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You want the poor to have more money? Well, doh! Splash the cash

It's really not that taxing

Paying welfare, lowering wages

So, it would seem that we're fine with just taking money off people, as much as they're willing to pay (yes, decided through tax) and then giving it to poor people.

Some of this, depending upon how we do it, leaks through into profit subsidies but the vast majority does not. We can also identify who is poor and who is not and give the money only to poor people. Looks like that might be about the best we can do.

I would also interject here with something that is purely opinion, as any moral point is obviously only opinion. Which is that if we say that the poor should have £X then it really is up to us, the people saying it, to cough up the £X for the poor.

Rather than saying the employers should pay it, the capitalists, or that prices should rise to cover the higher wage bill, or that a bit of inflation can hide it, or whatever other application of the magic money tree we might want to invoke, if we really do say that everyone should have £15,000 a year to live upon then we're the people who have to pay for it. Our choice, our cost.

But I accept that not everyone will agree there.

So, tax and redistribute is better than messing with the market. Just to give two real world examples. Sweden is a rather nice place to live. Eye-watering tax levels, certainly, a very redistributive welfare state. It's also a remarkably free market place underneath that: regularly beats the US on indices of how free market it is.

And it is indeed a nice place to live. Venezuela tried the messing-with-markets-route as a solution to the same problem of income inequality. And let's face it, today Venezuela is a shithole. Beautiful women and lovely people and gagillions of oil ... and an economic shithole.

Which brings us to our final problem. Tax and redistribution has its own problems. By taxing we make ourselves poorer (the levying of any tax stops some economic activity from happening, however glorious the cause we're going to spend the money on).

And our system of redistribution can be very cocked up indeed. The biggest worry is that the poor end up facing horrendous marginal tax rates as they interact with the beginnings of the tax system and the tapering off of benefits.

The UK's Budget each year details those facing high marginal tax rates. Well over three million facing higher than 60 per cent, hundreds of thousands over 80 per cent, and even some tens of thousands over 100 per cent. Going to work more hours costs them income, even before the extra costs of getting to work more often etc.

And yes, free market plutocratic running dog that I am I do continually point to the Laffer Curve. Tax rates can be so high that they discourage work altogether, thus lowering the amount of it done and reducing the tax take.

However, in our current society, given our current tax rates, that's not the preserve of the rich. Forty-five per cent income tax is, by some calculations, the tippy top of that curve (equating to about 54 per cent tax on income including employer NI etc, which is where Diamond and Saez put it).

But goose and gander stuff: a rate that's too high for the rich is also one that's too high for the poor. And that combination of the benefits system and the tax system does mean that it's the poor in our society who face the highest marginal tax rates.

Which ain't right, of course it ain't.

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