An Indian Businessman’s Prayer

“Please give me strength to pay my Income Tax, GST, VAT, CST, Sevice Tax, Excise Duty, Customs Duty, Octroi, TDS, Property Tax, Stamp Duty, CGT, Water Tax, Professional Tax, Road Tax, STT, Education Levy, etc, etc, etc, ….

Don’t Gorget Hafta, Donations, Bribes, Vhand, etc, et c.

If I Have Some Money left after that I will do Business.

Sincerely
An Indian”

Comment
Between the businessman and the supposed beneficiaries of these taxes, there are a lot of people supervising, administering, collecting, allocating and spending the money, plus the people in the agencies that police and enforce the system, and the politicians who devised it and the new taxes that inevitably they will add to the list.

[The list is from Sam Bowman and the good people at the Adam Smith Institute’s “Pin Factory Blog” HERE .]

Stop Taxing the Poorest Incomes at 20 Per Cent

Joseph Stiglitz write in FT.com (via Economist’s View, Mark Thoma):

“Do not squander America’s stimulus on tax cuts

and

“Joseph Stiglitz: Just Say No to Tax Cuts”

“Do not squander America’s stimulus on tax cuts, by Joseph Stiglitz, Commentary, Financial Times”:

“As news of the US economy worsens, he worries about whether a stimulus could restart the economy ...”

“We are in uncharted territory in this crisis. But household tax cuts, except for
possibly the poorest, should have no place in the stimulus.”

Comment
It seems to me that Joseph Stiglitz does not emphasis the correct and moral policy. Across the board tax cuts may not be efficacious in the current climate, but the case for removing the poorest consumers from the taxation system is convincing.

Raising the personal, non-taxable allowance from about £6k to £16k (even higher) would largely be passed on in spending and stimulate the economy fairly quickly.

Reducing tax rates in the higher income brackets may not have an such an immediate, or lasting, effect.

The poor spend; they do not save much as a group. Legends of poor-pensioner, miserly ‘millionaires’ are news, when revealed, because they are so rare.

The majority, and their families, are poor already before taxation hits them, if they have jobs, and raising the tax threshold will not make them rich; only a little less poor.

It’s not that this change would ‘solve’ poverty. The moral compulsion for removal is that paying income tax (20 per cent, thanks to the ‘Labour’ government) when they already very poor is itself immoral.

Removal of the income tax from the very poor may mean that the richer would pay ‘proportionally’ more on their much larger incomes, which Adam Smith said was appropriate in other contexts, and not at the expense of the poor, ‘who are least able to supply it.’ [WN V.i.d.13: p 728; Edwin Canaan, 1937 edition, Random House, p 686]

Adam Smith on Taxes

Rick Bolton writes (10 October) in the Chillicothe Gazette.com (HERE) an opinion piece headed: 'Wall Street CEOs should be held accountable for their actions'; a reasonable proposition in the current crisis.

However, if we are going to punish the guilty we should include among them those legislators responsible for the policies of increasing public debt to pursue their visions for what a modern country should encourage and who legislated to make such policies a reality. Sub-prime mortgages were also a form of social-engineering with what are called 'toxic consequences', unforseen, or ignored, by their proponents, which overly smart money traders hyjacked to make 'loads of money'.

Rick Bolton asserts that: ‘Even Adam Smith, author of "Wealth of Nations," the capitalist bible, favored a progressive tax structure. Smith believed those who benefit the most from the market should pay a higher rate in taxes.’

Comment

Ignore the nonsense about Wealth Of Nations being ‘the capitalist bible’…

The actual statement by Adam Smith is slightly different:

“I. The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.” (WN V.ii.b.3: p 825)

Yes, he confirms that the richer should pay higher taxes, but this is not quite the same as ‘those who benefit the most from the market’ should pay more; all people in society benefit from ‘markets’.

Taxes in Smith’s mind were for the funding of civil government, and partly because the tax base was much narrower in his day than it is now – many poor people could not contribute much at all (income tax had not yet been invented). He envisaged luxury goods, packages, houses, and rents being subject to tax and discusses in detail the tax practices of the UK, which soon shows how different the tax regimes have become in the intervening two centuries.

He clearly believed that certain people were more ‘able’ to contribute because they received higher revenue, which they respectively enjoy under the protection of the state.’

It wasn’t just because they received more revenue; it was because they enjoyed their revenues because the agencies of the state secured and protected their property rights. Without ‘justice’, society must in a moment crumble into atoms’ (Moral Sentiments, II.ii.3.3: p 86). The beneficiaries of state expenditures should in equity contribute to the revenue raised necessary for the government to function.

At the time Smith wrote Wealth Of Nations he was not just asserting taxation policy for market economies; most European economies were significantly, if not predominantly, agricultural societies with smaller commercial markets and government publicly-funded sectors.

It was also a fact that the maxims outlined by Adam Smith were not ‘his’ maxims; he reported on existing practices ‘recommended… more or less to the attention of all nations’ (WN V.ii.b.7: p 827).