Plucking geese – some musings

A Frenchman (whose name escapes me) once said something like: “A good tax system is one that plucks the goose with the minimum of squawking.” My suggestion is that we should leave the corporate goose its feathers.

Consider that this is an economically active goose. She will certainly pay rents and taxes (on land, on property and on labour in the form of wages) in the country where she lives. She will pay consumption tax on the grain she eats and she will pay sales tax on the value of the eggs she lays.

Better yet, whether she is a stockmarket listed or privately owned goose, she will pay a share of her profits from the sale of her eggs to investors. They will in turn invest the income in other geese, so creating more jobs. Or they will pay tax on it when they spend it.

She might also reinvest some of her profits in R&D, creating bigger, better, healthier eggs. The grain growers will employ more people to serve grain to the hungry goose and will pay consumption tax on their inputs. While the consumers of eggs will spend money on the equipment necessary to prepare eggs in numerous ways.

All in all the goose will pay its way several times over during its lifetime without needing to shed a single feather. And when it gets old and inefficient a corporate fox raider will buy the carcass and break it up to sell for glue, gravy and duvets.

Currently companies in many countries find it is easier (cheaper) to squeeze more out of a smaller workforce than to recruit flexible workers to take some of the strain. That is partly because many states seem to regard business as another arm of social security. It is also because most states think seem to think taxing the creators of jobs and wealth is just as efficient as taxing earnings and consumption (even though consumption taxes are harder to avoid and encourage much needed saving).

If governments (of whatever political persuasion) really want a thriving economy, with job creation and wider prosperity, they would do well to scrap corporation altogether, and other taxes hindering start-ups. At the very least, they should cut employment taxes so as to reduce the marginal costs of employing more people (while also reducing the pressure on existing employees). Currently they seem intent on strangling every goose they can find – sometimes before they have hatched.

If the UK does not do this someone else will and they will gain a huge advantage.

Note: this is a revised version of a comment I originally posted on the Economist website in  May 2010.


#DevoMax – good enough for Scotland, good enough for England too?

Interesting article (many valid points) but why did @Frances_Coppola say: “Wales and Northern Ireland would still be represented [in the Westminster Parliament], although there would probably need to be fundamental changes to prevent them being swamped by the dominance of England”?

Why do we draw this distinction between Wales, Ireland, Scotland and the rest of the UK? If someone claims to be English and demands fair representation for the English, they are roundly derided as little Englanders and xenophobic. Yet when someone in Scotland, Wales and Ireland says they are Scottish, Welsh or Irish and demands the same they are applauded as proud, independent people. Nationalism seems to be considered acceptable beyond the English border but not in England.

Yet there are no major genetic, racial, facial, or ethic differences between most of the people living in the UK. This whole debate about nationalism is founded on a nonsense notion that there is still a clear distinction between various local tribes. Even if there were, there are probably as many so-called Scots, Welsh and Irish living in England as there are so-called English in the rest of the UK. But if one group of people is permitted to demand self-determination, surely all should have the same right.

Now let’s look at the East of England: population 5.3m compared with 5.1 in Scotland. We are as homogeneous as the population in Scotland – we even have a proud history as a once independent kingdom (OK not since 917AD) and a rather independent state of mind (the unofficial motto of Norfolk is ‘do different’). Why shouldn’t we have equal representation and control over our destiny as people in Scotland – #DevoMax even?

Time perhaps to abolish all the district and county councils in the region and have an East Anglian parliament instead. We could build it between Bury St Edmunds and Thetford – our ancient capitals. By reducing the number of politicians and paying them a professional salary we might even reduce bureaucracy, improve efficiency and increase accountability – while attracting a higher calibre of candidate.

PS: As far as I can tell, I have a fair mix of Welsh, English, and Irish ancestors (as well as a few from the ‘kingdoms’ of Yorkshire and Lancashire) – so what does that make me? I think the answer is British.

Finally, one politician talks straight about the EU

David Miliband, writing in the FT (14 November 2011), has called for a new approach to Europe while excusing the failings of the past by saying: “Every political system is a balance of efficiency and legitimacy.”

Yet, the EU could have had sufficient amounts of both efficiency and legitimacy: if national politicians and EU commissioners had been more honest from the start and had admitted ‘ever closer union’ meant exactly what it said; if they had had the guts to take the (good) arguments for the EU (particularly the single market) to the people; if they had been prepared to listen to the concerns of the people rather than dismissing them as stupid or bigoted.

With good democratic leadership, rather than bullying and insults, I believe that the EU would now be stronger, fairer, more integrated and more at peace with itself. Instead, many people (not just in the UK) feel they have been lied to and ignored for too long. As a result, the EU has managed a dismal double-fault – that of squandering both efficiency and legitimacy.

Today, with the project facing ruin, Angela Merkel has finally had the courage of her convictions (or honesty bred of desperation) to tell her people what was obvious all along (but often denied by many europhiles as merely eurosceptic scaremongering): “The task of our generation is to complete economic and monetary union, and build political union in Europe, step-by-step.”

It doesn’t come clearer than that. Now let’s get on with the job – but with the people not despite them.