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.
> 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.
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.
> 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