back to article So how should we tax these BASTARD COMPANIES, then?

To break with tradition: this week let's see if we can propose something sensible rather than doing our usual liverish snarling at whatever it is that grips my goat this week. So, let's see if we can work out how we should actually be taxing capital and the returns to it. This, of course, involves the taxation of corporations …

  1. Thomas Gray

    Fair Tax?

    I'd be interested in hearing Mr Worstall's view of the Fair Tax proposal that is currently waiting in bothhouses of the US congress for some action to be taken. It seems to me to be very straightforward, simple but with the danger of being regressive. What do you think?

    1. Tim Worstal

      Re: Fair Tax?

      Won't work, not a chance. I've had this argument directly with the campaign. They insist that it should be a sales tax when it needs to be a VAT. But they just will not have it as a VAT.

      The basic idea, fund everything through taxing consumption not incomes, yup, great. A grant to make sure it's not regressive, OK. The rate won't be quite what they say it will be but that's minor.

      However, there's something we're pretty sure about concerning sales taxes. If you only levy the tax the once, at the final point of sale to the consumer, you can't really get the rate much above 10% or so without having vast evasion problems. They want it to be 24.5% (I think?) and to do that you need a VAT. That is, you collect little bits of it all the way down the production and value chain. Each stage reclaiming from the next the amounts it has paid on its own inputs. In essence, you use that supplier chain as an (unpaid!) enforcer of everyone collecting the tax.

      If you've 25% once only, at the point of sale, then it's waaaay to easy to run the long firm fraud, just as one example. Run a business flogging computers, say. Stay legal for a few months. Then buy in a vast amount that you're not paying the Fair Tax on. Because you're in business, only final consumers pay that tax. Now flog that kit out at 15% off the price you paid for it plus the Fair Tax. You're 15% cheaper than anyone else can possibly be. You sell masses. At a 10% margin, and you then skip out before sending the cheque off to the taxman. You've paid the supplier, but not the taxman.

      In a VAT system you cannot do this because the bloke who sold to you has charged you VAT initially.

      So, a 25% sales tax, instead of a VAT, makes the illegal market 25% cheaper than the legal one. We're pretty sure that you can get away with 10% or so as a sales tax. Not enough incentive for people to really try rooking the system. 25% is too much. Massive and widespread evasion. Thus it must be a VAT at that rate, not a sales tax.

      I've explained this at length to the campaign and got back simple blank refusal to either believe it or think of it being a VAT instead of a sales tax. My supposition is therefore that they're people more interested in running a campaign that gets some funding rather than people really proposing a decent change in the law.

      Moi, cynical?

      1. MonkeyCee

        Re: Fair Tax?

        Isn't there a similar issue with VAT and carousel fraud? In the end it's all about that if the tax is higher than a reasonable profit margin, then if you can avoid tax you make super profits.

        I'm a bit of a cynic too, and the number of systems that rely on people being basically honest (which in general they are) are wide open to abuse if the law covers only specific abuse, rather than a principle.

        The example for this is in New Zealand that a couple of surgeons who ran their own practise where paying themselves minimum wage and taking most of their "income" as dividends. Since this is pretty common for most one man and his dog outfits, it came as a little bit of a shock that the IRD decided this was tax evasion (due to under pricing of the skilled labour) and successfully prosecuted them, because the law is more about the intent rather than the specifics. Next tax year, NZ had a sudden new crop of millionaires since all the various high paid professionals (lawyers, doctors, accountants, architects etc) changed from declaring their income as dividends and instead as salary.

        As much as I dislike VAT, it's mainly effective because it pushes the cost of tax collection onto everyone in the supply chain, rather than have the tax collectors chasing whatever point in the transaction system we have agreed on to be the collection point.

        Any thoughts on wealth tax Tim? Both the inheritance/death taxes, and things like land/asset value tax.

        1. Tim Worstal

          Re: Fair Tax?

          "Isn't there a similar issue with VAT and carousel fraud?"

          Yes, the carousel is in fact that long firm fraud. It depends upon the idea that you don't pay VAT on imports to your supplier, just to HMRC on your regular VAT date. By which time you are long gone.

        2. Tim Worstal

          Re: Fair Tax?

          LVT is great, wealth taxes are a terrible idea. Will come back to those in a future piece I think...

          1. MonkeyCee

            Re: Fair Tax?

            Looking forward to it. I thought you'd be down with LVT and other resource rent taxes based on your comments on, uh, resource rents :)

            Capital/wealth taxes would only work (IMHO) if they where substituted for income taxes, and some consumption tax continued to exist. Otherwise you stick an even greater incentive to avoid them, and it's easier to hide wealth than it is income.

            In practical terms for how countries can raise more revenue right now, without having to dick around with the tax code, surely it's as simple as hiring more tax collectors. Well, until some point of diminishing returns, but it's still something like a couple of million in extra tax receipts per 50k employee last I looked.

        3. Gordon 11

          Re: Fair Tax?

          Any thoughts on wealth tax Tim? Both the inheritance/death taxes, and things like land/asset value tax.

          I'm not Tim, but my view on Inheritance Tax is that it should be higher than it currently is.

          If you haven't used what you earned during your lifetime then you were taking too much from the economy, so time to give it back (with obvious workarounds for business ownerships while they continue as such - if any part is sold then it should be taxed as IHT).

        4. johnaaronrose

          Re: Fair Tax?

          I've never understood why dividends are not taxed as income. Anybody care to explain why they should be differently taxed? Also, IMO capital gains should also be taxed as income: currently, they have an exemption limit which means that the more well off are effectively being subsidised by the less well off who do not generally own shares or second houses etc.

          1. Tim Worstal

            Re: Fair Tax?

            In most places dividends are taxed as income.

            There's two ways to do this. Tax the corporate profits in the company and then the dividends are tax free. Or, don't tax at the company level the profits that are paid out as dividends but do tax the dividends at the full income tax rate.

            UK and US have hybrid systems. UK: dividends taxed in the company before distribution. But then we assume that, on the personal income tax return, they have already paid basic rate income tax. Only higher rate taxpayers then pay more income tax on their dividends.

            US: Corporate income tax of 35% paid on profits that will be paid out as dividends (and those foreign profits, which haven't paid that tax, can't be used to pay dividends). The special rate of 20% (? Now? Changed recently) paid in income tax on those dividends by the recipients. The combination of the two is higher than the 39% top income tax rate.

            1. johnaaronrose

              Re: Fair Tax?

              @TimWorstal

              Quoting from a financial source:

              Companies in the UK pay dividends gross: i.e. without any tax having been paid.

              Theoretically, the tax rate on dividend income is 10% if you’re a starting or basic rate tax payer, and 32.5% if you’re a higher rate tax payer.

              In reality, the tax credit reduces these rates down:

              Starting/basic rate tax payer – No more tax to pay

              Higher rate tax payer – Dividend income taxed at 25%

              To summarise:

              Companies do not pay tax on dividends & individuals do not pay tax on dividends reeceived.

              Also, savers pay tax on interest received - either by the financial institution paying the tax by deducting it from the gross interest or by their paying the gross interest to the saver & the saver paying income tax on that payment. This applies even if the saver only pays basic rate income tax.

          2. Anonymous Coward
            Anonymous Coward

            Re: Fair Tax? Capital Gains...don't get me started.

            An individual decides to start his own business & needs a few known colleagues to do that.

            As the major investor he doesn't need cash from the few known colleagues who don't have it anyway.

            A few years down the line & things are going well and the "principal" decides on an incentive scheme approved by HMRC for employees to have share option. Options which cannot be bought for 3 years & must be taken up within 10 years.

            Approaching the 10 years those with share options decide to purchase. All good.

            Fast forward another 10 years when the principles & family have > 50% share ownership. No issue with that, he was the entrepreneur.

            The few known colleagues who wisely secured their share option & stuck with it to contribute to the companies success with their labour (since they didn't have spare cash to buy shares {which weren't for sale anyway}) have <5% of the total share.

            Unexpectedly, it is announced to the few known colleagues that the company is to sell. Note, this probably wasn't unexpected to the principle & his family so mitigation moves MAY have been available.

            The principle & family all have > 5% of the total company share & so when the sale goes through they claim Entrepreneurs Capital Gains Tax and pay 10%. Fab. Happy for them, we all worked hard for that sale value.

            The few known colleagues get to pay Capital Gains at standard income tax rates, up to 40%.

            Even the IFA I had to hire to get me through that one felt that was unfair.

            Bitter, moi!

      2. Anonymous Coward
        Anonymous Coward

        Re: Fair Tax?

        The inability of certain parties to accept that raising a Tax rate does not always mean an increase in Tax collected really pisses me off. They seem to have this ideological barrier to accept this concept.

        This is nothing new though. I can remember having a similar debate in the 1970's with Trots, ML's, Maoist's and other motley members of mostly now defunct leftwing parties. Then Harold Wilson raised the Income Tax to silly levels and ...

        Personally, I have the opinion that the SNP makes even the most leftwing Labour look rightwing.

        Long live the SSSRS (SNP Soviet Socialist Republic of Scotland)!

        1. This post has been deleted by its author

      3. Peter Johnston 1

        Re: Fair Tax?

        The same really happens with personal tax. If we were told that we have to pay 47% of our income in tax a massive evasion industry would result. So instead they take it in dribs and drabs on what we spend. Effectively they tax us twice (or more) allowing us spend our taxed income on taxed goods, then what's left they take as inheritance tax. A company tax is a direct tax on all of us as it raises the price of the goods we buy and a penny here becomes 10 pence at the till (ask the brewers).

        It was Hayek who showed what was really going on. Since democracy was spread out to the wider populations, politicians have seen the need to bribe people openly, while taking their money back secretly. What started at 10% (and caused riots back then) is now 47% and rising on an exponential graph. He called it the road to serfdom.

