My second idea would be to rebalance the tax system in a way that will be less comfortable for some Conservatives. Britain taxes income quite highly and wealth hardly at all. In other words we are taxing job creation more heavily than we are taxing inequality. (src)Except that this isn't true, of course. Taxes on income are not taxes on job creation, since the burden is borne by the employee. Income taxes tax labour, decreasing the rewards enjoyed by employees for their toil. Raising income taxes decreases (at the margin) supply of labour, rather than demand.However, taxing wealth would be taxing job creation. That is, unless you think that capital only ever lies unused and inert. When capital is deployed, it is used to employ people in pursuit of profit. The profits are then split between the provider of the capital and the provider(s) of the labour. If you tax wealth, you decrease the amount of capital available to employ people. This is exactly the definition of a tax on job creation — not to mention attacks on job creation. Cut into capital, and you cut demand for labour.Sorry, Tim: economics says No.
Thursday, August 18, 2011
Tim's idea: nice but dim
Tim Montgomerie, of ConservativeHome, writes in the Groan: