Monday, March 28, 2016

Quote of the day 28th March 2016

"I've noticed something odd about the debate over sugar tax.

My left-wing friends are sure that if you put up tax on sugar it will help reduce obesity. Yet they regard it as a myth that if you put up tax on company investment it reduces company investment.

Meanwhile my right-wing friends are certain that if you put up tax on company investment it will discourage company investment, yet see it as plainly ridiculous to argue that putting up tax on sugar discourages consumption of sugar."

(Lord Danny Finkelstein, diary column in The Times on Saturday.)


Jim said...

My main problem with the "suger tax" is much the same as all, what i like to call "sin taxes".
one of the main calls for Higher fuel duty, was to persuade the population to consume less fuel. Pretty simple really. Of course it has knock on side effects, where by it unduly harms sectors of the economy, but we can leave those aside for now, lets just look at Fuel duty as a way of pressuring people to use less fuel.

Well, oddly enough that is what people did - great, they stopped buying the big engine V8 cars, and large trucks with thirsty engines. so the manufactures had to have a re-think, in order to stay in business. They started to design cars that run cleaner, busses and trucks that run cleaner and improve fuel efficiency, they started to streamline wagons and busses more, hey, my wifes 2 year old Honda Civic 1.6 diesel is as quick my 10 year old accord 2.2 diesel, but she regularly gets 75 miles to the gallon, i am lucky to get 50. she also pays nothing for road tax as that tax was based on co2 emmissions (mine is currently £135 per year)

So these taxes worked right? - well no, you see governments are very good at forgetting what taxes were imposed for, and are good at spending the money, so any "loss of consumption" is seen in a loss of a revenue stream, and one that needs to be compensated elsewhere.

You see "sin taxes" only ever go into the big black hole that is public spending, they are never "ring fenced" to be used for something, like fuel could have been used for envionmental only issues, or sugar could be used for "obesity changing things" this wont happen. Its just quickly an income stream, which when "improved" upon, will leave a short fall in government income. Every sin tax does this.

Chris Whiteside said...

Interesting point - a much more sophisticated critique of "sin taxes" than the opne Danny was responding to.

My answer would be

1) We need to raise a certain amount of tax revenue to fund "public goods" like law & order, defence and public health.

2) Whatever we tax to pay for this will be discouraged and thereby distort the economy.

3) As a general rule, therefore better to tax as many things as possible at as low a rate as possible and thereby minimise the distortion rather than have lots of exemptions and thereby much higher tax, and more distortion, on the things you do tax.

4) But within that principle and within sensible limits, given that whatever you tax will be discouraged, and you have to tax something, other things being equal it is better to get more of your tax revenue from things it is actually a good idea to discourage. And less from taxes on things the country desperately needs more of.

Jim said...

To that I would ask why?, Why not just have income tax at a rate that people can see how highly they are taxed?

You see so many small taxes and no one knowing exactly how much the government are taking at any time. Why not just do it there and at least be honest about it?