        We have cart before horse. If we set tax at a standard figure and restrict it to a single tax per person, then told everyone what that means we could afford, a lot of the waste would be stripped away. But, as we saw in the '80s with poll tax, the people who are gaming the current complexity won't let that happen.

        PS: Another exponential out of control is expenditure. For example, the NHS employs 10x the world average number of caregivers, yet the outcome is only a year longer life.

        1. Anonymous Coward
          Anonymous Coward

          Re: Fair Tax?

          > If we were told that we have to pay 47% of our income in tax a massive evasion industry would result.

          Of course the real elephant in the room is that this is an obscene level of taxation.

          Most people don't seem to realise the total extent to which the government (and by proxy the EU) robs from us each year.

          A 25% sales tax might be quite equitable if the government manager to reel-in its expenditure to a reasonable level. But it is not in the nature of bureaucracies to reduce their consumption.

          1. Anonymous Coward
            Anonymous Coward

            Re: Fair Tax?

            One difference also is how the tax is collected. In the U.K., as far as I can recall, VAT is included in the cost of the X you buy from the store. Here in Texas City (not MC1), our sales tax rate is 8.025%, which is added on to the cost. A widget has a price tag of $100, but you'll pay $108.03 for it.

            Including tax in the sales price obscures the rate and allow easier rate increases.

            A sales tax rate of 25%, however, would result in a lot of jobless politicians.

            Am I wrong in thinking the tax on petrol was hiked right after the change from gallons to litres?

            1. Tom 13

              Re: hiked right after the change from gallons to litres?

              Well, if the tax was 15 pennies a gallon and you only changed gallons to liters, that's a helluva hike right there.

      4. Thomas Gray

        Re: Fair Tax?

        My understanding of FT is that the businesses don't charge the tax, it is collected at the tills. So no-one in the supply chain would need to, or be able to, defraud. No tax is collected at any part of the supply side.

        1. John Brown (no body) Silver badge

          Re: Fair Tax?

          That's the point Tim is making about the difference between Sales Tax and VAT. With VAT, the seller has paid the VAT on the goods so s/he has an incentive to collect the VAT from the customer and so on back up and down the supply chain. With a Sales tax, the retailer has not paid tax on the goods and so has an incentive to increase profits, cut prices and hence make more sales by avoiding the Sales Tax and only the tax man is able to identify and enforce the Sales Tax.

          When everyone is honest, Sales Tax is probably the better option since the only unpaid tax collector is the final retailer thus reducing the admin burden the rest of the way up the supply chain. But enough people are dishonest, or think they might get away with it "just this one time, the gas bill is due" that it eventually results in widespread tax avoidance as those "one timer" avoiders realise they can get away with it.

          1. Yet Another Anonymous coward Silver badge

            Re: Fair Tax?

            Then you simply avoid being the final retailer.

            Just like the contractor paying yourself in dividends. You simply buy that new TV/Computer/BMW for your side business and don't pay sales tax.

            Since your side business is doing Nigel Farage impersonations for children's parties you don't get a lot of work, but you do get to claim a lot of expenses

      5. phil dude
        Boffin

        Re: Fair Tax?

        @Tim Worstall: Are you referring to the fairtax.org campaign?

        The central point of this scheme is that is moves the burden of auditing on to businesses and away from citizens, and by reducing the IRS target base, will leads to a more effective collection mechanism. The abolition of the federal income tax is a key point.

        As to the sales vs VAT, they have different targets. Here in TN, I pay sales tax according to the city I live in, due to the county I live in and the state. e.g. TN sales tax is 7%. If I buy a new car I pay state tax. If I buy a TV in Knoxville (which has 2.25%), I pay 7+2.25 = 9.25%. If you live in Oak Ridge (30 miles away) tax is 9.75%, and it is a different county (Anderson).

        In their FAQ they explain:

        " What about value-added taxes (VATs), like they have in Europe and Canada? Are they not consumption taxes? While VATs are also consumption taxes, and better than income taxes, the FairTax is not a VAT. A VAT works very differently. It taxes every stage of production. ". Do you take issue with this explanation, Tim?

        And let us not forget this will require a constitutional amendment to abolish the income tax, so this is not a lightweight political movement - it is gaining crossparty support.

        A consequence of growing up in Europe is that you tend to actually believe that all the taxes you pay are necessary - but in actually fact it makes every citizen a second-class operator compared to businesses. The European union has made it worse, by trying to fudge the differences in productivity between regions into the tax code, and we all know how that is working out....

        Remember, you pay income tax(es) AND VAT, and you probably cannot deduct anything unless you have a mortgage.

        The devil is in the details, sure. But simply reducing the bureaucracy (e.g. IRS) is always a good thing...

        P.

        1. cambsukguy

          Re: Fair Tax?

          Tax relief on mortgages (which used to be available at the higher tax rate you paid) is now abolished in the UK, after first reducing it to the lower tax rate for some years.

          After all, it promoted house buying rather than renting but favoured people who had money to buy houses against those who couldn't afford to.

          In the US, a great deal of things seem to be tax deductible where here almost everything non-obvious (plumber's tools etc.) isn't.

          Furthermore, anything that is given to you by your employer is deemed tax-deductible to prevent an employer giving you (say) a car at cost (no VAT and using pre-tax income) and you getting the full value.

        2. Irony Deficient

          Re: Fair Tax?

          phil dude, Congress can eliminate the federal income tax without a repeal of the 16th amendment; a repeal would be needed to prevent a future Congress from being able to reïnstate one.

          1. phil dude
            Thumb Up

            Re: Fair Tax?

            My mistake of the emphasis, they cover that in the FAQ. I understand it was not predicated, but desirable.

            The point is this scheme does away with income tax and ONLY has a sales tax.

            As the FAQ points out, many Europeans have income and VAT, which creates the need for a massive, invasive, bureaucracy.

            P.

            1. Tom 13

              Re: Fair Tax?

              The Fair Tax is probably a better tax than a VAT. Tim correctly points out that you can't collect 24% with a Sales Tax, but you can with a VAT, and for strange reason thinks this a Good Thing(tm). But the one argument Fair Taxers make that simply doesn't hold water is that a sales tax eliminates the need for a massive, invasive bureaucracy. It doesn't. Most people are honest, but there are some who aren't Those people will cheat at every chance they get. Seeing that, some otherwise honest people start to cheat. The more cheaters you have, the more honest people start cheating. The end result is you wind up needing a bureaucracy for a sales tax too. And it winds up being every bit as big as the one we've got now, and at least as invasive. And depending on how slick they are, the politicians then go blaming the whole thing on "inherently greedy businesses".

              The income tax has only one redeeming value: it has the potential to put everyone at the same risk of government intrusion as everyone else. With everyone equally at risk, everyone has equal interest in making sure that invasion is as small as possible and as well protected with legal hedges as possible. The progressive income tax loses even that small protection.

        3. I ain't Spartacus Gold badge

          Re: Fair Tax?

          phil dude,

          Their FAQ is not right. They are correct to say that VAT is a consumption tax. But it does not tax every stage of production. Every business with a turnover greater than about £50k-£100k must charge VAT on everything it sells (there are some exceptions of course). But, it gets to offset the VAT on everything it buys against that.

          So the company will only pay VAT on goods/services bought from companies too small to feature in the system. Hopefully sales are higher than costs, so this can even have a positive effect on cash flow.

          Another useful advantage is that the government knows sales and total purchases of every company in the VAT scheme, mostly quarterly, so along with info from payroll taxes, can make better statistics on the economy.

          1. phil dude
            Boffin

            Re: Fair Tax?

            If their FAQ is not correct, they should be notified which is why I flagged it - it seemed clear to me.

            I am familiar with VAT as I helped my family's company when growing up - IMHO it is a PITA that you do for FREE to collect the Govt's wedge. It does not benefit the company, one iota.

            The FAQ addresses the govt monitoring, that biz-2-biz is still accounted for as a condition of them NOT paying sales tax. This would indicate the FAQ is correct, and this is not VAT.

            It is just the citizen at the bottom that pays the taxes. I *know* everyone is thinking they can setup a sham company, but the argument made in the FAQ is that you are statistically a lot less likely too due to companies vs citizens.

            And a very convincing point is made about illegal immigrants (23 million) - they don't pay income tax but they all pay sales tax.

            P.

        4. Tim Worstal

          Re: Fair Tax?

          "In their FAQ they explain:

          " What about value-added taxes (VATs), like they have in Europe and Canada? Are they not consumption taxes? While VATs are also consumption taxes, and better than income taxes, the FairTax is not a VAT. A VAT works very differently. It taxes every stage of production. ". Do you take issue with this explanation, Tim?"

          Yes, I do take issue with it. Some definitions.

          A transactions tax (say, the Robin Hood Tax) taxes each and every transaction at the same rate.

          Then we've got two types of consumption tax, sales tax and VAT. A sales tax is a single tax at the final sale to the end consumer. A VAT raises exactly the same amount of money as a sales tax (assuming no evasion). A 10% VAT garners the same revenue as a 10% sales tax. However, we collect the VAT in increments from each stage of production.

          To say that a VAT "taxes each stage of production" isn't quite right. We're taxing the value add at each stage, yes. But this is different from the transactions tax, which really is taxing the total amount at each stage of production.

          Thus I do think they're being misleading. And all of that doesn't change my basic point. Which is that to tax at 25% you can't do it with a sales tax. You have to move over to a VAT for tax evasion reasons.

          1. phil dude
            Boffin

            Re: Fair Tax?

            Here in the US, the population is used to seeing tax separate on receipts. I am not sure the amount matters as the fact it is there is quite plain. In the UK it is hidden at almost every tur

            The fairtax scheme has one huge benefit - it greatly reduces the bureaucracy. The UK might work because it is a small country and they embed tax at every level. The USA is huge and that makes it very expensive.

