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Adam Smith Institute Blog:

Taxing times

By Dr Madsen Pirie in: Tax & Economy •

I had a piece in the Telegraph business section on Wednesday, comparing Gordon Brown's tax policy with the maxims set down by his illustrious fellow-countryman, Adam Smith. Smith had said that people should pay taxes in proportion to income, that they should be certain rather than arbitrary, that they should fall due when they could conveniently be paid, and that they shouldn't cost too much to administer. I suggested that few would give the Chancellor four marks out of four, given his stealth taxes and his steady tax increases.

Much of my article was of steps which could be taken to simplify taxes in Britain, starting with the harmonization of income tax and national insurance. I also suggested that capital taxes could be harmonized, and put in line with income tax as well as with each other, absorbing the much-disliked death tax. The complex system of tax credits put in place by the Chancellor could and perhaps should be replaced by a simpler negative income tax. Out could go all the tax exemptions, allowances and tax credits accumulated over the years like junk in a store-room.

Yes, Smith himself had harsh words for taxes on labour (income taxes et al):

"In all cases, a direct tax upon the wages of labour must, in the long run, occasion both a greater reduction in the rent of land, and a greater rise in the price of manufactured goods, than would have followed from a proper assessment of a sum equal to the produce of the tax, [levied] partly upon the rent of land, and partly upon consumable comodities."

And similarly on capital taxes and profits. Yet he did favour one form of taxation more highly than any other:

"Both ground- rents and the ordinary rent of land are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own. The annual produce of the land and labour of the society, the real wealth and revenue of the great body of the people, might be the same after such a tax as before. Ground-rents, and the ordinary rent of land are, therefore, perhaps the species of revenue which can best bear to have a peculiar tax imposed upon them."

So why does the Adam Smith Institute continue to suggest tinkering with income and capital taxes to make them a little more fair, a little easier to collect, a little simpler to understand? Why not embrace Smith's idea, as developed by Henry George, in the "single tax". Get rid of most of these other taxes apart from perhaps behavioural taxes where there is a popular mandate to tinker with certain aspects of peoples' behaviour and instead insist that the only revenue a government can call on is the value of land within its borders.

It is simple, difficult to avoid - it doesn't matter whether you are domiciled here or not - if you own land you'll pay your tax or lose the land eventually - economically non-distorting, penalises a monopoly (anathema to the free markets AS and ASI espouse) and can set an absolute and market driven limit to the size of the state. A body like the Adam Smith Institute (seen as it is in many circles as a rabid right wing think tank) is in the ideal position to push the "Overton Window" on tax policy. So why is it so pedestrian and unimaginative on this, where their eponymous hero appeared much more certain? At least their counterpart in Australia is bolder (be prepared to turn your computer's sound down - the background music grates!)

Technorati Tags: Henry George, Adam Smith Institute, land value tax

You know who you are. Those liberals (in particular) who always claim that "libertarian free markets" will result in a corporate plutocracy, or that the current turmoil in world financial markets (yes, it's still going on you know!) is a result of "libertarian free markets". Here, especially for you (but of interest to others I hope too), is a brilliant explanation of how this mutualist understands that free markets benefit people, not corporations.

CORPORATIONS VERSUS THE MARKET; OR, WHIP CONFLATION NOW

by RODERICK LONG - LEAD ESSAY - November 10th, 2008

Defenders of the free market are often accused of being apologists for big business and shills for the corporate elite. Is this a fair charge? No and yes. Emphatically no—because corporate power and the free market are actually antithetical; genuine competition is big business’s worst nightmare. But also, in all too many cases, yes —because although liberty and plutocracy cannot coexist, simultaneous advocacy of both is all too possible.

Read the rest...

So, Dave's been at the Googleplex trying to give an inspiring vision of what the internet can do for us, and especially our relationship with government. I imagine that if the fun-loving boffins at Google made up the audience they will have been yawningly underwhelmed or resorting to bouncing their hyper-activity stress balls off the video screens.

It's a bit of ironic timing though, after last week's debacle over Labour stealing the Tories' or more accurately the Lib Dem's policy clothing, as my speech writers are just putting the finishing touches to the second of my pieces on Revolutionary Liberalism covering a much bolder image of how technology is about to turn our entire way of life on its head in new and exciting ways that twenty-first century politicians are going to have to work with.

The duckies guarding Google from politicians
Originally uploaded by Yodel Anecdotal

Far, far greater change is afoot than simply providing national statistics to end users and citizens so they can chose and make policy in a more informed way, like the challenges of the end of money as we know it, a whole new way of working in the knowledge economy and in international commerce. A world in which the Googles, Verizons and UPSes will be the moderators and media of global trade rather than governments, where the webs of trust that nation states have established to provide the function of guarantors in worldwide business are rent asunder.

A world that has implications for all public services, creating a new era of interpersonal trust and co-operation moved by the power of market information in individuals' hands unencumbered by the protectionism of states and politicians. An era that will have the power, because it will be people based, to usurp the role of international credit markets, so 'dis-credited' in the past few weeks. And it is the geeks in Dave's audience today, not the politicians, who will be leading the way.

Cameron is right about one aspect - politicians have got to learn to back off, for if they don't do so voluntarily and in co-operation with this new world, they will be ignominiously cast aside, redundant - but I will believe that he himself is ready for that challenge when he makes policy to prove it. Some of the greatest steps in concentration of power to Whitehall and Westminster are, after all, only a couple of decades old, coinciding with the growth of the information economy in the late eighties.