Thursday, October 19, 2006

Green or Blue?

Are the Tory party showing their true colours as the nasty party again? It wasn't that long ago that the leadership refused to discuss the matter. Now it is on the agenda again. Not a wise move if they wish to continue with their apparent makeover.

The whole package will obviously benefit the wealthy, especially the proposed abolition of inheritance tax and the reduction on corporation tax.

Despite my concern for the environment, I am always sceptical about so called 'green' taxes (which not only the Tories but the increasingly right wing leadership of the lib dems propose too). They tend to be aimed not so much at corporations but rather at ordinary people. The poor are, of course, hit the hardest.

If the proposed air fuel taxes come into being (which seem to have cross party support) flying may once again become the luxury of the rich, as it used to be. Those of us not so fortunate may have to kiss goodbye to holidays abroad.

A similiar issue is fuel taxes on cars, which stretch the budget of the average motorist (Although I would not be against an extra tax on 4x4s, mind. They are dangerous on the road as well as being pollutive. Nobody has to drive one of those things in town).

When it comes down to it taxes that are not related to means are regressive taxes. This goes for so called green taxes as well as VAT etc. More could be achieved by investing in cleaner energy via public money that is taxed from corporations who are the biggest polluters, not from ordinary people. But then that would be too much to ask. When faced with higher taxation big business can always threaten to take it's accounts elsewhere, hence the vicious circle. That's capitalism for you.


David Duff said...

Liz, sorry to introduce you to Economics 101 but corporations do not pay any tax at all, not ever - not a penny!

*You* (and me and everyone else) pay their taxes for them.

Out of kindness, I will forbear from pointing to some of the other economic absurdities in your essay.

Liz said...

David - corporations may not pay very much tax but they do pay some, else why are the Tories proposing cutting a tax which you say does not exist?

There is no need to be 'kind' either - I would much appreciate it if you tell me of these alleged 'absurdities' in my 'essay' (not exactly an essay but rather a brief comment).

David Duff said...

I can't go on to your other absurdities until we pin this one down.

I say again, corporations do *not* pay tax, consumers of their products and services (you and me) pay the tax in increased prices. Corporations simply *collect* taxes and pass them on to the Chancellor.

Example, some idiot puts a 'green' tax on 4-wheel-drive cars. The price of the car goes up because the 'corporation' needs to make the same amount of profit. If it goes up so far that people stop buying 4-wheel-drive cars, the 'corporation' ceases to make them, puts several thousand people out of work and shifts its capital into something that people will buy.

In other words, tax is merely an overhead, like rent, interest, wages, research, etc. The notion that somehow you can punish corporations by raising taxes is silly.

Liz said...

Carworkers can make other cars apart from 4x4s. I'm also aware that corporations pay little tax and the brunt of it goes to the public, which was in fact the thrust of my post (VAT is an example of such a tax). In my view the public should be taxed less and corporations pay more. Any tax not related to levels of income is inherently unfair. Prices should also be somewhat controlled so that they are not raised unfairly to make up for whatever tax the corporation is paying. But, as I pointed out, it is capitalism so any plan to punish corporations by massively increasing tax is probably not workable anyway.

Hence my scepticism about the whole thing - including green taxes which punish consumers rather than corporations.

David Duff said...

"I'm also aware that corporations pay little tax"

Liz, sorry to belabour the point but you obviously still do not understand - corporations do not pay *any tax at all* - not a cent! Corporation tax is simply another overhead and it is the *consumer* of the corporation's products/srvices who pays via increased prices.

This is precisely the sort of misunderstanding that is demonstrated by socialists time and again, and time and again they are surprised when a corporation, like HSBC last week, told the government that they were making the tax overhead so high they might consider moving operations out of the UK. Some people call this the Law of Unintended Consequences, I would prefer to call it the Idiots Law of Obvious Consequences.

If you want to use companies to collect more tax revenue then teh sensible way to do it is to *lower* corporation tax so that corporations from other countries, or home-based entrepreneurs, will be encouraged to start up here. Thus, you might be collecting a lower amount from each of them but there will be more of them to collect from! Also, the increase in competition will ensure that your fellow countrymen enjoy the best products at the keenest prices.

Perhaps, you are confusing corporation tax with tax on shares and dividends which is entirely different. By all means whack them as hard as you like but be aware that the pensions of millions of people depend on shares and dividends; also, be aware that in today's world there is nothing more fluid than money which can be switched out of the country literally at the speed of light.

Economics is like physics, for every force exerted in one direction, there is an equal and opposite force in the other direction.