            But let's take your example as a working one. Say I am a citizen in the new scheme wanting to avoid the tax? Where would I do this when buying food? (say Kroger). Would it be possible to a supermarket to set itself up to not collect tax? How would this work for a target this big? What electricity, how many utilities? Medical costs?

            Do you see my point? How many parallel "tax -efficient" institutions could exist without becoming a massive target for the govt? In addition they make the point that tax-cheats would be reportable directly....they do this currently in Virginia, BTW.

            There are many things that maybe haven't been shaken out, but simply reducing the bureaucracy must be a good thing. Do we agree on that?

            The assumption about evasion at a specific %age level seems perhaps compensated by the major scrutiny that would be on companies as they would be a) fewer than citizens b) much easier to find.

            P.

            1. I ain't Spartacus Gold badge

              Re: Fair Tax?

              phil dude,

              The difference between a VAT and a sales tax is that a VAT is harder to avoid. To take the example of a retailer in the two systems:

              VAT - They buy a bunch of goods from their suppliers and have to pay net price + 25% VAT. But this is OK, as they're going to claim that money back. They add their mark-up for their own profit, then the government's 25% VAT - and sell on to customers. Then pay the government their pound of flesh, less what they can claim back from their suppliers.

              To cheat the system, they'd sell to the customers at say 10% cheaper than everyone else, pocketing the rest that they were claiming was VAT, but this is barely going to cover them for the fact that they now can't claim back the VAT on their suppliers. Ooops. You still get the issue that very small suppliers can undercut everyone else by not charging VAT, but then they also can't claim it back - so there's a limit to how much they can do.

              Assuming our shop operates properly, they're paying no VAT themselves - it's just some extra admin, and a varying effect on their cash-flow.

              Sales Tax - In this example of a sales tax, there is only one side to the transaction. Being business-to-business, then our shop goes out and buys their supplies, no sales tax will be payable. Thus they have the ablity to sell to the customers at a discount, and pocket some portion of the sales tax. Obviously big firms can't get away with this, but smaller ones can, and if they can undercut the big boys (who do pay) then that's going to be a route to avoidance there.

              Now you might say the answer here is to have the retailer fill out loads of forms for the lovely tax man, so he can track what's going on and catch them at their dirty game. At which point, the simplicity and lack of bureaucracy that is the advantage of a sales tax has just collapsed. Now you've got the same level of paperwork going on, the same admin losses to businesses, the same level of paperwork for the government to tax - but still the easier possibility to avoid tax, as you've not got the incentive of claiming your own VAT back - that keeps (most of) the VAT people more honest.

              Also, you've had a big old moan about how bloated European governments are. And sure, governments can always find ways to spend money. But even though people may resent being taxed, they also resent it if you stop spending government money on stuff. That tension is the major issue of politics. But what would you cut? Health? Defence? Unemployment benefits? Pensions? Education? The UK government has averaged just under 40% of GDP in spending in the last 35 years, which means it's going to need to average taxes of about 40% of GDP. I suspect it will be very hard to move it very far from that, and keep the voters onside.

              Actually the US is a lot closer to that level of spending/taxing itself now, as federal spending has increased so much since the 50s.

              1. DaveDaveDave

                Re: Fair Tax?

                "But what would you cut? Health? Defence? Unemployment benefits? Pensions? Education? The UK government has averaged just under 40% of GDP in spending in the last 35 years, which means it's going to need to average taxes of about 40% of GDP. I suspect it will be very hard to move it very far from that, and keep the voters onside."

                Is the level of wastage and inefficiency we currently have inevitable, something we should just accept as a cost of government, or is it something that we can work on and reduce over time as we get better at government? I have no doubt that an efficiently run government would be able to do everything currently done for a significantly lower price, although I do concede that creating any such thing would be even more than 'very hard'.

                1. 9Rune5

                  Re: wastage

                  "or is it something that we can work on and reduce over time as we get better at government?"

                  In Norway, we have seen several huge (for our country anyway) IT projects that have failed miserably.

                  The thought has struck me several times that our country keep making the same mistake over and over again. Rather than take a good hard look at shelf ware, we assume that our way of doing things is so superior that we MUST develop our own IT solution. After all, no other city in the world has such a complicated system to transport people around as the capital of Norway. Of course we must develop our own ticket system. And if it takes two or three 100 million dollar tries to get it right, then that is what it takes! (never mind that you could buy a lot of trams and buses with all that money)

                  A small nation like ours should be clever enough to look to our neighbours and copy whatever they are doing. If that means changing our entire social security rules and regulations, then so be it.

                  I suspect the same holds true for a few other European countries as well.

                  As for the tax system, quite a few Norwegians end up having their income taxed 70% (http://onarki.no/blogg/2010/08/dette-betaler-du-i-skatt/) if you factor in a car purchase and an average consumption of alcohol. I suspect that is why we end up paying so much to people who are "sick" (http://www.slikbrukesskattepengene.no/). I'd get sick too if I spent more time worrying about what the state wastes my tax money on. With a steadily growing public sector there isn't many of us left who provide the necessary income to feed everybody else.

      6. tojb

        Re: Fair Tax? +1 for the long firm

        Very mellow historical novel of the sixties introduced me to the concept. Jake Arnott I think it was. Funny to think that some people still alive today were around back then.

    2. dorsetknob
      Big Brother

      Re: Fair Tax?

      In George Orwell's Animal Farm "" There was "NO TAX ON BACON"

  2. yoganmahew

    Individual taxes

    Despite being somewhat of a lefty too, I think all individuals should pay some tax (even on welfare payments). The reason being to have a stake in government/local spending. Within that, though, I think there should be a similar normal rate of income beneath which there should be no further tax. So you pay a nominal percentage up to x, and then more beyond that. No exemptions, no allowances etc. (Or perhaps all exemptions to be time limited and re-voted to prevent permanent bowdlerisation of the tax system).

    This seems similar enough to the normal rate of return tax proposed except for the 'always pay something'. I think the same should apply to corporations too - after all, they enjoy the benefits of the state and the legal system, so they should have to pay a 'maintenance fee' for those protections. If corporations can enjoy individual liberties, then I don't see why they should get away without paying individual taxes...

    1. Tim Worstal

      Re: Individual taxes

      " If corporations can enjoy individual liberties, then I don't see why they should get away without paying individual taxes..."

      The argument here is that only real human beings can actually pay taxes. Alternatively, any and all taxes mean that the wallet of some live human being gets lighter. There ain't anyone else here but us, after all. So, we can charge taxes to legal persons (corporations) but it's always some real person (ie, human) who really pays it.

      1. Awil Onmearse

        Re: Individual taxes

        "The argument here is that only real human beings can actually pay taxes. "

        The counter-argument being that by the same logic, only real human beings can have legal rights. If a corporation is a legal person under the law, it is a legal person under tax law too. Letting corporations have it both ways in some half-arsed fudge is largely what lets them corrupt the political and economic sphere beyond salvaging.

        1. Tim Worstal

          Re: Individual taxes

          Weeeell sorta.

          Because the point of having something called "a corporation" is to create a legal person. Only persons can enter into contracts (your dog, even a border collie and thus cleverer than most lawyers, cannot). Natural persons, ie humans, can. But what about groups of humans? That's where the corporation comes in. We can now create this legal person, which is distinct from the natural people behind it, and that legal person can enter into contracts.

          If we didn't have this then we'd be stuck with the idea of partnerships, where each and every member is jointly and severally liable. And we're really not going to be able to get tens of thousands of people to sign up to that idea in one organisation.

          There is an interesting question about which rights a natural person has a purely legal person should also have. But the argument that a legal person shouldn't have any is most odd, for that's the reason we've got legal persons in the first place, so that associations of natural people can have legal rights.

          1. Uffish

            Re: Individual taxes

            So you're saying that lawyers said a business was a person so that the business could sign a contract - instead of framing a law saying how businesses could sign contracts.

            Ye Gods, you're right about Border Collies.

            1. Tim Worstal

              Re: Individual taxes

              It's a very old piece of the law that. Only someone defined as being a person can enter into a contract. Or sue. Or perhaps more importantly, be sued. I can't sue your dog, your cat, or your house, because they are not legal persons. Thus if IBM isn't a legal person I can't sue IBM.

              Thus we make companies legal persons so they can be included in the legal system.

      2. Raumkraut

        Re: Individual taxes

        The argument here is that only real human beings can actually pay taxes. Alternatively, any and all taxes mean that the wallet of some live human being gets lighter. There ain't anyone else here but us, after all. So, we can charge taxes to legal persons (corporations) but it's always some real person (ie, human) who really pays it.

        Is that not entirely tautological? The only reason that only real human beings are the only ones who pay tax, is because you've already declared that only real human beings pay tax.

        One could take it from the opposite perspective: Most real human beings get their money from corporations, and give their money to corporations. So whenever we levy any tax on real human beings, "lightening their wallets", it's really the corporations that are having to pay that tax; through higher wages, lower margins, etc.

        I'm not sure it's at all productive, or even sensible, to declare that one group or another is "really" the one who pays all the bills; not in the massively interconnected and interdependent economies we have.

        1. Tim Worstal

          Re: Individual taxes

          Whether it's productive or not it's still true. All taxes are paid by human beings alone.

          1. yoganmahew

            Re: Individual taxes

            "The argument here is that only real human beings can actually pay taxes. "

            Perhaps it would be simpler to say that only fictional human beings should pay taxes - remove all personal taxes, including secondary taxes on how income is spent (tax on services) and tax production and capital only. Since this is the age of consumption and there's no shortage of capital sloshing about, surely it matters more that consumption is unfettered than that production or capital are. Freeing taxes on capital and production seems rather to be fighting the last two wars... but that would be par for the course for economics ;-)

          2. Benjol

            Re: Individual taxes

            Tim, it occurs to me that a valuable parallel here would be: "Only human beings go to prison".

