Taxing Times

[Ian H]

[There is a] routine claim that modern democracies are already taxed to the limit. A wealth tax, it is said, would simply drive the wealthy to move elsewhere. A property tax would be unworkable because a home is more than simply a liquid asset. Estate duties are massively unpopular because they appear to pursue people beyond the grave after they have already been taxed in life (hence the misleading but brilliantly effective label ‘the death tax’). Income taxes can’t go much higher without stifling economic activity and snuffing out entrepreneurship.

None of this is true. There is no upper ceiling on taxation – it all depends on the circumstances. During the Second World War income tax on higher earners in the UK reached 98 per cent and taxes on excess corporate profits were at 100 per cent. After the war it was understood that what had appeared to be political impossibilities were actually perfectly possible in extreme circumstances. As a consequence the postwar Labour government, though effectively broke, was nonetheless able to construct an extensive welfare state, including a national health service, that persists in some form to this day. It wouldn’t have happened without the war – a set-in-its-ways parliamentary democracy wouldn’t have made such a leap on its own.
https://www.lrb.co.uk/the-paper/v48/n13/david-runciman/the-cult-of-longevity

 

[BoldonLad]

[There is a] routine claim that modern democracies are already taxed to the limit. A wealth tax, it is said, would simply drive the wealthy to move elsewhere. A property tax would be unworkable because a home is more than simply a liquid asset. Estate duties are massively unpopular because they appear to pursue people beyond the grave after they have already been taxed in life (hence the misleading but brilliantly effective label ‘the death tax’). Income taxes can’t go much higher without stifling economic activity and snuffing out entrepreneurship.

None of this is true. There is no upper ceiling on taxation – it all depends on the circumstances. During the Second World War income tax on higher earners in the UK reached 98 per cent and taxes on excess corporate profits were at 100 per cent. After the war it was understood that what had appeared to be political impossibilities were actually perfectly possible in extreme circumstances. As a consequence the postwar Labour government, though effectively broke, was nonetheless able to construct an extensive welfare state, including a national health service, that persists in some form to this day. It wouldn’t have happened without the war – a set-in-its-ways parliamentary democracy wouldn’t have made such a leap on its own.
https://www.lrb.co.uk/the-paper/v48/n13/david-runciman/the-cult-of-longevity

It is a point of view, but, how/why should it be believed any more or less than all of the other Economic Theories (none of which have been tested, or proven).

 

[bobzmyunkle]

none of which have been tested, or proven.

There's the rub, we've had 50 years of neo-liberal economics. How many economic crises have we had in that time?
The market is infallible, except when the govt has to step in with bailouts.
Has that theory not been tested and found wanting?

 

[Ian H]

It is a point of view, but, how/why should it be believed any more or less than all of the other Economic Theories (none of which have been tested, or proven).

Well yes, apart from the actual example he quoted in the second paragraph.

 

[BoldonLad]

There's the rub, we've had 50 years of neo-liberal economics. How many economic crises have we had in that time?
The market is infallible, except when the govt has to step in with bailouts.
Has that theory not been tested and found wanting?

What theory?, if there are "N" Economists, there are "N+1" Economic Theories.

To the best of my knowledge, “the market” has never been given free rein, in a western democracy, because, the Politicians have not held their nerve, they have invariably intervened.

 

[BoldonLad]

Well yes, apart from the actual example he quoted in the second paragraph.

Yeah, we need another war, that will fix it, looks like Putin is our friend after all, looking after our best interests.

IMHO, the example does not “prove” that high taxation “worked”. It suggests that the Welfare State and NHS were made possible, but, no mention is made of “side effects”. For example, perhaps, the demise of our lead in various industries would not have happened if taxation had not diverted the money to those causes? No doubt, other “side effects” are available. Who knows?, we cannot rerun the scenario, can we?

 

[AuroraSaab]

When there's a world war on few companies or individuals can up sticks and move to a less tax heavy country. Not many 1940's British companies were in a position to move production and jobs to eastern Europe or the far East to maintain profits like they can today. It's a very different scenario to now where UK businesses are internationally owned and aren't tied to the UK emotionally or logistically.

 

[Ian H]

Yeah, we need another war, that will fix it, looks like Putin is our friend after all, looking after our best interests.

IMHO, the example does not “prove” that high taxation “worked”. It suggests that the Welfare State and NHS were made possible, but, no mention is made of “side effects”. For example, perhaps, the demise of our lead in various industries would not have happened if taxation had not diverted the money to those causes? No doubt, other “side effects” are available. Who knows?, we cannot rerun the scenario, can we?

...it was understood that what had appeared to be political impossibilities were actually perfectly possible in extreme circumstances - not necessarily war. I don't think Thatcher, who finished off UK industry, was an advocate of high taxation.

 

[BoldonLad]

...it was understood that what had appeared to be political impossibilities were actually perfectly possible in extreme circumstances - not necessarily war. I don't think Thatcher, who finished off UK industry, was an advocate of high taxation.

"Not necessarily", but, no example of an alternative set of "extreme circumstances".

Thatcher simply administered the last rites, the industries were dead or dying before Thatcher

 

[Rusty Nails]

"Not necessarily", but, no example of an alternative set of "extreme circumstances".

Thatcher simply administered the last rites, the industries were dead or dying before Thatcher

More la estocada than last rites.