To remind, the Laffer Curve applies to all
A complaint here about marginal tax rates at one point on the distribution:
More than half a million people are paying income tax of up to 60 per cent on the top slice of their earnings. A punitive tax trap catches out those on salaries of between £100,000 and £125,000 a year and the number being caught in it is higher than ever, …
That’s a bad idea, obviously. Well above any rational estimation of the peak of the Laffer Curve where revenue is maximised*. So, it should be lower, obviously.
But one of our regular reminders, the Laffer Curve does not only apply to rich people. Marginal tax rates can be too high for poorer people too. As that interface between the income tax system and universal credit is:
Under the UC taper, payments are reduced as claimants earn more. The current taper "rate" is 55%.
That’s too high by the best estimate the literature seems to have of that peak of the Laffer Curve. That is, we’ve already tapped out the ability of squeezing money from the populace in the form of incomes taxes (note, that means taxes upon income, income tax itself plus national insurance, both employees’ and employers’).
Which is why there’re so many beady eyes upon other methods of squeezing of course. Our own solution would be that government just spend less. Sadly, an extremely unpopular idea among those who gain the joy of spending however much the populace might like it.
Tim Worstall
*No, really, the Diamond and Saez estimate is of 54% (including employers’ NI) as the peak in a system like ours
And so it begins
A new government, yes, and what excitement, eh? Then it begins - the shrieks for more money from this or that sector:
Labour will miss its target of delivering 1.5m new homes this parliament without an emergency cash injection into the affordable housing sector, providers have warned.
Housing associations and councils have written to deputy prime minister, Angela Rayner, saying her promise to deliver “the biggest boost to affordable housing in a generation” will be impossible unless there are urgent interventions to fix the financial pressures providers face.
Our word, this is a surprise. More of everyone elses’ money simply must be poured into our, our very vital and special, sector. Well, perhaps not so much of a surprise, the only piece of news here is who has been first out of the blocks.
There is, of course, an alternative solution:
….cash from rents was currently not enough to cover its costs.
Umm, rents could rise?
….the provider had stopped buying new sites because….
Or, possibly, lower the cost of new sites. Which really does mean that supply side reform of blowing up the Town and Country Planning Act 1947 and successors. Proper blow up - kablooie.
For as we’re being told here, even the taxpayer assisted social housing sector cannot afford current land with planning permission prices. The solution is therefore to flood the zone with land with planning permission and so reduce those prices. This then makes housing cheaper for everyone, of every type of tenure. Further, we don’t need to increase the subsidy to the social housing sector and, even, the housing benefit bill will fall.
In fact, if we really flood the zone with land for building we’ll not need to have a social housing sector at all - for housing will be cheap for all.
Amazin’ what a bit of supply side reform can achieve, no?
Tim Worstall
We can’t see the problem here - sounds pretty good actually
A current complaint echoes one made by Naomi Klein a decade back. Which is, as the kids say these days, problematic. For if you’re echoing a Naomi Klein economic argument you’re going to be somewhere between wrong and wildly wrong.
The amount of wind and solar power under construction in China is now nearly twice as much as the rest of the world combined, a report has found.
Research published on Thursday by Global Energy Monitor (GEM), an NGO, found that China has 180 gigawatts (GW) of utility-scale solar power under construction and 15GW of wind power. That brings the total of wind and solar power under construction to 339GW, well ahead of the 40GW under construction in the US.
…
The findings underscore China’s leading position in global renewable energy production at a time when the US is increasingly worried about Chinese overcapacity and dumping, particularly in the solar industry.
Klein whined, bitterly, about the absence of trade tariffs on Chinese solar panels. As those were illegal under WTO rules they got banned and as a result a solar panel factory in Canada went bust. Well, OK, you can be nativist if you like but Klein’s actual complaint was that this was a blow in the fight against climate change. Canadians being restricted to only expensive home made panels would lead to more solar panel installation than Canadians being able to buy cheap solar panels from China. No, really, that was her argument. Wildly wrong, of course, but then Ms. Klein rarely does let us down.
The American complaint is that China has wildly overinvested in - perhaps even subsidised - the solar panel and cell industry. As a result the price to buyers is below what anyone unsubsidized or not wildly overcapacity can possibly sell at. The claim then is that this is a problem.
