One of those ideas. We should tax inflation.
We did in fact do that. Through the 70s, companies were taxed on nominal profits not real ones adjusted for inflation. The return to capital fell to near 10% of GDP, not even covering depreciation and the entire productive base of the country was going bust. So, let’s not try that one again perhaps.
The specific proposal here is that government should set a wage rise it thinks is consistent with its desired inflation rate. Say, 3%. Anyone who then increases wages by 5% would have to pay a tax. The 2% that is over the target would be that level of that tax. So, a 5% pay raise would cost the employer 7% in the 5% wage rise and the 2% tax. A 6% raise would cost 9% - 6% wages, 3% tax and so on.
Sigh.
Firstly this is gargantuanly stupid because we are not in an economy static in form. Things change all the time. The demand for buggy whip makers falls, that for AI engineers rises. We therefore not just desire, hope for, but need wages to be flexible. It has to be possible to raise AI engineer wages to tempt them away from the joys of buggy whip making.
That is, the idea of government control of wages - even if indirectly through taxes - kills off the very point of having a market economy in employment in the first place.
It’s also ludicrous in that we all know how to get around such a limitation. We change the name of the job (AI engineer to AI senior engineer) and thus rerate the payscale. The NHS has been doing this with nurses’ pay for decades now. There’s the basic pay rise, yes, but then on top there’s the rise coming from years in post and then there’s the progression in posts and…..you get the idea.
But this is the bit that made us shriek with laughter:
Of course, one would need to deal with the administrative difficulties that come with any new tax and the inevitable problems of implementing such a scheme. But a government that delivered the much more complex furlough scheme during a lockdown should not allow itself to be deterred by teething difficulties.
The Morris Marina minds - OK, we’ll accept that some of them manage to rise to Austin Allegro - of the British civil service are to administer a complex scheme like this?
‘Ee’s ‘avin’ a giraffe.
We hire our senior civil servants from those who do classics, history and English. You know, the people who cannot count?
Just to remind everyone. Plans for running the country have to be simple because the people who run the country are simple. Nothing complicated like numbers or discretion can be allowed.