To whom? Expensive to whom?

The Resolution Foundation - them again - tells us that the system of Individual Savings Accounts is very expensive:

ISAs are expensive

Expensive to whom?

The starting point of their analysis is the logically - and morally - objectionable idea that all belongs to the government. That Tutto Nello Stato idea that we out here are lucky to be allowed to keep some of our hard earned and that allowing us to do so is a cost to government. This is, of course, incorrect - government is a cost to us out here and it is the impositions of tax itself which is that cost. A reduction in what is taken from us is therefore a saving, not a cost.

Oh, sure, government sometimes buys us pretty things and some parts of government are even worth having - those are the benefits of our having government. But those are the benefits, tax is the cost.

So, us keeping some of our money is a benefit, not a cost.

Any analysis that starts from something so obviously logically wrong - that tax reductions are a cost - is therefore clearly wrong.

We can go further, for of course we can. Investment itself is usually thought of as a pretty good thing. As people like the Resolution Foundation are wont to suggest in fact - we’re really sure we’ve seen reports of theirs bemoaning the low rate of investment in Britain.

That further is that the tax system should go further in encouraging saving and investment - the progressive consumption tax. Not that gains inside an ISA are untaxed, but that income placed into an ISA remains untaxed. Full exemption from income tax (and NI) for sums placed into something like an ISA. All income and gains inside an ISA - which remain inside an ISA - remain untaxed. It is at the point of extraction from the ISA to be spent upon consumption that the money gets taxed - at the full marginal income tax rate at the time of extraction.

Effectively we end up with something akin to a blend of an ISA and a pension. Income, from whatever source, which is then saved is untaxed. Gains within the tax wrapper are untaxed. Extraction from the tax wrapper carries income tax.

There is a logical argument against this. Which is that some to many will utilise such a system to save money. Thereby becoming bourgeois and so not requiring the intervention of the State in their lifestyles. But, you know, we think a bourgeois state where the people are rich enough not to require the State’s intervention in their lifestyles to be a pretty good thing. Even, a Good Thing. Something to be desired and even the system set up so as to produce it.

That is, not just the current system of ISAs alleviated of the impositions of taxation but all saving by all so alleviated. Action This Day etc.