But we also have this climate change will be the death of us all idea. We’ve got to install solar as fast as we possibly can. Further, we actually subsidise factories to make such solar systems.
So, what’s actually happening here is - by allegation at least - that it’s the Chinese taxpayer taking the hit of saving the world not our own home grown and patriotic taxpayers.
We think this is an excellent idea. They’re paying and we’re not, the climate gets saved all the same.
Really, someone needs to tell us why cheap solar cells is a problem. Possibly of more importance in the long run is why is anyone lifting economic ideas from Ms. Klein?#
Tim Worstall
Get Ready for Growth?
Fewer than 72 hours since her appointment, the Chancellor seems to have emphatically set the tone for a new pro-growth agenda. Speaking at the Treasury, Reeves pledged to take the fight to the NIMBYs.
The Chancellor has already given the green light for the construction of two new data centres which had previously been halted by red tape. Promising 1.5 million new homes in five years, the Chancellor announced the reintroduction of mandatory house building targets; which should lead to a 15% increase in GDP- according to the Home Builders Federation.
Perhaps most interesting was the framing of growth at the centre of any planning decision. For too long has the national interest been sacrificed at the altar of local bureaucracy, costing the taxpayer billions without any material result. Many infrastructure and planning decisions will be made nationally rather than locally, taking power out of the hands of local government bureaucrats and NIMBYs. With DHLUC and HMT taking the reins, infrastructure programmes can be deployed more quickly and efficiently, if it is done right. But the war on housing bureaucracy does not end there – 300 new planning officers were announced to clear local backlogs, alongside a taskforce to accelerate approval for over 14,000 homes currently held in planning purgatory.
Why not go one step further and introduce approval for planning applications that have not received a response in six weeks? Getting shovels in the ground is a top priority, and so there is room for further progress. Nominally, housing of all kinds should be unleashed, allocated as per the market, to truly tackle the affordable housing crisis.
Envisaging a purposeful role for the state, there was also an emphatic endorsement of reform, the reversal of the ban on onshore wind represents both a cut-back in red tape, and future lower energy costs. The same is true of pledges to get building underway on ‘grey-belt’ land and brownfield sites. Similarly, transport too will benefit from planning reform, with projects such as the Lower Thames Crossing to be cut free from excessive regulatory tape. Unblocking resistance across the board – housing, transport, infrastructure, energy – will therefore be central to promoting long-term productivity and growth.
These plans will inspire hope that some of the barriers to building.– which have for too long obstructed growth and development – will finally fall. But whilst announcements are promising , we must wait now for the results.
Ever get the feeling you’re being propagandised to?
Apparently that sugar tax was very good, very good indeed. So say all the newspapers:
A repeat:
The amount of sugar consumed by children from soft drinks in the UK halved within a year of the sugar tax being introduced, a study has found.
The tax, which came into force in April 2018, has been so successful in improving people’s diets that experts have said an expansion to cover other high sugar food and drink products is now a “no-brainer”.
The research, published in the Journal of Epidemiology and Community Health, looked at responses from 7,999 adults and 7,656 children between 2008 and 2019 to the annual nationally representative UK National Diet and Nutrition Survey.
It showed that the daily sugar intake for children fell by about 4.8g, and for adults 10.9g, in the year after the levy’s introduction.
Except pretty much none of that was true. Or even is true with the exception that there really was a sugar tax imposed on soft drinks.
As Chris Snowdon points out here. For example:
Firstly, the study doesn't claim sugar consumption halved, as the headline says, nor that "sugar consumed by children from soft drinks in the UK halved within a year of the sugar tax being introduced" as the article says. It found that sugar consumption by children from soft drinks halved between 2008 and 2019, with nearly all that decline occurring before the sugar tax was introduced in 2018.
That, of course, is a less than ringing endorsement of the success of the tax in reducing sugar consumption - and therefore obviously of the case for any extension. As Snowdown goes on to point out it’s also not had the slightest effect upon child obesity which is the background justification for the whole idea.
We’re being fed unsugared pap as propaganda here.
Which does make us think more kindly of that Welsh idea. It should be a criminal offence to lie in politics. As we’ve noted that is going to curb politics rather a lot. But it is going to be interesting.
