Wednesday, 21 March 2012

Osborne's Budget doesn't go far enough

By Max Jewell 

Art Laffer has been telling anyone who’d listen for the last thirty years that lower taxation is they key to a stable and prosperous economy. Not only does a low taxation rate actually increase government taxation revenue, naturally tax evasion decreases Michael Caine is an example of Laffer’s hypothesis - ‘the Government has taken tax up to 50 per cent and if it goes to 51 I will be back in America’1 - but it provides for increased consumption and increased investment which should give the UK economy a much needed boost. The 50p tax band was demonstrably inauspicious, it raised only a third of the projected taxation revenue2, a cursory glance at the laffer curve would have been profitable for Mr Brown. Between 1980 and 2007, the US cut taxes at all income levels. Result? The top one per cent went from paying 19.5 per cent of all taxes to 40 per cent. In Britain, since the top rate of income tax was lowered to 40 per cent in 1988, the share of income tax collected from the wealthiest percentile has risen from 14 to 27 per cent3. Taxing ‘the rich’ less than 50% is not unfair, a normative concept, nor is it immoral, taxation as a concept is amoral. There is no such thing as morality when it comes to economics, it is imperative that the economic recovery is prioritised, the normative, anemic, concept of ‘fairness’ is irrelevant and discarded as an argument. It seems rather bizarre that anyone can claim that a budget where the initial income tax threshold is raised is ‘unfair’.

Similarly, the reduction in corporation tax should remove the burdens that are pressing upon the strings of British industry. An exorbitant corporation tax is deleterious to the British economy, too high and investment and employment will suffer. Osbourne’s corporation tax reduction is totally copacetic. Equally, it is about time the archaic Sunday trading laws were repealed or, temporarily at least, relaxed. Miss Bazley’s concern about ‘no new funds [being] made available for green energy production’ (See response below) is somewhat incongruous during a debate about economics. The performance of the UK economy is of far greater importance than some spurious hypothesis about anthropogenic global warming. In a world where the increase in the cost of oil has a major impact upon UK macroeconomic performance the £3bn new oil field allowance to open up fields west of Shetland Islands is an excellent idea.

The budget is a move in the right direction. Over the course of the year Osbourne should look to further decrease taxation, moving towards a regressive, flat rate of income tax and a reduction in the untempered prolificacy that is expenditure on the NHS.

1 Stars warn of exodus from Britain over 50p tax rate as Treasury admits 69% of the wealthy will evade it: https://pgsmail.pgs.org.uk/owa/redir.aspx?C=f1427b3f8bce4cd7879a8ea020f4a3ed&URL=http%3a%2f%2fwww.dailymail.co.uk%2fnews%2farticle-1173792%2fStars-warn-exodus-Britain-50p-tax-rate-Treasury-admits-69-wealthy-evade-it.html

2 https://pgsmail.pgs.org.uk/owa/redir.aspx?C=f1427b3f8bce4cd7879a8ea020f4a3ed&URL=http%3a%2f%2fwww.guardian.co.uk%2fuk%2f2012%2fmar%2f21%2fbudget-2012-key-points-updated-live

3 https://pgsmail.pgs.org.uk/owa/redir.aspx?C=f1427b3f8bce4cd7879a8ea020f4a3ed&URL=http%3a%2f%2fblogs.telegraph.co.uk%2fnews%2fdanielhannan%2f100119741%2fmemo-to-the-occupy-protesters-here-are-ten-things-we-evil-capitalists-really-think%2f

1 comment:

  1. Like your article. But be aware that Nigel Lawson as Chancellor in the late 1980s created a false boom and encouraged it by making the rich pay less tax whilst keeping the base rate the same - so the poor were not helped in any way. As far as economics have morality, I call that immoral.

    ReplyDelete

Comments with names are more likely to be published.