            1. Tim Worstal

              Re: Individual taxes

              True, but we do execute companies. Called bankruptcy.

          3. gloucester

            Re: Individual taxes

            Make that "All taxes are paid by human beings eventually" Tim and I'd agree.

            1. Tim Worstal

              Re: Individual taxes

              Yes, that is what is meant.

    2. DaveDaveDave

      Re: Individual taxes

      " I think all individuals should pay some tax (even on welfare payments)."

      Then you are lacking a fully-functional moral compass. Some things - e.g, murder - are just morally wrong, and taxing poor people even a small amount of what little they have is one of them.

      Seriously, what goes through the head of someone like you? 'I know, here's a great idea, it involves taking money from poor people and that's not evil at all'?

  3. All names Taken
    Alien

    No! Don't do it el Reg!

    No! Don't do it El Reg!

    Don't be a UK Treasury flunky lacky woteva - the Treasury has (or handles) trillions of your UK doshes and that sort of turnover will always attract the wrong kind of people (usually operating under the talk hi, deliver lo, line your own pockets as swiftly as possible business model?)?

    Don't be borged unto the well, you know ...

  4. Duncan Macdonald

    Tax assets instead of profits

    As it is too easy to manipulate the profits (as stated in the article), instead tax the gross assets at a rate of about 1%. (For a licensed deposit taking institution (banks, building societies etc) the deposits would be deducted from the gross assets before the tax was calculated.) Use the gross assets instead of the net assets as they are less easy to manipulate.

    1. Steve Davies 3 Silver badge

      Re: Tax assets instead of profits

      1%? What planet are you living on?

      What is the current interest rate paid to savers? 1-2% (2% if you are lucky)

      So taking 1% of that away will decrease the rate paid to savers by 1%. Some accounts already offer less than 1% rate before tax.

      What happens then sunshine?

      Perhaps I'd be better off drawing all my retirement savings out as cash and putting it under the mattress? I'd probably get a better return anyway.

      1. MonkeyCee

        Re: Tax assets instead of profits

        Savings at 2% or less are losing you money however you cut it. Buying something that will probably hold it's value is pretty much the only way to actually "save" in the old fashioned term. My bank even changed their T+C so they can in fact charge us negative interest if needed.

        Nothing to do with massive QE, oh no. Pay no attention to the man behind the curtain pressing ctrl-p on a spreadsheet ;)

        Shares, bonds, land, precious metals*, and anything that you have good market knowledge about are better bets. Property and collectibles will pay off a lot more if you make the right bets, but buyer beware and all that.

        *I prefer the industrial ones like silver, platinum and palladium. But gold is traditional.

        1. Tom 13

          Re: But gold is traditional.

          Never forget lead in that list. You'll need it and a few other bits and pieces to protect all that gold you're holding. And non-hybrid seeds. Critical are those non-hybrid seeds.

      2. Gordon 11

        Re: Tax assets instead of profits

        What is the current interest rate paid to savers? 1-2% (2% if you are lucky)

        But investors can expect around 5-7%. So investment would be encouraged...

    2. Doctor Syntax Silver badge

      Re: Tax assets instead of profits

      "tax the gross assets"

      How does that work out in terms of equability between a capital intensive and a labour intensive business?

    3. Tom 13

      Re: Tax assets instead of profits

      Right. Let's see how long you're paying taxes after you can't eat anymore because you've just taxed all the farmers out of existence.

  5. Paul Crawford Silver badge

    Evasion opportunities?

    One thing that has been touched upon in these comments, rather than in the article, is the issue of how easy it is to evade the show of profit in order to avoid taxation.

    That is the main beef of "man in the street" when it comes to corporate tax, not that it is, say, less than standard rate income tax, but that on massive turnover somehow international business (and some UK based ones) magic it away via shell companies, curious accounting practice, etc, and they are only seeing a pittance in "profit" to tax, when we know (or at least suspect) someone, somewhere, has made a fortune.

    Now there may well be a truth that taxing people directly, be it consumer, worker or shareholder, is simpler and ultimately who pays anyway. But for a lot of the public having some system that taxes on turnover or related activity would be seen as fairer as there are not huge sums of money going abroad without tax being paid to support the local government and population.

    1. MonkeyCee

      Re: Evasion opportunities?

      It depends on which company you are looking at. It's pretty clear that Apple, MS, Google and various other tech outfits are making non-US profits disappear through various interactions using Irish, Dutch and Luxembourg based subsidiaries.

      But then you've got Amazon, who pretty much don't make a profit by design, just keep pouring it back into itself until, um, our robot overlords arrive?

    2. Tom 13

      Re: Evasion opportunities?

      Life isn't fair. Get over it.

      Admit that the mega corps will ALWAYS be able to find accounting trolls who are smarter than you are. It therefore follows that the tighter you try to grab their gonads to tax them, the more they'll slip away from you. Once you've admitted this the solution is simple, easy, and requires no enforcement mechanism: set the corporate tax rate to zero. With no taxes on profits, there's no need to keep them overseas or NOT pay them as dividends to shareholders.

      The one place that may require some lawyerly tweaking is wages. The reason so many millionaire and billionaire executives exist is because under current law compensation they get in the form of shares, warrants, etc are taxed as capital gains instead of income. Treat it as income instead of capital gains. If they get it as stock and retain it as stock, we might offer the option to defer the taxes do on it, but whenever they sell the shares they pay the tax as if the whole thing was income, with similar definitions for warrants, etc.

  6. Anonymous Coward
    Anonymous Coward

    Penalties

    Doesn't taxing excess profit amount to taxing success? Isn't what we really want is a tax on all capital which would pressure effort to maximise returns and also be broadly equitable as people with more capital would pay more tax.

    I have to confess I don't know how you'd do that in practice though.

  7. arrbee

    Maybe the simplest thing would be to stop trying to tax businesses at all, while also removing their legal status as 'people' (since only people pay taxes).

    1. Jim99

      Who thinks companies are "people". Where has this idea come from? Lawyers talk of companies (and cooperatives, friendly societies, trusts, etc for that matter) as having legal personality, simply for want of a better word.

  8. Anonymous Coward
    Anonymous Coward

    I know Tim will think I am being rather simple but I do wonder why we have tax at all. If my memory is correct, it may not be, this last round of taxation started as a way to fund a war. That war has been over for a very long time but we still have the tax which everyone bitches about. I assume we still have it because government became a rather hungry beast that thought it could grow on the backs of the population that were earning money.

    Now, maybe the country should be run as a company for the benefit of the shareholders - the population - and should therefore make a profit with dividends being shared out among the shareholders. The question is why wouldn't such a system work? I know the government would be dead against it because it would force many in government out of the feed trough be it MPs, department heads and/or hangers on.

    If we must continue taxation why not negative income tax for individuals and something based on that for companies. That way startup companies get a chance to grow and we do away with the welfare state.

    Then, who am I to think such things, after all I've been an engineer for nearly 50 years not an economist.

    1. Uffish

      Re: "country should be run as a company"

      Isn't that communism? So far, country wide communism only seems to have encouraged even more ways of gaming the system for personal benefit and public loss.

    2. Paul Crawford Silver badge

      Why tax?

      AFIK the reason for taxation is we all want to live in a safe and prosperous environment.

      That in turn means we need protection from those who would steal our sheep and rape our wife (or steal the wife and rape the sheep, same principle). For outside of our nation (a somewhat arbitrary boundary, usually resulting from hundreds of yeas of bloodshed and the odd natural boundary) it means we need some armed services and intelligence agencies , and inside that boundary we need the police and legal system. All has to be paid for.

      We also want things to be generally clean and safe, so we need things sanitation and refuse disposal, health care, some standards and enforcement of employment law, etc. For long term prosperity we also need education so those who are able can do well in employment, not just those lucky enough to be born to those who value and can afford to pay for it. Bitter experience has shown that most people are lazy and will try to avoid "public spirited" support, very much so if it costs them money, so we also have to find a way of making sure it is paid for. So we have taxation.

      "why not negative income tax for individuals"

      Is that not one key aspect of the welfare state? To provide support for those who cant otherwise afford food, shelter, etc? While it might be popular in certain political circles to class them as spongers and time-wasters, and I dare say there is a proportion who are like that, the reality is a lot of folk will find themselves out of work at some point in their lives for any one of a number of reasons. Without support they could well end up as 'unemployable tramps' and never get a 2nd chance. Even if you are totally self-interested you should still want some welfare state, as poor and hungry people may decide to take your property and maybe life as well since they have little to lose.

      I am not saying current governments are optimum, but it is a hell of a lot better than the pre-taxation days.

      1. Tom 13

        Re: we all want to live in a safe and prosperous environment.

        No, I want to live in a secure and prosperous environment, not a safe one.

        That will get you your next paragraph. After that we start arguing.

        The reason that taxes are so problematic is that there is a sufficiently large block of people who are too busy-body to let their neighbors make legitimate choices with which they disagree. And the reality is that it is more of a problems with greenie tree huggers, and save the whale children types than it is with most bible thumpers.

    3. Tim Worstal

      " and should therefore make a profit with dividends being shared out among the shareholders."

      That's Social Credit, as devised by a Major Douglas, very popular between the wars. Doesn't actually work sadly. Partly because "profit" is near impossible to calculate in the manner necessary. Partly because there's not actually enough profit in the economy to run the size of government we seem to desire.

      We could actually run "government" off those sorts of sums. But what we couldn't also do is the redistribution, the taking money off rich folks to give to poor folks that everyone also seems to want to do. And it's really that which makes modern government so large.

