Re: Misunderstanding Economics
So, a potential employer has a job of work to do that it's worth him paying £100 to have done. It's not worth £120 to have done.
There's someone looking to do a bit of work and they'd do that job for £100 but not for £80.
(We can extend this model to anything we like. Someone's willing to grow and sell a pear for £1 but not for 80p, and someone is willing to buy and eat a pear for £1 but not for £1.20. All economics happens at the margin, so don't worry that this price differences wouldn't affect *your* decision. They will, at that margin, affects someones').
Great, so the two meet, agree, the job gets done and everyone's happy.
Now introduce a "wedge". That's actually the technical term for it. Say we add a 20% tax to those wages that must be paid. The employer will still only pay £100, the labourer will only get £80 and so the job won't get done. The pear won't get grown or eaten. and this is true of us pushing up the wages through insisting upon holiday pay and sick pay etc. Or of VAT, or national insurance, or income tax and so on.
Anything that introduces that wedge between the initial market clearing prices means that some economic activity won't happen.
Now, obviously, we do need to have government of some, however small, size and thus we've got to have taxes. And certainly at low levels what we get in government (a criminal justice system say) is very definitely worth more than the economic activity we lose by paying for it. But that's not true of all sizes of government, of all taxes.
The question is, well, when?