Working in free market economics can sometimes feel as if one is merely writing footnotes to an 18th century Scot. Pretty much anything worth saying has already been written by Adam Smith, and often all that we can do is collect some more evidence, quantify the effects that he predicted, or apply his wisdom to the modern world.
Maybe that explains some of the wilder economic theories of recent decades; some people will write anything, no matter how daft, just to try to be original.
But in my field of tax, it turns out this feeling that it’s all been said before is even older. Never mind the 18th century; the basic economics of business tax was summed up in the 1500s:
“Taxes and imposts upon merchants do seldom good to the King’s revenue … the particular rates being increased, but the total bulk of trading rather decreased.”
That was Sir Francis Bacon, lawyer, politician and scholar under Elizabeth I and James I, credited with being one of the founders of the enlightenment, scientific method, the modern approach to the common law, and America.
As with Smith on economics, what more is there to say on business taxation that does not merely expand on what Bacon wrote over four hundred years ago? If you tax something, you have less of it. If you tax business, even though the Treasury may see a direct benefit, the indirect effect is that the whole country is made poorer.
It sums of most of the few things we know for certain about tax. What matters isn’t who actually pays the tax and how much is collected, but what the wider effects are; what economic problems does the tax cause and who bears the cost of those?
And Bacon had grasped a fact that seems to have eluded many campaigners today; different taxes have different effects, and taxing businesses is one of the most economically damaging ways for a government to try to raise revenue.
With business tax, we know that the vast majority of the burden of the tax falls not on business owners but on workers, as higher taxes result in less investment into business, and therefore fewer jobs are created and those that are tend to be less productive and so lower paid.
Second order effects, the incidence of taxes, endogenous growth theory, the Laffer Curve, negative externalities, optimal tax theory; the phrases weren’t invented but the concepts were all there in one paragraph, in the writings not of a modern academic but of an Elizabethan courtier.
Still, at least in tax the work was only done four hundred years ago. Pity those negotiating post-Brexit trade deals, where the definitive treaty on international trade was signed eight hundred years ago:
“All merchants shall have safe and secure exit from England, and entry to England, with the right to tarry there and to move about as well by land as by water, for buying and selling by the ancient and right customs, quit from all evil tolls”
Magna Carta of course. That’s import duties dealt with as well; is there anything left to write about?