    4. Diogenes

      Now, maybe the country should be run as a company for the benefit of the shareholders - the population - and should therefore make a profit with dividends being shared out among the shareholders

      WS Gilbert beat you to it - see Utopia Limited.

      1. Anonymous Coward
        Anonymous Coward

        Taxes are what gives fiat money value

        The reason we've been able to move off the gold standard to fiat money standards is because of the power to tax. If there were no taxes, why would you need dollars or pounds or other government backed money? You could barter, use bitcoins, gold, or balls of fluff from your belly button to pay someone for something - whatever they are willing to take.

        While I'm sure that appeals to die hard Randists, the economy loses a lot of its efficiency when everyone doesn't agree on a common medium of exchange.

    5. Tom 13

      @ Ivan 4

      Go rent and watch Rollerball. And remember, like Highlander there is only ONE Rollerball and it was made before the turn of the century.

      There are plenty more sf novels along those lines out there. That's why you don't want a corporatist government. Government, at least in the UK and the US is NOT built to be efficient. It is in fact built to be in-efficient so that each and every person can (in theory if not in practice) influence the outcome of any law. It's inherent in an even deeper sense of fairness than the one Tim is trying to define here.

  9. Mark 65

    Hmmm

    I like the idea Tim but, correct me if I'm wrong, doesn't it still require that we have sorted out the profit shifting that goes on? I mean, you could create the most equitable efficient system going but if you can profit shift then they will all still be at it moving profits to the race-to-the-bottom tax locale de jeur. If it does require that the profit shifting issue is solved then, once that is achieved, who would give a shit about changing the system?

    1. Yet Another Anonymous coward Silver badge

      Re: Hmmm

      That's why it's an economic theory -> not even good on paper + impossible in practice.

  10. Peter Johnston 1

    High Wage and High Cost Economies

    In some countries wages are high, but everything costs more.

    In others wages are low, but everything's cheap.

    Indirect Taxation is often what makes the difference.

    For example, in the UK, 75p of every litre of fuel is paid to the government in tax.

    That affects the price of everything.

    Making us an "everything costs more" economy and we need higher wages to compensate.

    But internationally, that makes us a bad place to situate a company.

    High wages means high cost of goods. So the company goes somewhere else.

    We compete only against other governments who do the same - cheaper than Germany but way off Indonesia, for example.

    And we're offering high corporate taxation against other countries' free factories, incentive schemes and better infrastructure. The net effect is negative.

    The Butterfly Wings effect of high corporate taxation in a world economy is massive. The loss of companies like HSBC will not only cost us corporation tax, but rates, employee rents, purchases of goods etc.

    1. Paul Crawford Silver badge

      Re: High Wage and High Cost Economies

      "That affects the price of everything"

      Yes, but it also pays for better standards of health, hygiene and public safety. Where would you rather live, a poor-to-middle region of the UK, or poor-to-middle of Indonesia?

      (nothing against Indonesia as such, but its your example)

      1. Anonymous Coward
        Anonymous Coward

        Re: High Wage and High Cost Economies

        "That affects the price of everything"

        Yes, but it also pays for better standards of health, hygiene and public safety. Where would you rather live, a poor-to-middle region of the UK, or poor-to-middle of Indonesia?

        Sorry to burst your bubble but Australia is a high wage high cost economy and its health system is inferior to the UK by international measures. It is also based on the American system of "pay multiple times and fuck you if you're poor". They say it has universal coverage but I know of several people (not wealthy) that claimed on private health and ended up with huge out of pocket expenses for treatment of things like cancer that you'd generally expect to be covered in a civilised society.

        Their reason for doing so? The public system was moving so slowly they'd likely be dead before their first round of treatment and in all such cases time is of the essence. Still, saves the taxpayer money doesn't it?

      2. Tom 13

        Re: also pays for better standards of health, hygiene and public safety.

        Actually that's doubtful.

        The reason the UK and the US have better standards is because of how long we've made them a focus of our endeavors. The serf scrabbling in the dirt doesn't care about them. He cares about feeding his family and hopes he doesn't lose someone to disease or heat/cold in the appropriate season. Like it or not, those poor regions have only recently come out of the age of the serf. England started making the trek around 1250 and it is hard to make up for that time differential with money.

  11. Graham Marsden

    "The things that actually seem to work in making the poor richer."

    You mean the things that give us jobs being shunted to whatever part of the world gives the cheapest employees at the time (and screw the poor buggers who had that work previously)? The things that give us the Minimum Wage instead of a Living Wage? The things that give use Zero Hours contracts? Etc etc etc

    Oh, sure, you can say "but look how cheap you're getting your goods, so that makes you better off!" but that rather relies on people enough money to spend on those goods, but, in the mean time, reduces much purchasing to the least expensive option because that's all many people can afford.

    Of course *some* people are getting richer, however they're the ones who can afford to buy shares and the ones further up the ladder, but many of them are just saying "I'm alright Jack, keep your hands of off my stack".

    So how about this, Tim: Don't tax profits more, just make companies pay their lower level workers a better wage than the bare minimum if there's sufficient profit to allow it. At the same time, stop rewarding those at the top with huge bonuses that will mostly not get spent, so there's the same amount of money, but it's going to those who will actually use it as liquid assets ensuring it goes back into the economy.

    1. Tim Worstal

      Re: "The things that actually seem to work in making the poor richer."

      "Of course *some* people are getting richer, however they're the ones who can afford to buy shares and the ones further up the ladder,"

      Well, no, the people who have been getting rich out of globalisation have been the shit poor out there who now get three squares a day and the like. The last 40 years have seen the largest reduction in absolute poverty in the history of our species. I call that a success.

      1. Graham Marsden

        Re: "The things that actually seem to work in making the poor richer."

        > the people who have been getting rich out of globalisation have been the shit poor out there who now get three squares a day and the like.

        Oh right! Great! So all the people in the UK who are now out of work and on benefits (let alone being forced to rely on food banks as they get sanctioned by a hypocritical government enforced scheme to somehow force them into jobs that have been "globalised") should be *happy* that there are people elsewhere in the world who now have *their* jobs and are churning out goods so much more cheaply that, if they had any money, they could buy... erm...

        Meanwhile I note that you manage to completely ignore and avoid answering my suggestion about paying workers a reasonable living wage which they will then go out and spend which will increase the circulation of money.

        Want to have another go and actually address that point, Tim?

        1. Tim Worstal

          Re: "The things that actually seem to work in making the poor richer."

          I have spent many years addressing that "living wage" argument.

          I'm fine with the way it's calculated as it's akin to Adam Smith's example of the linen shirt. Not being able to afford a linen shirt does not make you poor. Except, if you live in a society where not being able to afford one is regarded as being the sign that you are in poverty, then not being able to afford one makes you poor in that society.

          So, go round and ask people, well, what should you be able to do in order not to be in poverty? Answers come back like a couple being able to go out for a couple of pints once a week, off to a cheapish (Old Toby Carvery or the like) once a month and so on. This really is how the Living Wage is calculated. No problems with any of that.

          However, that Living Wage is given as a pre-tax number. And the UK charges quite substantial income tax and national insurance to incomes at that sort of level. In fact, it charges so much that the post-tax Living Wage is within pennies per hour of what the Minimum Wage would be untaxed.

          We don't thus have people being below that living wage because wages are too low. We actually have people below that righteous and just income because taxes are too high. And thus my five year (and counting) agitation to get the personal allowance raised to the minimum wage. It's working too, three of the four majors now have that as manifesto commitments for income tax, take the battle on to national insurance next.

          And, yes, I really can prove that this comes from me. The whole kit and caboodle.

          We don't have low wage poverty in the UK, not judging by the Living Wage we don't, we have tax poverty. And the answer to that is simple, stop bloody taxing poor people. And by doing so we instantly convert the minimum wage into the Living Wage.

          Pretty good, eh? Especially for a neoliberal running dog lackey of the capitalist plutocrats like me, eh?

          1. codejunky Silver badge

            Re: "The things that actually seem to work in making the poor richer."

            @Tim Worstal

            "We don't thus have people being below that living wage because wages are too low. We actually have people below that righteous and just income because taxes are too high."

            Well said.

          2. Mayhem

            Re: "The things that actually seem to work in making the poor richer."

            We don't have low wage poverty in the UK, not judging by the Living Wage we don't, we have tax poverty. And the answer to that is simple, stop bloody taxing poor people. And by doing so we instantly convert the minimum wage into the Living Wage.

            Yep, that's one of the simplest and easiest changes for a government to do to raise the quality of life for everyone.

            The basic personal allowance is £10600, the minimum wage is approx £11800.

            That £1200 is a heck of a lot of cash at that level of income, which will be directly funnelled straight back into the economy via the Vimes boot theory of economics.

            Make it a universal change, and every taxpayer benefits, as they have more disposable income, and the money is just as fake as the QE.

          3. Graham Marsden

            @Tim Worstall - Re: "The things that actually seem to work in making the poor richer."

            > And the answer to that is simple, stop bloody taxing poor people.

            On that, at least, Tim, we can certainly agree.

            But that does, of course, still depend on people actually *having* jobs which a) haven't been "globalised" to some other part of the world and b) pay at least the minimum wage not only per hour, but also for a enough hours a week for it to make a difference, instead of Zero Hours where you work (or not) at the whim of the business owners.

            > Pretty good, eh? Especially for a neoliberal running dog lackey of the capitalist plutocrats like me, eh?

            Just one thing: those are *your* words, not mine.

            FYI on the Political Compass chart I come in at -0.3 on the Left/ Right scale and -7.75 on the Authoritarian/ Libertarian scale. Which means that whilst I might be "more left-wing than some", I'm certainly not "left wing" according to the usual definitions.

