Pollynomics never does work, but really Ms. Toynbee this is absurd
The first rule of economics is “Incentives Matter”. At which point:
On the contrary, finding money for productive capital investment in Labour’s priorities for growth, green energy and a housebuilding bonanza
It’s possible to mutter about whether that’s the right goal and all that but let us accept it as the one being pursued. After all, economics doesn’t tell us what the goal should be it just explores ways of getting there.
The frontrunner is raising capital gains tax (CGT)….Why, the IFS’s Paul Johnson asks in his book Follow the Money, is capital gains tax not due on a lifetime of shares, property or antiques, swollen in value but absolved on death?….inheritance tax (IHT) paid by just the wealthiest 4% of estates and too easily avoided: why do pension pots, farms and family businesses escape it?….It’s time to charge national insurance (NI) on all income, not just on pay,….Pensions tax relief is ripe for reform: high earners get 40% and 45% relief subsidised by the state…. Just as a thought experiment, the LSE’s wealth commission shows a one-off raid on wealth above £2m, charged at 1% a year for five years, would bring in £80bn.
Excess wealth and income is there for the plucking
So, if you invest well - profitably, that proof that the investment was a societally useful one - then we’re going to double the share of that profit confiscated. If you don’t bother to sell but keep it for your kids then we’ll take 80% of it (IHT plus CGT). We’ll raise the tax on income from investments by 15 percentage points. Don’t even think about saving for your old age of course - pensions pots being by far the largest source of capital. And if you manage to avoid all of those strictures then we’ll come take your money anyway.
As we say, economics doesn’t tell us what the goal should be, only possible pathways to arriving at the intended destination. Or, of course, pathways that won’t get us there.
So Pollynomics is telling us that the way to increasing productive capital investment is to nick all the money anyone might ever achieve from making a productive capital investment?
This violates that first rule of economics, that incentives matter. But then, you know, Pollynomics, it’s never been any better than this.
Tim Worstall