I’ve been reading Richard Murphy’s book, “The Joy Of Tax” – subtitled ‘how a fair tax system can create a better society’. Let me start by saying I am entirely sympathetic to this message. The low-tax boors, usually backed by think-tanks funded by very rich and very anonymous men, are one of the major groups creating our fractured society, and there is a real need for them to be taken down. We can’t run a decent society without tax, and the arguments that progressive levels damage the economy are weak.
Mr Murphy is an accountant on the side of the angels. He dismisses the argument that low taxes give people more choice – or that people do not consent to taxes at elections. The book takes a hard look at the various evaders and avoiders, and finishes by listing the measures that need to be taken to ensure we run a better society with everyone chipping in appropriately. That’s good. There are plenty of people criticising the way the world is, and few explaining how to make it better. (In passing, another is, or was, Prof. A. B. Atkinson – https://en.wikipedia.org/wiki/Tony_Atkinson – whose last great book on “Inequality” not only bust the myths on the subject, but explained how to fix it). The old criticism – “I know what you’re against; now tell me what you’re for” – could be directed against controversialists on both sides of most current debates. Good to see colours nailed to masts here.
However (yes, you were waiting for the big but, and here it comes), the book could have been so much more effective. This is because Mr Murphy makes mistakes of omission, and of commission.
Firstly, the mistakes of omission. Any book that wishes to effectively sponsor a progressive role for taxation and public sending needs to face up to the charges that the Tories, Republicans, the IEA, Adam Smith, Freedom and other institutes and parties make against it. Murphy doesn’t really do this. There is no rebuttal of the idea that public management is inefficient, compared with the lean practices of the private sector. You’d have thought there are enough examples around to rebut this – from the water and rail companies to the excesses of the banks – but Mr Murphy is mute. Nor is there much mention, let along contest, of the idea that higher taxes damage economic growth and wealth creation, apart from a chart that shows that richer states have higher tax rates. And the common view – wrong, but popular and common – that raising tax rates actually doesn’t raise the tax take because of the deterrent effect on effort (and effective evasion) is also not covered. This 300 page book, which aims at explaining tax policies to the common man, does not have Laffer in the index. Nor is the weird idea of public spending ‘crowding out’ productive private investment, the idea that Thatcher and her crew used to justify cuts in the recession of the early 80s, given the kicking it deserves – or any sort of kicking at all, actually.
The National Debt should also be discussed, rather than brushed over in passing. It’s salutary to know that much of the debt that was used to rescue the banks in the 2009/10 period was simply conjured up, rather than ripped from the hard-working taxpayer, but there’s more to the debate than that. Our children will not have to pay off the National Debt, and we have not come anywhere near to frightening off investors with government profligacy. The way to pay the Debt down is to expand the economy, not contract it: that is the way we dealt with the World War II debt (as described in earlier posts).
The mistakes of commission are in the presentation of his ideas. If you assume (a fragile assumption, maybe) that the aim of the book is to persuade some tax sceptics that society needs a broader and fairer tax base to run better, the argument must be shaped to attract those views. Yet the early chapters basically argue that tax receipts are the government’s money, not yours. This may be legally true, but it’s a view that your moderate conservative will find unappealing. What’s more, you can make a better case by representing public spending as a process providing goods and services on your behalf, than by saying it’s not your money really anyway. It would appeal both to people’s selfishness – you’re getting a great deal for health and security, much better than you could get individually – and to their altruism – how great it is that you contribute to the old and disabled, ensure there are no homeless, defend our nation effectively, educate kids of all classes, races and religions together.
A minor point – I also question whether we needed the detour into what’s known as Modern Monetary Theory – the idea that banks and governments can create money costlessly, with little risk and without using the process of deposits and re-lending known from traditional textbooks (like the one I wrote). It may be partly accurate to say that banks can just print money, so we don’t need to make choices between public priorities, but to the average Joe it’s an argument that looks like Emperor’s clothes, or a way to do what the left is frequently accused of, unrealistically believing in magicking money from nowhere. It also doesn’t explain bank crashes very well, and the need for liquidity reserves, very well, or at all.
The book ends with a Budget Speech incorporating Mr Murphy’s ideas. It is well worth reading, especially as it has been written by an experienced accountant who knows the ins and outs of company behaviour. The proposals are radical and innovative. However, he describes what is at least a five year programme, and it would be better presented as such.
Don’t get me wrong. I think this is an important book, and one that should be read by anyone interested in the management of our society. Perhaps I’m criticising a different book, one for a different audience of non-converts. If I am, all I can say is that such a book would be even more valuable, and might even sell more. Maybe I’ll write it. As soon as this pub closes ….
Grumpy Wisdom 