            I'd be interested to know where you come out on those scales...

            1. Tim Worstal

              Re: @Tim Worstall - "The things that actually seem to work in making the poor richer."

              6.88, -6.82.

              Well out there beyond Friedman and verging on Randian (but not, not an Objectivist).

              "But that does, of course, still depend on people actually *having* jobs which a) haven't been "globalised" to some other part of the world "

              But as above, trade doesn't change the number of jobs in a country. Just doesn't.

              1. Graham Marsden

                Re: @Tim Worstall - "The things that actually seem to work in making the poor richer."

                > 6.88, -6.82.

                RIght (pun not intended!), so whilst I am to the left of you, I'm certainly not a "Leftie".

                > trade doesn't change the number of jobs in a country

                I really don't see how that follows.

                If there is trade, beyond that of basic barter, there is a need for money, so bankers and accountants. There's shops to sell the goods, so retail staff. There's tax on the money and wages, so tax collectors...The employees have more money, so they can buy more etc etc etc...

                Therefore the more trade, the more demand, so the consequential higher need for these other jobs. Conversely, if trade diminishes (for instance if a supply starts becoming exhausted) the production costs will go up, the price will go up, the demand will remain the same (or fall as people look for alternatives) but the number of people selling the product will diminish, hence fewer associated jobs.

                If the jobs move elsewhere in the world, because it's cheaper to employ people there, there will be fewer jobs in the original location, fewer people employed there, so less money to spend in that local economy, so they will be less well off even allowing for the (presumably) cheaper goods because the amount they save on the cheaper products is unlikely to equate to the amount of income they've lost.

                Someone, somewhere else, might be better off, but that's pretty cold comfort for the newly unemployed.

          4. Mark 65

            Re: "The things that actually seem to work in making the poor richer."

            I certainly agree that it makes no sense to say "here you go son, here's a minimum wage to stop you getting fucked over" one moment before adding "and now hand over the tax man's take". Still, the whole realm of Government revolves around clipping the ticket and getting in the bloody way of everything.

            1. DaveDaveDave

              Re: "The things that actually seem to work in making the poor richer."

              Any sentence that includes the words 'here's a minimum wage' will end up in some ludicrous contradiction because it's such a bonkers concept. Supposedly it's a nice idea to tell people 'your labour is not valuable enough for you to be permitted to sell it in our society'. Sounds pretty damn harsh to me if you're not then giving them some training or other help to increase the value of their labour.

              Of course the minimum wage's history is that it's always been an instrument of oppression, from when it was first brought in in the US to stop 'negro' workers getting jobs until today.

              1. Mark 65

                Re: "The things that actually seem to work in making the poor richer."

                @DaveDaveDave: I've always viewed minimum wage as a guilt payment by the Government to those they've fucked over. Whether that be through open borders driving down wages at the bottom or a lack of genuine training opportunities and/or a shit education system that teaches to the test rather than providing people with the skills to get on in life. Of course their (all Governments) failure to deal with real price inflation plays a part too by allowing costs to soar. That failure may take the form of blowing bubbles (no M Jackson jokes please) in housing to general failure to invest in critical infrastructure which leaves the country importing ever more energy from overseas. Like I said - it is a guilt payment.

      2. Anonymous Coward
        Anonymous Coward

        Re: "The things that actually seem to work in making the poor richer."

        Sure, people in other parts of the world having less-bad jobs (or jobs at all), some money in their pocket and, ideally, improved health and general conditions is important. This is all fine except that if my job has gone over there, it doesn't do me much good knowing that a hard-working schmoe over there can now put his kids through school if I can no longer do likewise for mine (and especially if I see that the CEOs of my former employer all got bonuses for "increasing profitability" after my department and I all got pink-slipped). I understand that my former employer is a business, not a charity, and its sole raison d'etre is to spin profits for its shareholders; if my output can be procured more cheaply over there, then that's what the company is going to do. But increasing buying power over there by decreasing it over here (if we now have more people who do Job X over here chasing fewer openings for Job X, that means the "surplus" will have to do something else, usually -- in my observation and experience -- at a lower wage) is helpful. I guess from the mile-high view, if ABC Corporation saves $1 million a year by sending the Job X work over there and firing the Job X people over here, that $1 million will find another way into the economy than via my and my former co-workers' spending, and as long as it's sloshing around and buying stuff somewhere (keeping more people over there employed, since that's where more stuff is being made) there has been no real net change on a global scale. Except that with my reduced buying power (I had to take a lower-paying job in order to ensure even a modicum of cash flow to keep the bills paid) my immediate environment is losing (not just not growing, but losing) as my discretionary spending is slashed. Multiply me by the many thousands who have lost jobs to cheaper labor over there, the impacts to our municipalities from our reduced spending (and increased use of social services) and I am not sure this zero-sum game is such a good outcome.

        A.C. because I could be anybody.

        1. Anonymous Coward
          Anonymous Coward

          Re: "The things that actually seem to work in making the poor richer."

          D'oh, should have read "But increasing buying power over there by decreasing it over here ... is not helpful". No wonder my job went over there.

        2. Tim Worstal

          Re: "The things that actually seem to work in making the poor richer."

          Trade doesn't, can't in fact, change the number of jobs in an economy. That's determined by aggregate demand. It can change "which jobs" for sure, but not the number of them.

    2. Doctor Syntax Silver badge

      Re: "The things that actually seem to work in making the poor richer."

      "they're the ones who can afford to buy shares"

      <Sigh> How many times do we have to say this? Do you have a company or private pension? Do you have life insurance? Then directly or not you're a shareholder. Unless you're without these benefits then instead of saying "the ones who can afford to buy shares" or the like, say "me". When you do that, does it sound any different?

      Yes, I know there are people who are likely to come along and say they're fed up with comments like this but it needs to be repeated until it sinks in.

      1. Graham Marsden

        @Doctor Syntax - Re: "The things that actually seem to work in making the poor richer."

        > Unless you're without these benefits then instead of saying "the ones who can afford to buy shares" or the like, say "me". When you do that, does it sound any different?

        I'm sure it does "sound different", if you ignore the people who *don't* have a company or private pension or life insurance, after all, obviously they're not worth bothering about.

        But, in any case, you are being incredibly naiive if you think that pension funds and life insurance companies are running their operations simply for the benefit of people who pay into them, because what they are really doing is thinking "ok, what's the bare minimum we can get away with giving out that will keep people paying in to these schemes whilst maximising our profits and bonuses?"

        If I buy or sell shares *myself* then, apart from a brokerage fee and any taxes that may be liable, the rest of the money is *mine*. If I pay it into a pension or life insurance fund, that's certainly not the case and that needs to be repeated to people like you until it sinks in.

        More importantly, as I already said, it also depends on me or anyone else having enough money to actually afford to take the risk of getting into the share markets *and* being willing to put it away as part of a long-term investment and there are a lot of people for whom this is simply not the case and *these* are the people who are not "getting richer".

    3. DavCrav

      Re: "The things that actually seem to work in making the poor richer."

      "You mean the things that give us jobs being shunted to whatever part of the world gives the cheapest employees at the time (and screw the poor buggers who had that work previously)? The things that give us the Minimum Wage instead of a Living Wage? The things that give use Zero Hours contracts? Etc etc etc"

      Minimum wage in the UK? Luxury! You talk about being poor, but when I were a lad we'd have to work down t' mine for 18 hours and then etc etc etc.

      There are essentially no poor people in the UK. There are people who are relatively poor, compared with even richer people you know, but on the global scale they are in the top 10-20%. I thought you supported taking money from the richer to give to the real poor, i.e., the poorest 3.5 billion in the world? Globalisation and international trade has done just that, vastly improving the lives of the billions of genuinely poor, at the expense of a few dozen million in the West who have a bit less good of a life. Surely that's a win?

      1. cambsukguy

        Re: "The things that actually seem to work in making the poor richer."

        Yes, but there are a lot of people in the UK working six days a week for 50 or 60 hours to just do okay.

        Just because they can have cellphones and colour TV doesn't mean they are not exploited.

        It always reminds me of the Michael Moore film where he talks about the USA in the so-called Golden Years constantly harped on about by the GOP and their flunkies. During that time (50s, 60s), they had very high upper rates of taxation and at least a reasonable welfare state.

        The rich paid their taxes, crime was pretty damn low. Quality of life was high for most and incomes were far more equitable.

        People could become very, very wealthy, even from a low starting point - open a restaurant, add a few, franchise it, boom, McDs or whatever.

        The USA now has a poorer status against the rest of the world in many, many metric including life expectancy (a very important metric I think). Income inequality is obscene, the incomes of CEOs make the disgusting disparity in the UK seem almost acceptable.

        However, I for one wouldn't want to have to move to a gated community and pay for private security just because I owned a few restaurants. That way lies the awful Brazilian bullet-proof car lifestyle.

        And yet, in (say) Finland or Sweden, ones sees far smaller wage and wealth disparity, general acceptance of high taxes, intolerance of tax abuse and avoidance etc. along with low crime rates, low infant mortality, excellent welfare states and a safer environment generally (as well as reasonably prices public transport). The UK and the USA especially could learn a lot. People have predicted the demise of these economies for the last couple of decades but I know where I would rather live.

      2. Graham Marsden
        Thumb Down

        @DavCrav - Re: "The things that actually seem to work in making the poor richer."

        > Globalisation and international trade has done just that, vastly improving the lives of the billions of genuinely poor, at the expense of a few dozen million in the West who have a bit less good of a life. Surely that's a win?

        Right! "Be happy that *you're* being fucked over, because at least that's helping out someone else!"

        (But whatever you do, don't ask how many millions or billions the people on the top actually need to live on, just ignore the man behind the curtain...)

