From the TUC

4 Responses to Web links for 22nd April 2010

  1. Tweets that mention Web links for 22nd April 2010 | ToUChstone blog: A public policy blog from the TUC —
    Apr 22nd 2010, 7:40 pm

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  2. Tim Worstall
    Apr 25th 2010, 4:44 pm

    “I don’t accept the argument that ordinary consumers will lose a lot under a financial transactions tax – even if the full cost of the expected revenues of $400 billion a year globally fell on consumers in the developed world, and in practice nothing like that much would be passed on, it would not be a huge burden individually.”

    1) Given some 1 billion rich world consumers it would be $400 a year each. so you should perhaps ask people “would you like to pay $400 a year to end poverty” instead of pretending that bankers will magically pay it all.

    2) As people have been desperately trying to point out to you, the burden of the tax will be larger than the amount raised in tax. So the real question you should be asking people is ” Would you like to pay $800 (or $1,200, or $1,600, depending on the size of the burden) so that $400 can be spent on ending poverty?”

    You’d get rather dusty answers to both questions….which is of course why you don’t dare ask them.

  3. Owen Tudor

    Owen Tudor
    Apr 25th 2010, 10:49 pm

    Tim, “people” haven’t. Only you. And only you have made the imaginative leap from “some of the $400 billion raised will be passed on to consumers” to “all of the $400 billion will be passed on to consumers”.

    The incidence issue has been addressed at length by others in the campaign. We believe that little of the amount raised by an FTT will be passed on to consumers, and that far less will be passed on under an FTT than under any other way of meeting the cost of climate change, the cost of meeting our existing commitments about global poverty, and shrinking government deficits. The question therefore isn’t “would you pay x to achieve y?”, but “how would you prefer to pay your bill, and would you like the extremely rich people at the table to be made to contribute rather than legging it for the exit as they usually do?”

  4. Tim Worstall
    Apr 26th 2010, 6:12 am

    “Tim, “people” haven’t. Only you.”

    You need to read around a little more. Giles Wilkes for example.

    And you’re still missing the point that is being made. Tax incidence isn’t just about whether taxes are “passed on”. It’s about what changes in behaviour take place as a result of the tax and how those changes in behaviour affect others.

    As I’ve pointed out several times a tax on liquidity will lower liquidity. Lower liquidity will lead to wider margins. Wider margins will mean everyone using the financial system pays more for said use.

    This isn’t some weirdness that I’ve thought up. It’s there in one of the source documents referred to by Richard Murphy in the TUC document on the RHT. It’s there in the second document he wrote for you as well. Both times referring to the FX market.

    Spreads on an FX deal can be 0.5 to 1 bps. Add a 0.5 bps tax and spreads will widen. If they widen to 2 bps then everyone is paying not just that 0.5 bps tax they’re also paying that extra 0.5 to 1 bps in extra margin.

    The cost to consumers of the tax will be higher than the amount raised in the tax itself.

    Now it’s possible that spreads won’t wide. It’s possible that they will widen more than this. But this is the sort of detail which will determine whether it’s an efficient method of raising money or not. And it’s just not a question that any of you have addressed in the required detail.

    All we’ve had is that some years ago spreads were 4.5 bps so if they do widen we’ll just be where we were a few years ago. True, but ignoring the point that the tax now costs consumers 8 times what is raised in tax revenue.