This is clearly politics - it’s advocacy of a tax, that is politics. Somewhere between fact and what we’re being told there’s a certain error. So, who do we bring the private prosecution against for lying in politics? The authors of the original paper? The journal that published? The Press Association (we assume the reason everyone is running it is because that’s the intermediate source)? The individual newspapers? Or perhaps just all of them?
It really is going to be fun, isn’t it? Now, how does that crowdfunding lark work - if Jololyon can get piles of cash to pay lawyers then….
Tim Worstall
We always have enjoyed this social media carrying the news argument
Enjoyment comes in many forms of course:
Meta has claimed news is not the antidote to misinformation and disinformation spreading on Facebook and Instagram, as the company continues to push back against being forced to pay media companies for news in Australia.
Meta announced in March it would not enter into new agreements with media companies to pay for news following the end of contracts signed in 2021 under the Morrison government’s news media bargaining code.
The assistant treasurer, Stephen Jones, is considering whether the Albanese government should use powers under the news media bargaining code legislation to “designate” Meta under the code, which would force the tech company to enter negotiations for payment with news providers, or risk fines of 10% of its Australian revenue.
If that happens then perhaps Meta will do as it did in Canada, simply stop allowing news links on the site(s). That would be bad because:
Publishers have said the effect of a news block would be devastating. Broadsheet – which publishes city, restaurant and entertainment guides – told the committee in a submission it would lose up to 52% of its revenue should news be blocked. The publisher said it “would make it nearly impossible for the business to survive”.
The traffic from Meta is an essential part of the news business plan and ecosystem. Some of us here having worked in the online news industry it’s very much a part of the game to try to craft articles, headlines, that then go viral on social media. Pats on the back ensue from having done it successfully.
So, the actual argument being deployed by the news industry. We make lots of money from Meta sending us traffic but Meta must also pay us for running the articles - our copyright, d’ye see? - which send us lots of luvverly, profitable, traffic.
We do rather expect competent adults to be able to see through this but apparently some governments don’t have any of those.
There is that stated enjoyment of seeing an entire industry having enough brass neck to try it on in this manner. But we’d also make the observation that any government that can’t see through this perhaps doesn’t have enough competent adults to run the water systems, electricity industry and so on - all the things they claim they’ve also got to do.
Tim Worstall
Just kill the bureaucracy
A note from Germany:
Activists who campaigned for decades for legalisation say that the rollout, closely watched by countries around the world to see how the experiment plays out, has been hampered by that most German of substances: red tape.
The hotly disputed law passed by Olaf Scholz’s three-party coalition, which took effect in April, legalised cultivating up to three plants for private consumption, the possession of 50g (1.75oz) of cannabis at one time at home and 25g in public.
But euphoria at the market finally emerging from the shadows has been stubbed out by regulatory zeal and what activists call political chicanery in conservative regions where the opposition to cannabis is strongest.
Frankly, given the usual German proclivity for bureaucracy we’re surprised they didn’t make home growing mandatory.
But there’s also a note from Britain:
The planning system is the last unadulterated vestige of postwar socialist utopianism, created in 1947 by the Town and Country Planning Act and founded on the well-meaning but ultimately flawed belief that a small group of people should dictate the development of complex systems, like an economy. Or a city. So real reform by Starmer will mean taking on cherished ideas of the left.
The tales of the wholly and entirely vile corruption of the system are there. But so too is the vast cost of having that bureaucracy in the first place.
The correct answer in both cases is simply to kill the bureaucracy. Simply state that there is no regulation of the activity, there are no permissions required.
Now, the Soviets used to, when the system became constipated like this, shoot a few commissars, something that has its attractions. But given that we’re liberals, proper ones, we’ll run with just killing the bureaucracy, not the bureaucrats. The rest of the Carthaginian solution, razing the system to the ground, ploughing the land with salt, should still proceed of course.
Abolish the Town and Country Planning Act 1947 and successors. Blow up, proper blow up, kablooie.
The result would be the most lovely housebuilding led boom, just as we had in the 1930s. The last time we actually had the private determination of the use of land. It would even solve this problem:
Green MP opposes 100-mile corridor of wind farm pylons in his Suffolk constituency
Adrian Ramsay, the party’s co-leader, will go against the Government’s net zero plans
Well, perhaps not solve, entirely, what could be considered to be gargantuan hypocrisy but at least we’d have to pay no attention to it when solving climate change.