        1. Tom 13

          @Graham Marsden

          Communism lost. It simply doesn't work. You need to find a new philosophy. One that doesn't include any of it at all. Because, well, bottom line, even Hitler didn't kill as many people as the commies did.

          1. Graham Marsden
            WTF?

            @Tom 13 - Re: @Graham Marsden

            > You need to find a new philosophy

            Even ignoring the massive Godwin, I think you need to first understand what Communism is because if you think I'm advocating it, you *really* haven't understood what I'm saying.

            Try having a look at the Political Compass site and look at where Communism is and then see how far removed from its ideas I am...

  12. Anonymous Coward
    Anonymous Coward

    If every comment could end up like this

    1) Don't tax people's income. People should not have to pay tax for the right to work.

    2) Tax peoples' consumption. People who consume more of the economy's output pay more tax.

    3) Remove existing tax systems completely. They generate immense overheads and waste while encouraging and facilitating avoidance and evasion.

    And now for the mandatory link to the Automated Payment Transaction tax site.

    http://apttax.com/

    Read it, see how the APT can also act as an automated VAT (even though it is not VAT).

    The APT principle is to take 0.35 % on every purchase and sale, paid by buyer and seller (for a total of 0.7 %).

    Cash withdrawals and deposits are taxed at 0.7 %, which ensures the underground economy pays taxes as well.

    Electronic payment systems can manage tax collection directly and automatically at the point of every sale.

    Imagine a single tax which applies to everything from bubble gum to Maseratis and is too small to bother evading.

    Imagine the tax collectors and tax lawyers looking for a new line of work.

    Imagine not having to fill out stupid and incomprehensible forms every year, quarter, month whatever.

    Imagine the amount of human and financial capital it would unleash into the economy.

    No tax breaks, no exceptions, no backhanders, no backroom lobbying.

    Every other collection system is has eventually become broken, abused or corrupted. APT is simple to understand and simple to use. We should do it.

    1. Tim Worstal

      Re: If every comment could end up like this

      Ouch, this is a transactions tax. Very bad things, transactions taxes. Very bad indeed. Sir John Mirrlees will be around to smack your bottom for this suggestion.

      Last time I read through a detailed proposal for this the claim was that it would raise more than the total economy in tax in a year. Which shows that there might be the odd error in it somewhere.

      1. Anonymous Coward
        Anonymous Coward

        Re: If every comment could end up like this

        Tim,

        Two down votes will leave scarcely a ripple on my battle-hardened posterior, Sir John, so bring it on.

        I realize that you remain unconvinced of any real benefits from an APT, but refuse to give up.

        I invite you to look at this proposal for a similar scheme in Australia.

        It includes some figures and arguments.

        Comments welcome.

        http://www.nationallibertyparty.com.au/policies/eureka-debit-tax-policy/

        1. phil dude
          Boffin

          Re: If every comment could end up like this

          @AC , I support Tim on this one.

          We want less government not more, and APT seems the perfect way to have government in every crack and orifice from now until the end of time.

          The fairtax.org site has a wealth of information on it, and perhaps it is an American idea for America.

          But with 23 million illegal immigrants that are not paying income tax, this would be approximately equivalent to Ireland, Finland, Denmark, Slovakia and Norway not paying income tax. Source: Wikipedia

          Do you think anyone in Europe would notice?

          P.

    2. David Roberts

      Re: If every comment could end up like this

      Tax cash deposits and withdrawals?

      Collect all taxes electronically?

      So you propse to inentivise me to keep cash under the mattress and pay for and receive goods on a cash in hand basis?

    3. Mark 65

      Re: If every comment could end up like this

      The problem is that although you remove the income tax you need to up the VAT/consumption/transaction rate to avoid losing "Government income" or "other people's money" as I prefer to refer to it. This seems good at first until you realise that at the point at which the workers retire you've likely made everyone poorer in their final years as they weren't paying income tax before but now they're getting striped by your new taxes. Can't see you ever getting that one off the ground especially seeing as they've already had the parasites in fund management clipping the ticket on their money pot for the last 40+ years.

  13. Anonymous Coward
    Anonymous Coward

    Disgraceful

    A cogent article followed by a thoughtful comment stream with polite argument presentation from which I learnt something. Its a disgrace!

    FWIW: Despite living in a VAT regime, my company (and I mean *my*) passes on VAT, I had never cottoned on to the difference between VAT and a Sales Tax. Seems a bit obvious now ...

    Cheers

    Jon

  14. jake Silver badge

    Whatever.

    Taxing corporations leads to lowering the corporate bottom-line. Which leads to individual consumers paying more money for (thing). Corporations pay no taxes. TheGreatUnwashed do.

    Before anyone asks, I have no answers.

  15. Crumble

    I don't buy it.

    The snag with using government bond yields as a proxy for average rate of return is that yields have been badly distorted by Quantitative Easing programmes. The flood of money coming in has pushed up demand and pushed down yields. Ten year gilts are about 2% and no likelihood of returning to the old "normal" any time soon. What happens if the UK ends up like Switzerland with ten year bonds yielding less than zero percent?

    If you want to do this complicated scheme (who am I to argue with a Nobel), find another proxy.

    1. Mark 65

      Find something that isn't measured by Government directly or at arm's length. CPI is a case in point of a hugely manipulated index. The Chinese certainly learned from the West on that front and unemployment numbers.

  16. Arthur the cat Silver badge

    You've read Mirrlees???

    All 1391 pages of it. You get a tip of the hat for stamina at least.

  17. jonathanb Silver badge

    Two problems

    There are two problems, one of which you covered, and the other you didn't.

    If you want to find out the Return on Capital Employed, you need two things, you need to know the "return" ie profit, which can be subjective, and you also need to know the "capital employed".

    You dealt with the problems in calculating profit, so I won't go into any more detail on that. But what about the problems in calculating the capital employed? If you travel on an airline for example, you might think that the huge plane that you are sitting in is a large part of the capital employed. After all, you can't run an airline without planes? The problem is, these planes are not on the airline's balance sheet, or very often, on anyone's balance sheet. David Tweedie, chairman of the International Accounting Standards Board, has declared that one item on his bucket list is to fly on a plane that is on someone's balance sheet. Companies do not like putting assets on their balance sheet, because that increases the capital employed, and therefore reduces the return on capital employed.

  18. x 7

    "increased productivity make all richer"

    Not true

    Assuming static demand then increased productivity reduces the need for labour and so makes average employee earnings lower - either through redundancy or reduced hours

    The only people who benefit from increased productivity are the owners of the company's capital.

    I guess your riposte will be that demand isn't static: that the economy grows and so maintains employment, but as we've seen in recent years that isn't a given and nor is it always desirable. Economic growth usually fuels a boom in imports - not domestic production - and so benefits overseas producers, not our own. Economic growth = exploitation of overseas low cost labour to the detriment of domestic production. And why is it low cost? Because of absence of health, safety and environmental concerns. Because of low living standards. Because life is cheap in developing countries. And death even cheaper.

    1. Yet Another Anonymous coward Silver badge

      >The only people who benefit from increased productivity are the owners of the company's capital.

      Which is us - almost all of every major company is owned by your savings, pension and insurance policies.

      The real reason fro taxing capital less than income is that the people that propose it - such as economics columnists - are self employed and can pay themselves in dividends.

      1. Tom 13

        Yet Another Anonymous coward

        Which is us - almost all of every major company is owned by your savings, pension and insurance policies.

        Well, it might be you and I, but it certainly doesn't include him. You can tell from his posting he's an eater, not a producer.

  19. All names Taken
    Alien

    Why don't we ...

    ... tax success (any profit making will be taxed incredibly highly?)?

    ... make sure that landed families (that is UK families with a tradition of wealth going back centuries are well catered for in the highest posts in the public finance and if they are not able to take advantage of these we will give them a heritage type funding business model?)?

    --- make sure that any analysis of familial longevity of employees in the public sector is never, ever analysed or given light of day or breath to breathe by?)?

    ... make sure that any surpluses of capital in the UK are borged immediately with exceptions to close friends, those in the know, or ?)?

  20. Anonymous Coward
    Anonymous Coward

    "we want to tax capital incomes at lower rates than labour based incomes"

    I'm not sure you can take it as a given that everyone will agree with that statement.

    What it sounds like is that the rich (who have capital) get richer (sitting on their backsides) while the poor have no choice but to work *and* pay higher rates of tax than the rich into the bargain.

    As far as I can see, the argument for why this is a Good Thing is that it encourages the capital to be put to good use, and that benefits everyone.

    But suppose capital gains were taxed at the same rate as labour. Would this really stop capital owners from investing? What else would they do with the money - put it under the mattress?

    1. Yet Another Anonymous coward Silver badge

      Re: "we want to tax capital incomes at lower rates than labour based incomes"

      It even taxes people investing capital differently.

      If you are poor and put money into a savings account, you pay income tax on the interest.

      If you are rich and buy shares, you pay lower capital gains tax on the profit.

  21. david 12 Silver badge

    "well, let's only tax profits above the normal rate of profits."

    Implemented here in AUS in something that was (past tense) called "the mining tax", since rescinded. What the 'ivory tower big government academics' had failed to appreciate was that government and mining valued the speculative profits at different rates: in mining, profit is not a fungible good.

    The mining industry sells to their investors the high-risk chance of speculative profits. That is their market proposition. They make a profit in that market.

    In contrast, the government valued "profits above the normal rate of profits" on the same scale as "normal profits"

    The effect was that the value to government was much less than the value lost by the mining companies. That was an unsustainable situation.

    1. Anonymous Coward
      Anonymous Coward

      Re: "well, let's only tax profits above the normal rate of profits."

      I guess sort of similarly if VCguys bet on 10 companies expecting 1 to do well and pay for the other 9 losers. But then they get nailed on higher than average profits tax on the one winner->less investment, or more risk.

