Adam Smith Institute

Now that Mike Huckabee has actually won something in his quest to be the next President of the United States it's time to have a look at one or two of his economic and taxation ideas. As the basic one is the "Fair Tax", why not that? This is the idea that all other Federal taxes will be swept away and replaced by a 23% sales tax.

This is, to put it kindly, insane. Don't just take my word for it though, for detailed reasons as to why it is try Bruce Bartlett. 

The idea's been around for a few years now and from writings elsewhere I've had my share of ALL CAPS emails berating me when I've tried to point out the obvious errors in the idea. 

Even if the rate proposed is correct (it isn't, it'll be much higher) the idea of collecting the entire tax take at the point of the retail transaction simply won't work. We're all well aware of small traders offering two rates for the job, cash and on the books. We've now extended that to the entire economy, as we don't have the chain of people adding VAT on each part of the value they add: only on that final sale to the consumer.

Not that there's any chance of Congress enacting such a tax system, whoever becomes President, but it is slightly alarming that the Republican front-runner at this point is advocating such a system. Which of the two alternative explanations for the advocacy of the idea you find more alarming is up to you: that Huckabee doesn't know the problems with the scheme or does and is still proposing it. 

It's supposed to be the season of goodwill, and I've been thinking about goodwill recently. Not the good cheer and fellowship that is supposed to exist between human individuals, but goodwill in the commercial sense.

The goodwill of a business is the loyalty of its customers, and indeed its suppliers. When people buy or sell a small business, they are not just buying or selling a piece of land, or a building, or even the stock in the shop – although all of those things have value. They are also buying the goodwill. They are buying the trust that customers have in the business, and their willingness to return to it. They are buying the willingness of suppliers to continue to supply it. And they are buying the knowledge of how to make the business work – things like which customers should be avoided because they don't pay, or which suppliers provide the best value for money and the most reliable service.

Until recently, this goodwill and inside knowledge have been a large fraction of the value of a business. Larger companies even put the value of their brand - the name that customers trust - on their books as an asset, as valuable as cash or stock.

But has the internet changed this? How much inside knowledge do you buy when you buy a small business, like a shop. It might indeed be useful to know which customers and suppliers are reliable. But in terms of sourcing the stock which you have for sale, that is a lot easier these days. A quick online search will discover plenty of willing suppliers. And through blogs and chatrooms it's not hard to check the reliability and value of any of them.

I think this must affect small businesses in particular. A loyal customer base is worth something, but the knowledge of how to stock and run a shop, say, is much easier to acquire these days. Perhaps most of that knowledge now can't really be sold as part of the price of the business. On the other hand, this widespread online knowledge must make it easier for people to start new businesses, and add to the competition. What's bad for shopkeepers might be good for their customers.

My true love sent to me: nine ladies dancing, which probably refers in the song to the nine fruits of the Holy Spirit, which include Love, Joy, Peace, Kindness and so on.

Well, it's a bit early for dancing, or even joy. Believe it or not, but if you live in the United Kingdom you are going to be working for the government every single day between now and 1 June, which is when Tax Freedom Day falls. Roughly 40 percent of what we make and earn is snatched from us by the tax authorities to be spent on things that our governments in London, Holyrood, Cardiff and Belfast think that we should be given.

It's been scientifically calculated that the average Christmas present costs 14 percent more than the recipient thing it is worth. If you just gave cash instead, then the recipient could buy something they think is worth the money. When you buy something for them, they never think it's quite right, and sometimes they put it in the cupboard and just forget about it. And it's the same with government. They buy services for us which we don't want - usually because they are very ineffectively delivered. If they gave us the cash - or even vouchers - instead, at least we could get value for our money.

And actually, it's worse. The government isn't giving us all these useless present with their money. It's paying for them with our money!