Let’s just be liberal about it - we want to be free, to do what we want to do.
Tim Worstall
This might not be a good start
New people, new ways, new ideas - and not all of them will turn out to be good either. As, possibly, here:
Shein’s £50bn listing
Donald Tang, the executive chairman of the China-founded online fashion retailer, could be in the UK this week as the company prepares to list in London. Its executives have already met Labour MPs and received an indication of support for its listing, stating that “raising investment” is among its “missions for government”.
However, the flotation has faced strong headwinds: from questions over Shein’s valuation and alleged labour malpractices to an EU plan to impose import duty on cheap goods. Shein pursued a London listing after ambitions for a US listing were seemingly frustrated by US legislators.
Reynolds will need to make it clear that Labour will not simply wave any listing through, while at the same time the City fights to protect its status on the world financial stage in the face of an exodus of stock-market big names.
Whether the low value customs exemption remains and so on is, obviously, entirely a matter for the government of the day. But what is this idea that the government - or the Minister responsible - should be approving or not each individual stock market listing?
No, we really do not want to have that sort of political interference. Nor, obviously, the sort of sucking up to the Minister that the exercise of such a power would, inevitably, entail.
If the London Stock Exchange - a private company recall - desires or does not desire Shein to be listed then that’s up to the LSE. Or, rather, should be and keep the politicians out of it.#
Tim Worstall
This isn’t the way the world works
Putting millions of people on weight-loss injections is a “horribly flawed” plan, he says, that would do little to lift people out of the junk food trap that is making them sick in the first place.
“It’s the ultimate in cynical reductionism,” he says. “It’s a ‘let them eat cake’ moment, really. Let the poor people eat Ozempic and we’ll just keep giving them food that makes them obese and mentally unwell. That just seems morally wrong.”
We do not have a system where people are “given” food. Many try to produce food. The people then pick and choose who food they would like to consume.
This is known as a free market in a free society.
Professor Tim Spector, the geneticist, microbiome expert and co-founder of the personalised nutrition company Zoe, finds the thought of Britain trying to jab its way out of an obesity crisis deeply disturbing.
At which point Tim Spector, professor or not, can go boil his head. Because the underlying insistence there is that the people should no longer be allowed to choose:
Given all these false dawns, Spector admits that he has lost faith in politicians of all shades. One solution, he says, would be to take health “out of the political game” and have it run by an independent cross-party group with a long-term focus. “A bit like when the Bank of England went independent. I would make improving the diet a cornerstone of health policy.”
A permanent bureaucracy choosing our dinners for us. And which we cannot change even by voting not to have it.
Head boiling seems a bit to tame. There is also this:
Obesity is driving a tide of chronic illness including heart disease, type 2 diabetes and depression, which is threatening to bankrupt the NHS.
As we keep pointing out obesity saves the NHS money. People who cannot even get that simple fact right, well, what are we going to believe of their statements on anything more complex?
Tim Worstall
Failing Chesterton’s Fence
Before you decide to get rid of something it pays to work out why it exists in the first place. Only if we can say that the original reason and cause no longer exists would it then be sensible to abolish the whatever it is.
This is not a tough piece of logic.
René Heiden pulls two glass yoghurt jars off the shop shelf, and lists the nearby supermarkets in which they can be returned once empty.
His Berlin grocery shop avoids single-use packaging in favour of reusable containers, a waste reduction model that is having something of a revival in Germany. But it’s surprisingly hard to get right.
Experiment away, of course. For that’s what a free market economy is, a constant merrygoround of experimentation. Technologies change, desires change, what’s the best meet of the two?
But it is still true that all too few stop to think about why we adopted the packaging we did adopt. Why? Because other ways wasted more of the thing being packaged. And the thing being packaged was and possibly is more valuable than the packaging. So, saving resources by economising on packaging could in fact waste more resources.
As we say, experiment away, that’s the only way we’ll all find out. But forcing people to use less packaging really might not be wise. Might, in fact, waste not save resources. For why did our forbears start using packaging in the first place?
Tim Worstall