Good piece that, and as one of the Left-leaning critics of the original piece (thoughtful or not!), I agree with a lot of what you say, particularly around tax simplification.
I do understand the dead-weight argument, but it is an argument from micro-foundations. It's not obvious that that's how it's transpired in reality compared to the other rule of thumbs.
There have been countries with governments that deny supply and demand exist, and their record have obviously been comparatively very poor.
It's nowhere near as obvious that higher-tax OECD countries do much worse than similar countries with lower tax ones.
Similarly, there isn't a clear correlation between GDP and tax rates in the US across states.
Sure, once you get near and over 50% level, then you're more likely to get laffer curve effects, but overall, it's the effectiveness of the tax regime that affects the wealth of a country more than the overall level.
You were definitely one of the thoughtful critics!
You make a good point that this is a micro-argument, aimed at assessing individual policies (even fairly large ones, like the NIC rises) and that the macro picture is different and more contested.
I would probably put the importance of having a lower tax regime higher than you would, but would definitely accept it can be outweighed by other factors, e.g. investment levels, effectiveness of the tax regime, planning and regulation, etc.
I liked your original piece and the idea of agreeing on a ground rules before a debate. This said, “taxes harm the economy” still feels too broad. You’ve already pointed out the possible exceptions of land-value taxes and sin taxes.
But more importantly, deadweight loss is a micro concept and although it implies a loss of consumption I don’t think it necessarily lead to loss of economic activity. Taxes will almost always reallocate spending rather than destroy it, for example, a banana tax that nudges people toward British apples could boost domestic jobs if apples have a higher domestic multiplier.
Similarly, narrowly targeted tariffs for sunrise industries improve growth by steering resources where they’ll do the most good.
Perhaps these are the exceptions that prove the rule but I don’t think you need to demand extraordinary evidence to believe a tax might benefit the economy.
Appreciate the examples, which are good ones, but I think that 'in the wild' these are far more often overused than used well, so scepticism is the right starting point.
For example, most tariffs are harmful, but these arguments are much more likely to be adopted by industries seeking to gain a protectionist advantage than in cases where they are true (even though real cases do exist).
> There are cases where we are on the right hand side - particularly if dealing with very wealthy, very mobile people with a lot of choices, or very high rates of taxation.
Dan's list albeit sensible is politically ticklish in parts. Labour should have simply started implementing most, if not all of it, in Year 1 of their landslide victory. Objectors can only be so cross about so much at a time. Swamping them with change would have got most of it through. Probably too late now though.
Excellent piece; I also read the original piece and agreed with much of it although I incline to the view that the law of supply and demand is more always than usually true. As for tax reform - indeed, it is long overdue. But it is a huge political and administrative challenge, because to do it right will tread on a lot of toes (another rule of thumb, which applies redoubled in no trumps for tax law: every special case in legislation is there because a well-funded and articulate lobby group got it put there) and I'm not sure it can be done without a manifesto commitment. I think it's election-winning though, if only we had any politicians other than Farage with the presence to lead rather than slavishly follow public opinion.
So what’s your objection to a Land Value Tax? It raises revenue. Not only does it not harm the economy, but it benefits the economy by encouraging a more efficient use of land. Believe it or not, it does not reduce the amount of land in existence!
This is great and beautifully clear, thank you. There are two things about it, relevant to the UK's current situation, that it leaves me unsure about. Both relate to the conceptualisation of the British economy itself. It is certainly a jurisdiction, but is it still a whole economy, or has it been internationalised - by trade and by overseas ownership - to the extent that it is more reasonably considered a mosaic of multiple economies, of which the British element is by far the dominant part in consumption and exchange, but no longer the dominant part in initiative and administration? Specifically, how is your case for thumb rule 2 changed, if it is changed, by the ease with which individuals and companies in 2025 are able to change jurisdictions - will, indeed, be encouraged to do so by tax policy in other countries? And how is it changed, if it is changed, by the apparent beneficial impact of a UK tax cut on overseas economies - that it is likely to induce, for instance, increased sales of American-designed, Chinese-made devices, charged by French nuclear power stations or Chinese solar panels or Qatari gas, fed to us along cables owned by overseas investors?
Good piece that, and as one of the Left-leaning critics of the original piece (thoughtful or not!), I agree with a lot of what you say, particularly around tax simplification.
