Sunday, 25 March 2012

A Taxing Issue

Did I hear correctly that Mrs Forbes-Hamilton is in pole position for the Malaysian GP? 

They say the minimum pricing proposal on alcohol is going to result in the heavy drinker paying £136 a year more on booze. I guess that means around £300 extra for me then. 

Going back to this 50p tax thingie; we need to reduce the deficit and simultaneously reduce unemployment from the 2.6m figure at which it currently stands. Every unemployed person is a drain on the economy, therefore reducing unemployment and getting more people paying tax is the logical key. 

Here’s a novel though on a taxation system to generate jobs – see what you think. 

Now we all know that millionaires arrange their tax such that they end up paying very little tax in the first place – every tactic to make them pay more ends in dismal failure with the result they pay only homeopathic tax (the simplest way to do this is to divert excess into a pension – which in itself attracts tax relief rather than taxation). 

Well, if all earnings over say £150k were tax free (or taxed at a low rate), then there would be no incentive to salt money away offshore, with the result that such cash would be either spent within the economy on conspicuous consumption (thus generating jobs), or invested on-shore for lending to businesses (thus generating jobs). It’s not as if millionaires keep wads of cash under the bed doing nothing; believe it or not, that’s not how you become a millionaire. Let’s face it - it’s only the wealthy or the government who have enough money to make any difference to the economy anyway. Such a regime might also attract more millionaires to our shores.

I suppose it all boils down to whether you think tax is better spent on making things (or services) within the private sector that can be traded and exported, or on public sector services (which we undoubtedly need to a certain extent) that focus inward and cannot be exported. A tax system that penalises the rich with an escalator factor above a certain level of income is inherently unfair – after all, bakers don’t change rich people more for a standard loaf of bread simply because they can afford it.


  1. Actually, the old socialist in me is quite attracted to the idea of a baker who charges people differently for the same loaf depending on how rich they are. Where is this baker located - they have a new customer.

  2. Alan: But that's not socialist. The baker in Chelsea would earn far more than the baker in Accrington by dint of nothing more than location.

  3. PS - I think it's called regional pay bargaining, and something the unions are dead against.

  4. An excellent idea. I guess it would work. Jobs would be created, no doubt.

    As far as the Baker is concerned, isn't that what happens now, to some extent? There isn't a 'National Price' for bread, as far as I know. Bread is somewhat cheaper where I live, than it is in London, though the same Baker doesn't charge different people different prices in the same shop.But what would be wrong with that, anyway, if the rich man is prepared to pay?

  5. V2: I believe a baker who charged rich people more would soon find his clientele dramatically reduced as other bakers took his business in a free market.