:00S, oops, I've checked HM Treasury's thing ...S, oops, I've checked HM Treasury's thing again, we have to scale down the 30% by 60%, so GDP would 'only' be 12% higher if average rate dropped from 50% to 35%.<br /><br />And no, I'm not talking about 'crowding out', I am talking about dead weight costs as explained at <a href="http://en.wikipedia.org/wiki/Excess_burden_of_taxation" rel="nofollow">Wiki</a>.Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-44497213796026897392014-12-28T17:59:30.154+00:002014-12-28T17:59:30.154+00:00Thanks for the clarification. But without the taxe...Thanks for the clarification. But without the taxes presumably many other jobs - many of them useful - would not exist, or might re-enter as privatised "dead-weight costs" in the form of private healthcare, private education etc - which is where we seem to be headed anyway. Or am I being slow, again?Sackersonhttps://www.blogger.com/profile/17284329249862764601noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-14041153857109415662014-12-28T17:55:14.874+00:002014-12-28T17:55:14.874+00:00S, no, that's "collection costs" whi...S, no, that's "collection costs" which are considerably less than 1%.<br /><br />"dead-weight costs" are all those transactions which don't take place, all the businesses which are not viable, all the jobs which don't exist… as a result of taxes on transactions, profits and employment.Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-77114540733624252992014-12-28T16:12:04.452+00:002014-12-28T16:12:04.452+00:00Sorry to be so slow, but are you saying 30% of inc...Sorry to be so slow, but are you saying 30% of income tax raised is used up in collecting it?Sackersonhttps://www.blogger.com/profile/17284329249862764601noreply@blogger.com