They Have Money! Tax Them!

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This is a lovely little example of the attitude towards taxation from a certain strand of the left. Some people have been saving some money. Therefore we must tax them for how can we allow people to actually have economic resources in reserve?

The richest 20% of Britons will have reduced their spending by around £23bn by the middle of June, according to analysis by the New Policy Institute that shows the coronavirus pandemic has allowed the better off an unprecedented opportunity to increase savings and pay down debts.

After three months of lockdown, reductions in the amount households spend on entertainment, sport, hair and beauty, eating and drinking and transport, those in the bottom fifth of the income scale will have reduced their spending by just £3.5bn.

D’ye see that? Didja? Inequality of savings – tax them!

That is actually what they say too:

‘Excess saving’ in lockdown: a big new economic challenge

“Excess” is such a lovely word, isn’t it? They’ve got too much. Rather than the truth, people just getting on with maximising their own utility.

The Government could just leave the excess saving to work its way off over time in the hope that high income households will spend as soon as they are able, helping revive the hospitality and night time economy, leisure and tourism, and so on. But doing nothing like that is a bad option. First, it is clear that social distancing is going to delay the revival for quite some while. Second, this saving surge for the better-off is happening at the same time as many are looking at severe drops in their earnings and the UK is facing a severe recession with mass unemployment in the months ahead. That inequality cannot be ignored. Third, if these savings are not spent on productive activity, there is a real danger that they will simply add to asset price inflation, a productively useless but nevertheless profitable activity at least for some.

If doing nothing has adverse macroeconomic and adverse distributional consequences, what are the alternatives? Should the Government try to keep the saving as saving, to finance its debt? Should it tax it away to reduce that debt? Or should it seek to redirect the spending towards productive investment and, if so, how?

See, toldja. People actually having economic resources is a problem that must be solved by government action.

Some people out there really are grotty little shits, aren’t they?

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Boganboy
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Boganboy

I have a nice simple quick obvious easy solution. Just abolish the lockdown.

Michael van der Riet
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Michael van der Riet

Yes! The really annoying bit being the ASI turning into a proper set of teacher’s pets, Our Tim excluded, and coming up with all kinds of Correct Answer solutions to getting the economy up and firing on all cylinders again, except the obvious answer, end the lockdown that every day it continues is making the problem worse!

John B
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John B

‘ Should it tax it away to reduce that debt?’ Aaah, sweet child. ‘Cos Governments have a track record of using higher tax revenue to reduce debt rather than to finance ever more. And were those 20% richest households all getting the same income as beforehand in order to accrue this pot of gold? The presumption is those ‘rich’ did not divert their previous spending on wine, women and song, to keeping up mortgage or rent payments and other expenses. And among that 20% will be a certain number of small business owners, having to meet their overheads in the… Read more »

Spike
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Spike

Paying down debt is good, it frees up the capital for new uses. The problem is that those new uses are not being rewarded to compensate for the new risks. The risks include the massive effort to have gov’t regulate “social” behavior, inflation and new taxes to soak up “stimulus” spending (or enable more of it), and opinions like the one expressed in that article.

David
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David

Civil servants have more generous pensions – I guess special taxes on them are unlikely to happen.

Phoenix44
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Phoenix44

So I get to consume less because the government stops me consuming – which is me becoming poorer – and so I should be taxed more to pay for being made poorer?

It’s the confusion between money and wealth once again, that bedevils so many on every side of the trade debate.

ANNRQ
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ANNRQ

This is more about punishing people that have money than it is about taxation. They can dress it up in obscurant terminology, but they just want to take it away.

They are the sort of person who would steal a silver teaspoon from their granny’s tea set to punish them for having it.

Spike
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Spike

Why, yes. This is the only reason to levy capital-gains taxes on individuals, after you have already “taxed the corporation” [sic] on its increase in wealth: So that the stockholder can feel the pain personally.

Grendel
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Grendel

Nice to see the people’s inability to spend their own money on the things they want due to authoritarian rule being described as an “unprecedented opportunity”. One might note that the better off have always had the *opportunity* to save more and spend less, yet instead of making a giant pile of gold and jewels to sit atop, they for some crazy reason choose to have a social life, fun and stuff.

Michael van der Riet
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Michael van der Riet

The problem with rich people saving is that they tend to save in large amounts, not five bob at a time, and when you have bucks you can choose your savings vehicle to be productive and render good returns. This must at all costs have an end put to, or whatever the correct civilese is. Money must be taken from its productive home that is optimally accelerating the economy, and placed into a sort of care facility along with other sick investments.