Wednesday, June 20, 2007

ASI taxes Brown on taxes

Madsen Pirie is the President of the Adam Smith Institute, the London think tank known for its broadly Smithian approach to policy measures that would raise the performance of UK business and improve the effectiveness of the social programmes of the public sector.

The ASI is often demonised as a ‘rightwing’ body by ‘leftward’ leaning media and politicians, and numerous NGO personnel, who gain attention for their own policy prescriptions, many of which caused the problems that ASI suggests, always politely, are capable of sensible remedies for the benefit of all.

ASI studies an issue, consults and thinks about it, and makes workable suggestions for getting from ‘here’ to ‘there’, always without rancour, never with abuse, and generally without too-high expectations that what they recommend will be adopted rapidly. It takes a Smithian ‘long view’ and never fails to remember that the humans on the chessboard of life are not wooden pieces that can be moved about by the dictates of government, or the rabid exhortations of charismatic would-be ‘leaders’.

In sum, ASI is an authoritative source of workable ideas, sometimes just a few small steps ahead of where decision-makers are ready to go, and interestingly, and to their quiet (not smug) satisfaction, where decision-makers often end up going, and for which they (the decision-makers) earn the credit. ASI is not in the business of loudly claiming credit; it is happy that the sensible changes have been adopted and that the decision-makers bask in public acclamation for their, often courageous, actions.

Madsen Pirie is in the Daily Telegraph (London) today with an article, ‘Brown failed to follow a fellow Scot's lead’, with Brown being Gordon Brown, Chancellor of the Exchequer for a few more days, before his anointment as Prime Minister, and the ‘fellow Scot’ being Adam Smith, and the subject that of Adam Smith’s ‘maxims’ (never canons!) of taxation from Wealth Of Nations (WN.V.ii.b.3-6: pp 825-26).

I would recommend this article to every reader because it captures the ASI method of sound ideas presented in readable format that carry within them a clear and workable change in approach that in time would radically alter the economic dynamism of the UK (or any other) economy.

Dr Pirie’s proposals with appropriate concern for the lower paid (and unpaid) segments of society (relieving them of the burden of income tax and the greater burdens of society not creating work and wealth for them because of distortions elsewhere in the economy), and with appropriate concerns to reduce the burdens of taxation on creating wealth, which is a necessary component of any policy to allow people to enjoy benefits of economic growth.

It is a programme to get from the ‘here and now’ with its massive taxation burdens, affecting all segments, all sections and all possible sources of ‘stealth taxes’, its massive complexities (9,973 pages and counting), its massive administrative burdens (£5.1 billion, but who’s counting?), and its massive distortions to the proper working of the economy, to where we want to go.

Dr Pirie proposes workable step changes in the taxation ‘system’, possibly taking two or three annual budgets, perhaps more. He favours, eventually, a serious consideration of a ‘flat tax’ (as I do), but characteristically, does not demand that leap just now. ASI is not in the business of demanding changes that have not chance of being implemented in real time. It prefers to persuade, a step of two at a time, and to allow the positive results to speak for themselves (and, if something does not work in practice, it accepts the outcome graciously – and suggests a different route).

If you want to see Smithian reforms in the process of becoming available for consideration by politicians, aspirants to Office, and to influencers everywhere, read it here.


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