Coppola Comment

It's been pretty quiet in Lafferland since the Brexit referendum. All the talk has been of trade and sovereignty, not deregulation and tax cuts. But there's nothing quite like a Tory leadership election to bring supply-siders out of hibernation. So here is Sajid Javid singing an old sweet song to attract the votes of Tory party members: Cutting tax rates could bring in billions of extra revenue, which would mean: More nurses 👩‍⚕️👨‍⚕️ More teachers 👩‍🏫👨‍🏫 More police 👮‍♂️👮‍♀️ "I would cut [top rate] if it brings in more revenue and gives us better public services" - @sajidjavid #TeamSaj pic.twitter.com/MxVUVcI5q2 — TeamSaj (@TeamSaj) June 2, 2019 Cutting taxes for the rich in order to generate more public revenue. The Laffer curve is back. Not that it has been absent for long, really. Seven years ago, to much applause, George Osborne cut the top rate of tax from 50% to 45%. When the cut took effect there was a large increase in tax take. ...

Are inheritance taxes unfair? Many people think they are. "Why should I be taxed twice on money I've earned during my lifetime?" they say. This is, of course, a fallacy. Dead people don't pay taxes. Living ones do. So inheritance tax is not double taxation of money the dead person earned while they were still alive. It is taxation of an unearned windfall for the people to whom they leave their assets, usually their children. Other forms of unearned income, such as interest on savings and capital gains, are taxed. Why should someone be taxed on unearned income they receive as a result of investments made from their own earnings, but not on unearned income they receive as a result of investments made from someone else's earnings? That doesn't look very fair, does it? Surely taxing that unearned windfall must be fair.  No. According to the economist Greg Mankiw, taxing inheritance is fundamentally unfair: From my perspective, the estate tax is a...

There is a great deal of confusion over National Insurance - what it is, how it works and what it funds. I have attempted to clear up some of the muddle elsewhere . But partly, it stems from the existence of something called the NI Fund. If there is a Fund, surely this implies that National Insurance contributions are invested? If so, those (like me) who insist that state pensions are unfunded are talking gibberish. There is indeed a NI Fund. But it is badly named. It would be more accurate to call it the NI Clearing House. It receives NI contributions from workers and employers, and it disburses payments to pensioners and benefit recipients. As long as NI receipts exceed pension & benefit payments, the Fund runs a surplus. But when pension & benefit payments exceed receipts, the Fund runs a deficit. When a clearing house like the NI Fund runs a surplus over a number of years, it builds up reserves. The NI Fund has significant reserves, mostly built up since the start of th...

One of the things that has emerged from the PQE debate is a suggestion that it is time to consider ending the Bank of England's inflation-targeting mandate. Unfortunately this got mixed up with calls for ending the operational independence of the Bank of England ( Richard Murphy ), or abolishing central banks (Bill Mitchell, stated in response to a question at Reframing the Progressive Agenda ). What we might call the "twin peaks" approach to macroeconomic policy-setting has been adopted the world over. Separation of fiscal and monetary policy, and independence of the central bank, have become the hallmarks of good practice. Many countries have also adopted inflation targeting, though not all have: a good many developing countries still target exchange rates, and are currently learning (painfully) that exchange-rate targeting doesn't work when everyone's currencies are depreciating madly due to commodity price falls. But the status of the central bank and ...

Last week I attended a conference on Shadow Banking at Cass Business School. One of the things that struck me in the course of the two days was the disconnect between those who perceive the shadow banking system simply as a deconstructed banking system that we don't yet fully understand, and those who see it as the primary means by which money is hidden from view for the purposes of avoiding taxation. In his excellent presentation on tax havens, Ronen Palan commented that separation of fiscal and monetary policy meant that central banks didn't concern themselves with the social effects of shadow banking. In his words, they didn't "join the dots". This post is my attempt to join the dots.  Much attention has recently been focused on the shortage of safe assets in the financial system. There have been proposals for creation of a larger supply of safe assets through issuance of more government debt ( Gorton , BIS ) or changing the tenor of government debt from lo...