In a recent interview with the BBC, I basically accused UK Prime Minister David Cameron of being a feckless and clueless demagogue who is engaged in a desperate effort to resuscitate his political future.
I shouldn’t have been so kind. Cameron manages to combine bad policy and bad morality in a way that is embarrassing even for a politician.
Writing for the Daily Telegraph, Janet Daley eviscerates Cameron’s puerile approach to fiscal policy, beginning with some mockery of his class-warfare approach to tax enforcement.
David Cameron said something last week that was the precise opposite of the truth…the Prime Minister said was: “If you want a low-tax economy, you have to collect the taxes that are owed.” When what he should have said, of course, was: “If you want to collect the taxes that are owed, you have to have a low-tax economy.” Mr Cameron’s statement was one of the more subtle threats contained in the declaration by the G8 – which was pretty much all they could agree on – that they are now the rightful owners of all the wealth produced by anyone except for certain exemptions that they will, subject to minimal notice, decide upon. His remark, presumably designed to provide moral justification for the unprecedented levels of shared surveillance and breaches of data protection that governments are preparing to launch, actually stood on its head the truth about effective tax collection. Which is that the lower rates of taxation are, the less likely it is that payment of them will be avoided or evaded.
She also makes some very astute points about other issues, including the Laffer Curve.
The introduction of the 50p rate of income tax caused two-thirds of those earning a million pounds per year simply to disappear from the reach of HM Revenue & Customs. Whereas under the previous highest tax level of 40p, 16,000 people were prepared to declare earnings of one million pounds, that number shrank to only 6,000 after Gordon Brown, bless him, raised it to 50p. Result: the Treasury lost £7 billion in revenue.
Ms. Daley also comments on tax compliance and the risks of letting governments destroy financial privacy as part of their efforts to undermine tax competition.
If people regard levels of tax as fair (in the true sense of the word, not the Left-wing sense, which actually means “vindictive”), they will not go to expensive and dangerous lengths to escape from paying. The more punitive and discouraging of wealth-creation taxes are, the more they are avoided by stealth or geographical relocation – or by the even more economically disastrous measure of people being disinclined to increase their own productivity. Ah yes, but isn’t this the problem that those heads of government are determined to address? Rather than lowering taxes to levels that those who are taxed find acceptable, they will simply close off all the avenues of escape. There is to be no more possibility, by international agreement (which is to say, the coercion of smaller, less rich countries), of geographical movement for tax advantage.
She closes by opining on why this is really a debate about the burden of government spending and whether taxpayers exist to feed the spending appetites of politicians.
If you eliminate tax competition – if you create a uniform, universally policed tax standard – it is the poorer countries that suffer because they are deprived of the capacity to attract foreign capital. …What is at the heart of all this is the growth of governments: the treasuries of the world are becoming needier and greedier. …Underlying almost all political debate on this matter now is the unspoken assumption that privately owned wealth is inherently evil, and that its only moral justification is to provide revenue that governments can redistribute. …let me remind you of what you may actually believe, shocking as it may sound in the context of prevailing public discourse. Are you ready? It is not the primary function of business to provide funds for politicians to spend.
Amen. The statists and collectivists that dominate the political elite treat us like a herd of cattle to be milked and slaughtered.
We need tax havens in order to impose at least a tiny bit of restraint on the greed of the political class. These low-tax jurisdictions aren’t a sufficient condition to save us from statism, but they sure as heck are a necessary condition.
P.S. Who moved farther in the wrong direction, U.S. Republicans who went from Reagan to Bush or U.K. Tories who went from Thatcher to Cameron?
[…] “holes in public finances” are at least partially a result of the Laffer Curve. As I’ve repeatedly warned, higher tax rates rarely – if ever – collect as much money as politicians […]
[…] in public finances” are at least partially a result of the Laffer Curve. As I’ve repeatedly warned, higher tax rates rarely – if ever – collect as much money as politicians […]
[…] OECD, you’ll think this is morally wrong. Not because you object to homosexuality, but because you think tax avoidance is very bad and you believe the state should have more […]
[…] you’ll think this is morally wrong. Not because you object to homosexuality, but because you think tax avoidance is very bad and you believe the state should have more […]
“So there you have it, the people who have earned money are too shortsighted, hysterical, rapacious and idiotic to be trusted to invest it themselves. The money must be seized from them by politicians, who will invest it with almost perfect foresight and complete disinterestedness (as illustrated, for example, by the economic planners of Soviet Russia). For people who are risking their own money will of course risk it foolishly and recklessly, whereas politicians and bureaucrats who are risking other people’s money will do so only with the greatest care and after long and profound study. Naturally the businessmen who have earned money have shown that they have no foresight; but the politicians who haven’t earned the money will exhibit almost perfect foresight. The businessmen who are seeking to make cheaper and better than their competitors the goods that consumers wish, and whose success depends upon the degree to which they satisfy consumers, will of course have no concern for ‘the general social advantage’; but the politicians who keep themselves in power by conciliating pressure groups will of course have only concern for ‘the general social advantage.’”
Henry Hazlitt. The Failure of the “New Economics”, 1959
Of course, Mr. Hazlitt wrote this before the advent of font sarcastics.
The key phrase of this entire article was that high tax rates result in “people being disinclined to increase their own productivity.”
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When a guy sits down to count how productive he has been – to count the day’s earnings – and he has to say “one for me, one for you” when the “you” is someone who has contributed nothing to his productivity, he has to wonder how much harder he wants to work.
Switzerland has low levels of taxation, apparently high tax payment compliance, enjoys the rule of law, and is outstandingly prosperous. Could there be any relationship between these four?
“His remark, … , actually stood on its head the truth about effective tax collection. Which is that the lower rates of taxation are, the less likely it is that payment of them will be avoided or evaded.”
That’s EXACTLY what I was thinking as I heard about this drivel emitted by Cameron. These people are despicable, and ruinous.
Excellent article by Ms. Daly for sure…