    2. Anonymous Coward
      Anonymous Coward

      Re: "well, let's only tax profits above the normal rate of profits."

      The main issue with the mining industry is that the royalties paid by said companies for the mined items are not high enough or properly set i.e. they should move with the underlying market price such that in a recession, like we are now entering, the mining companies catch a bit of a break but in the boom times so does the nation to which those resources actually belong. The MRRT was a ham-fisted attempt at correcting this and was partly so piss-poor because of the royalties being state level and the company tax federal level. Australia needs to sort its shit out on that front as it's quite clear that despite riding the biggest boom in history WA is going to be on its arse with it's hand out for pennies soon enough.

  22. Anonymous Coward
    Anonymous Coward

    A Modest Proposal ...

    Introduce the Death Penalty for Shareholders whose Corporations fail to pay the correct tax.

    That would sort out the priorities of the boards of these companies when determining what is in the best interests of their shareholders.

    1. Yag
      Coat

      Re: A Modest Proposal ...

      Well, you know, your pension plan includes a portfolio including some shares in such companies.

      No, leave your coat here, you won't need it where you're going...

    2. JimC

      Re: A Modest Proposal ...

      The days when shareholders were the problem seems to me to be long gone.

      The current problem with capitalism seems to me to be that the executives are plundering the wealth from both the shareholders (=pensions funds, account holders and so on) and the productive staff, and grabbing an ever increasing share from themselves. They can get away with this because the ownership is so scattered into powerless pockets (pensioners etc) that all the decisions on how the money is distributed are made by executives, who have an inflated belief on what their share should be.

      It would be very interesting to compare the relative payment to shareholders, staff and executives in businesses now to that of twenty years ago. It seems to me that since the crash staff have had wages held down, shareholders have had returns held down, but executives have... filled their boots. Aux lanternes...

      1. Anonymous Coward
        Anonymous Coward

        Re: A Modest Proposal ...

        I've always wondered why CEOs are so revered. Perhaps Tim could explain it because, as far as I can see, they are the biggest shower of useless c*nts ever to walk the earth and generally roam from post to post mildly fucking up each company on the way before leaving with a huge severance package and collecting a golden hello at the next company that seems not to have noticed how shit they are. Seriously, I want that job. I believe Zero Hedge even charted Stan O'Neal's (Merrill Lynch CEO) golf handicap getting better whilst his company went to shit. Mainly because he was playing more rounds than ever.

        1. DaveDaveDave

          Re: A Modest Proposal ...

          The good CEOs are revered precisely because, as you mention, a bad one can tank a company. They're few and far between, of course, hence the competition to find and retain them.

          "I believe Zero Hedge even charted Stan O'Neal's (Merrill Lynch CEO) golf handicap getting better whilst his company went to shit."

          You shouldn't believe anything you read on ZH. They just make stuff up out of thin air when they feel like it. It astonishes me that people cite a source which repeatedly spreads ludicrous antisemitic conspiracy theories about the Zionist World Government.

          1. Anonymous Coward
            Anonymous Coward

            Re: A Modest Proposal ...

            Regarding the ZH comment - you can believe it, they took the records off of the official (maybe US PGA) site as Stan had a reasonable handicap. Whenever he played his scores were entered into the system in order to modify the handicap - that's the only way in golf - and thus they were discoverable. I only cite it because the information is true and verifiable.

  23. teebie

    capital is what increases productivity?

    "we want to tax capital incomes at lower rates than labour based incomes. Because capital is what increases productivity"

    Surely having enough staff, paying staff enough that they can be arsed to work, and training staff enough that they can be effective all increase productivity (*), and are labour, not capital

    (*) of course there is a point at which this becomes counter-productive, but I doubt many companies reach this

  24. Anonymous Coward
    Mushroom

    So, what do we do for work when everything is completely automated then?

    The underlying problem is that "work" is rapidly becoming obsolete. Yes, "service industries" I hear you say. AI will take care of most of that in the next 10 years or so.

    All our economies will crash by then. Our money will be worthless and we will have a depression far worse than in the 30s for real, concrete reasons rather than imaginary, confidence-based ones.

    1. codejunky Silver badge

      @ skelband

      More automation and machinery was to make working days shorter and put people out of work. Instead we make progress and use that time to do other jobs. Work is far from obsolete.

      1. Anonymous Coward
        Anonymous Coward

        Re: @ skelband

        People are working longer hours and their standard of living is declining. In a lot of places well qualified professionals can't even afford to buy a house. Where have you been for the last 30 years?

        1. codejunky Silver badge

          Re: @ skelband

          "People are working longer hours and their standard of living is declining."

          Really? Serious? More information than ever thanks to technology being so cheap it is available to almost everybody in the country. A large portion of kids go to uni and go for a job. My parents left school, got a job and my dad still works for the same place. We have more money with greater access to the world with more options. Most people can afford to go out, have a few drinks, go to the cinema, eat out. Stay in with a film on their flat screen TV with sound bar, nice food and more time saving devices at such affordable prices that almost everyone has them! Declining from what? A lazy dream?

          "In a lot of places well qualified professionals can't even afford to buy a house"

          I have little patience for most of these people. FREAKING MOVE YOU LAZY BUGGER! I could sit and cry outside of a nice posh house because I cant afford it. Instead on my ok salary I moved with my student gf to a city, rented for a few years and saved enough to buy a house. So when people on often higher salaries than me complain they cant afford a house I ask what the hell they spent their money on.

          "Where have you been for the last 30 years?"

          School, college, uni, work, rented accommodation, bought a house. You?

          1. Anonymous Coward
            Anonymous Coward

            Re: @ skelband

            > School, college, uni, work, rented accommodation, bought a house. You?

            Your perspective is tainted by your own very limited experience.

            A professional of my and your experience, 40 years ago, would have expected to be able to have a (non-working) housewife, a detached house and garden, membership of a club and servants (yes, being an employer as well) and expect to retire with a decent pension.

            Now in most places in the western civilisation, if you live where work is, are white-collar professionals (married or otherwise), in order to afford even an apartment, both you and your wife will have to work long hours with a crippling mortgage with very little left over to save for retirement. You can forget about hiring others, you can't possibly afford it.

            If you have kids, what little savings you have will likely be destroyed by school and college fees, costs of books etc which have increased exponentially despite the real cost of education and publishing going down. Your kids could take out student loans, you say though. What better way to get them onto the debt mill than this? Is this the future we want for our offspring?

            This is no fantasy. It is the life that I live now and millions of others do every day. And all of this is caused by the perversion of our current economic systems and the scarcity of the need for labour. It will only get worse because I can think of no reason why it should get better. The downward spiral of debt and cost of living increases is built into the economic systems of our countries.

            Up until now, the downward spiral has been so slow and insidious, that most people don't realise it is happening.

            But don't worry. You have the latest smartphone. Technology is indeed decreasing the labour that our industries need and improving efficiency. There are acres of factories powered almost entirely by robots that were once full of people. That's great and it makes great cars and cell phones.

            The problem is that our social and economic systems demand that to live, we need labour. And although service and technology industry jobs are taking their place, technology is more rapidly moving into those areas. In the last 15 years or so, we have seen an explosion of automation, driving people out. Even in that small amount of time, we are now talking *seriously* about surgery being performed more efficiently and consistently with better surgical outcomes and less pain by machines rather than humans. It will become commonplace in the next 10 years. All those surgeons had better start looking for different careers. Delivery networks are almost entirely automated. Financial systems are almost entirely automated. So much of what is left for people to do, that we call "service industry" is just organising this vast engine of economic consumption. About 95% of government is there solely to manage this monster and to chastise those that question it.

            So what is the response to this from the industries that remain? Protectionism and perverse incentives to fight this technological revolution so that we can preserve the need for money to live, even though money and the labour that it purportedly represents is fast becoming irrelevant. Extreme copyright and patent extortion. The fabrication of "wars" to give people something to do and to distract them.

            Up until now, this has all happened over a time scale that most people don't appreciate. The rate of change is getting faster and faster though. We can't continue to remake our labour faster than technology is developing to take it over.

            Unfortunately, the first to seriously suffer will be retired people. Increasingly, people are finding that it just isn't possible to save enough for retirement. The cost of living is rising faster than wages. State pensions are drying up as governments have less money to spend on them (despite the fact that tax is rising). The baby boomers have exacerbated the situation and many people think the this is the only reason for the pension crisis. It isn't. It is just making it happen sooner and more obviously that it would otherwise. Even so, many commentators are talking about the pension crisis now in terms of people failing to save for the future. In the 80s many professionals were hoping to retire early, say at 45. Now many professionals are wondering if they will ever be able to retire at all.

            1. codejunky Silver badge

              Re: @ skelband

              I have thought about it and we will have to agree to disagree. The dream of 40 yrs ago doesnt match any reality I know of for the generations 40 yr ago. The loss of jobs you state hasnt happened and automation has brought more jobs in new industries that would have been impossible before automation.

              A lot of the problems I see with people and money is the people themselves. They spend the money and wonder why it isnt there once they spend it. What worries me is I know people who have credit cards (multiple) and dont pay them off in full! They live in debt and then tell me they want a house so will NOW start to save. Its insane! These people often have multiple foreign holidays per yr, latest gadgets/designer-wear/car/status objects and yet dont know where their money has gone.

              House prices have rocketed but mostly in the areas where people will get into insane debt to buy a house. Compare that to me buying a large house I can easily afford in a city on a single good wage while looking after my gf. That alone defeats the idea that people either buy a house or have a pension.

              As for kids, if you cant afford them dont have them. Kinda like not buying what you cant afford. Its a simple concept people used to know. The same people from 40 yr ago who's dreams never approached what you suggested.

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