Monday, 16 January 2017

Oh This Is So Ludicruous

Over the weekend, the consistently clueless Nicola Sturgeon bemoaned the possibility of a post-Brexit UK being a 'low tax, de-regulated' economy; and then on Sunday's Andrew Marr Show, Jeremy Corbyn lambasted the Chancellor's consideration of making post-Brexit Britain a tax-friendly nation in competition with the EU if we don't get a good deal (most prominently by drastically cutting corporation tax).

When are people like Corbyn and Sturgeon going to learn some of the basics - that low tax, lightly regulated economies are exactly the kind of economies that see prodigious economic growth by encouraging more outside investment, and by making it worthwhile for entrepreneurs to work hard in our nation?

The reality is, they are getting their reasoning backwards: what they think would be doom and gloom for Britain would actually be a liberatingly positive thing. Take corporation tax. While it would be better if it was removed altogether (as I explain in this blog post), cutting it would be a significant step in the right direction because it would make the vast majority of the population better off (including the working poor). 

The reason why is easy to understand for anyone who understands economics, because the issue is all about who picks up the cost of corporation tax. Quite simply, the burden of corporation taxes falls either on the employees of the company, or on the customers, as shareholders will see to it that the cost is not borne by them. Company profits are revenue minus expenses, and there's no way the shareholders are picking up expenses they can pass on to others.

Alas, due to the fact that much of the electorate believes the same thing about tax and regulation as Corbyn and Sturgeon, there is almost no selection pressure on these politicians to grasp the fact that a tax-friendly, more lightly-regulated economy will not only help Britain thrive, it will help the economy grow to pay for the services they are saying are 'in crisis'. Corbyn and Sturgeon, by contrast, want to preside over an economy in which neither of those things happen.