I do understand the dead-weight argument, but it is an argument from micro-foundations. It's not obvious that that's how it's transpired in reality compared to the other rule of thumbs.
There have been countries with governments that deny supply and demand exist, and their record have obviously been comparatively very poor.
It's nowhere near as obvious that higher-tax OECD countries do much worse than similar countries with lower tax ones.
Similarly, there isn't a clear correlation between GDP and tax rates in the US across states.
Sure, once you get near and over 50% level, then you're more likely to get laffer curve effects, but overall, it's the effectiveness of the tax regime that affects the wealth of a country more than the overall level.
You were definitely one of the thoughtful critics!
You make a good point that this is a micro-argument, aimed at assessing individual policies (even fairly large ones, like the NIC rises) and that the macro picture is different and more contested.
I would probably put the importance of having a lower tax regime higher than you would, but would definitely accept it can be outweighed by other factors, e.g. investment levels, effectiveness of the tax regime, planning and regulation, etc.
Enjoyed the piece, thanks! Let’s hope we don’t have to wait too long for a party/leader to make the case for a programme like Dan Needle’s!
I liked your original piece and the idea of agreeing on a ground rules before a debate. This said, “taxes harm the economy” still feels too broad. You’ve already pointed out the possible exceptions of land-value taxes and sin taxes.
But more importantly, deadweight loss is a micro concept and although it implies a loss of consumption I don’t think it necessarily lead to loss of economic activity. Taxes will almost always reallocate spending rather than destroy it, for example, a banana tax that nudges people toward British apples could boost domestic jobs if apples have a higher domestic multiplier.
Similarly, narrowly targeted tariffs for sunrise industries improve growth by steering resources where they’ll do the most good.
Perhaps these are the exceptions that prove the rule but I don’t think you need to demand extraordinary evidence to believe a tax might benefit the economy.
Appreciate the examples, which are good ones, but I think that 'in the wild' these are far more often overused than used well, so scepticism is the right starting point.
For example, most tariffs are harmful, but these arguments are much more likely to be adopted by industries seeking to gain a protectionist advantage than in cases where they are true (even though real cases do exist).
> There are cases where we are on the right hand side - particularly if dealing with very wealthy, very mobile people with a lot of choices, or very high rates of taxation.
This applies particularly to legal people: https://www.bbc.co.uk/news/articles/cz6g85qp0p6o
Dan's list albeit sensible is politically ticklish in parts. Labour should have simply started implementing most, if not all of it, in Year 1 of their landslide victory. Objectors can only be so cross about so much at a time. Swamping them with change would have got most of it through. Probably too late now though.
Footnote 8 is critical and it is tragic Labour do not seem to be going down this route.
Agree.
Excellent piece; I also read the original piece and agreed with much of it although I incline to the view that the law of supply and demand is more always than usually true. As for tax reform - indeed, it is long overdue. But it is a huge political and administrative challenge, because to do it right will tread on a lot of toes (another rule of thumb, which applies redoubled in no trumps for tax law: every special case in legislation is there because a well-funded and articulate lobby group got it put there) and I'm not sure it can be done without a manifesto commitment. I think it's election-winning though, if only we had any politicians other than Farage with the presence to lead rather than slavishly follow public opinion.
So what’s your objection to a Land Value Tax? It raises revenue. Not only does it not harm the economy, but it benefits the economy by encouraging a more efficient use of land. Believe it or not, it does not reduce the amount of land in existence!
This is great and beautifully clear, thank you. There are two things about it, relevant to the UK's current situation, that it leaves me unsure about. Both relate to the conceptualisation of the British economy itself. It is certainly a jurisdiction, but is it still a whole economy, or has it been internationalised - by trade and by overseas ownership - to the extent that it is more reasonably considered a mosaic of multiple economies, of which the British element is by far the dominant part in consumption and exchange, but no longer the dominant part in initiative and administration? Specifically, how is your case for thumb rule 2 changed, if it is changed, by the ease with which individuals and companies in 2025 are able to change jurisdictions - will, indeed, be encouraged to do so by tax policy in other countries? And how is it changed, if it is changed, by the apparent beneficial impact of a UK tax cut on overseas economies - that it is likely to induce, for instance, increased sales of American-designed, Chinese-made devices, charged by French nuclear power stations or Chinese solar panels or Qatari gas, fed to us along cables owned by overseas investors?