From what I've been able to gather Cambo's basic plan is to reintroduce the transferable tax allowance for married peoples to encourage them - you know, to get married and stuff; the basic idea of transferable tax allowances is one I discussed in this post in a highly liberalised form as a bridge to yet greater liberty from the state, putting everyone in direct control of their finances and welfare whilst encouraging voluntary collectivism; all good things.
As a result the FT piece is pretty much a proto-fisk of my idea so let's break it down for posterity, particularly as, like Friedman, I'm in favour of tax cuts whenever we can get them:
British politics is obsessed with a silly row over whether the Conservative policy of “recognising marriage in the tax system” is affordable. This is an idiotic question. Anything is affordable if you are willing to raise taxes elsewhere or borrow to fund it.
Or, you coul not fund the particular activities that put government spending up needing higher taxes.
The only relevant issue is whether a transferable tax allowance (or other tax breaks for marriage) are a good idea. This important debate has been forgotten. Here are some reasons why transferable tax allowances are a terrible idea:- Simplicity. Transferable tax allowance further complicate the income tax system.
Further. complicate. the. tax. system? You know, he's right - the last thing we need is one extra page of legislation in the tax rule book which is already the size of the bloody phone book.Independence. Recognising marriage in the tax system undermines a woman’s (or a man’s) ability to keep her income separate from that of her spouse. Women’s legitimate irritation at being treated by the state as an appendage to their husbands was one of the main reasons the tax system became increasingly blind to marriage under the last Conservative government in the 1980s and 1990s.
Cept that, even the original transferable tax credit was transferable both ways.
Besides couldn't the same arguement be applied to the institution of marriage? The loss of (some) independance? The purpose of the tax credit itself enables one partner not to work so they devote more time to their family; from personal experience my wife has expressed a desire to go part time or even quit altogether so she could do just that. Could we finally put this pseudo-feminist rubbish to rest?Misunderstanding history. It wasn’t nutty progressives who got rid of the married man’s allowance and undermined the married couples’ allowance in the tax system. It was a combination of those awful lefties (Nigel Lawson, John Major, Norman Lamont and Kenneth Clarke) who were Conservative chancellors between 1983 and 1997. Gordon Brown took the last bit of the married couples allowance and called it the children’s tax allowance in 2001. It now has a new and horrible name: ‘the family element of the child tax credit’ and it is assessed on joint family income.
I'm not entirely certain what this has to do with anything; Bory's got rid of it so they can no longer suggest it in the future.Incoherence 1. George Osborne wants to get rid of the family element of the child tax credit - ie the one part of the tax system that is a remnant of the old married man’s allowance. In his 2009 Party Conference speech, he said: “We can no longer justify paying means-tested tax credits to families with incomes over £50,000.” This passage came just six paragraphs after he said: “That is why we are going to support marriage in the tax and benefit system.”
One of the current criticisms of the tax credit schemes is that as a means of supplying more money to "'ard up fam-il-ees" it does tend to give a awful lot of money to the middle classes - something that benefitted Blair in establishing the NuLabour dynasty which has screwed us all so royally.Incoherence 2. The standard argument for a marriage tax break goes like this. Children of married parents have better and more stable lives, therefore marriage is good, therefore the tax system should support marriage. While the correlation is true, there is no evidence that proves the causality runs in this direction. Only the most bone-headed reject the possibility that stable, well-meaning couples are likely both to marry and to raise children well. This wilful confusion of correlation with causation is really worrying in politicians that seek to govern.
Yes correlation and causation, it's a pity that most of the media and elites tend to ignore this arguement in other areas - Global warming must be down to CO2; the current financial crisis is down to bankers bonuses.Incoherence 3. Is the world really a better place if a couple who would have chosen not to marry decide to tie the knot because they would pay a little less tax? It strikes me as perhaps the most morally dubious reason possible for marriage.
Agreed; if only this logic would be applied to the benefits enjoyed by our burgeoning underclass of teen mothers, or the long term unemployed or sick, or even the terrorist apologist.It probably won’t work 1. This is pure conjecture, but I don’t think the elasticity of marriage to a tax break is likely to be very high.
Of course! Because a few measly quid is what drives people to spend thousands on weddings. Idiot.It probably won’t work 2. Politically, the Conservatives have already said that civil partnerships (between same-sex couples) will be eligible. Given this, it will be difficult to discriminate against cohabiting couples or even lone parents by excluding them from any tax break. The obvious unfairness that a married couple with two kids pays less tax than their stable cohabiting equivalent will cause a huge political stink.
My guess is that few cohabiting couples will care, being gouged for huge amounts of their income either way - all the more reason to completely liberate the system so everyone benefits.Income distribution. The beneficiaries of transferable tax allowances are single-earner couples who tend to be at the upper end of the income distribution. The policy is therefore a straight-forward redistribution from poor to rich. There is nothing inherently wrong with this - it is a political choice - but anyone proposing such redistribution must be honest about the consequences.
Labour supply. A transferable tax allowance is a straight subsidy of single-earner couples compared with two-earner couples. So those in favour of it must also be in favour of reducing the potential labour force. It really is something when a political party is insistent on getting more disabled and sick people back into work, so that they can pay taxes to allow rich mothers to stay at home.
Ah you see there's that cause and effect thing, this time being inverted - mothers staying home give rise to more nurtured kids who become more successful adults who become higher earners enabling wifey to stay home breeding more successful kids...and so on. Also Cambo's TTA would enable poorer couples to act in the same way as richer couples - why wouldn't Giles want that?
Also note the Freudian slip near the middle of this comment - "reducing the work force"? Won't go into the obvious repurcussions in somehow saying a stay at home mums somehow don't contribute to the economy; if we take that logic to it's conclusion we could get rid of all the public sector, producing no profits, nor the apparent belief that we are somehow obligated to serve our brethrin in the pursuit of some fascolist wet dream.
As for the other point, about this being unfair - fine, let's raise the tax bracket and enable everyone to transfer it a they see fit; I'm tired of politicos picking winners; they aren't very good at it and it disenfranchises us all- it is not their money to redistribute as they see fit; married and unmarried couples would be wise to remember this before any other fact.