Tax

[TheAnimus]

ah so its only people in NI who didn't vote for labour........ Thanks for clearing that up for me.

[neonplanet40]

Nope i didnt say that. What i meant was that people in Northern Ireland arent paticularly concerned about the politics in England because as you can imagine we have enough on our plates over here with the divolved government and their antics.

My overall point remains the same though.

Either do something about it or give over.

[TheAnimus]

Hexus political party?

[neonplanet40]

Sounds good to me. We could use our quad cores to take over the world

[Salazaar]

I guess everyone's all heard the phrase 'nothing is certain except death and taxes'.

While some of it is dubiously spent some times we're in no better or worse a situation than most other western nations. At least our MPs are only buying widescreen TVs and not marble clad palaces and private armies.

[TheAnimus]

i would have more respect for Gordon Brown if i saw him brandashing a gold plated AK47 every now and again, am i the only one?

(if someone wants to photochop gordon onto one of those pics of sadam, they'll get a thank user click )

[Salazaar]

i would have more respect for Gordon Brown if i saw him brandashing a gold plated AK47 every now and again, am i the only one?

(if someone wants to photochop gordon onto one of those pics of sadam, they'll get a thank user click )

Fear... Respect... They both get the votes in

[iranu]

But you put them in government. YOU put them there to achieve the goals you seen as best and yet YOU KEEP them in government even though they have neglected them goals. If you dont like them then why doesnt your nation as a whole get them out? Replace them with another government or form your own lol.

This is certainly very true, however, you have to look at within the context of people posting at Hexus who are more likely than not either educated or in the process of being so and those that work outside of government and it's agencies and pay taxes.

Take a hypothetical (local) government employee, lets say a bod who does those housing pack thingys (HIPS) that no-one wants but everyone pays £300+ for. Are they going to vote for a political party that is potentially going to put them out of a job? No of course not so it's within the interests of people who work for governments to vote for the party that is going to benefit them most. Labour has expanded the Public sector hugely over the last 10 years so they have a built in vote. Ditto for those that rely on the state for their income. So even if people do vote they are up against those that will always vote for the Labour Party.

I don't think it will make a difference at the next election because people are fed up enough to get rid of the present lot and good riddance. However, what you are seeing now is the frustration of people who will most likely have to wait another 2 years for the privilege of voting whilst in the meantime suffering under the present government.

[Blitzen]

This is just another one of them arguments about government. I live in N.Ireland its a bit different because i dont vote of labour etc etc and im moving down to the Republic anyway after univsersirty to teach.

But you put them in government. YOU put them there to achieve the goals you seen as best and yet YOU KEEP them in government even though they have neglected them goals. If you dont like them then why doesnt your nation as a whole get them out? Replace them with another government or form your own lol.

Its easy to just sit her and rant but at the end of the day thats all any of you's are doing and that is doing nothing worth note to the government.

If it was really THAT bad and THAT inconvienient you's would do more.

So yea the tax we pay is crap and the amount politicians get paid is utterly disgusting considering they do dam all. BUT UNTIL the people of the UK stand up and speak out against it as a UNITED front then its not going to change. The fact that it gets worse every year says something.

Sorry but you are wrong to blame it on labour.

This merry go round of getting stiffed by paying large taxes is not 'labour specific'.

Anyone that think things would improve under a different government are livng in cloud cuckoo land.

[neonplanet40]

I wasn't referring to labour exactly i just said them becuase they are the present government but i meant governments in general whether its conservative lib-dems etc. The people vote them in and can only have themselves to blame if they don't like what has happened.

But iranu i get your point. There will always be loyal supporters but as you said. people are getting fed up. Maybe a change would improve things? Or of course it could make them worse, who knows. I don't really mind tbh as theya re all the same. Maybe a HEXUS political wing isnt such a bad idea

[Saracen]

..... Taxes on booze, cigs, cars etc. are there to be disincentive to prevent pollution and health problems. .....

<Choke, splutter, cough>


I see the government PR spin is still working fine.

Take a look, Sim, at the principle of price-elasticity of demand. Any economist will explain it, but as I'm here, I'll have a go.

Some things, called 'price elastic' items, are very sensitive to changes in price. A relatively small increase in price will have a large impact on demand. Other things are almost immune to price changes. That's a 'price-inelastic' item.

Suppose there are two brands of crisps and the taste is identical. Both are freely available on the shelves in all stores (and pretend brand preference doesn't work), and clearly and prominently marked with their price. You genuinely don't care which brand you buy as you can't tell the difference. If one brand increases it's price, which do you buy? Right. A lot of demand will instantly shift to the other brand, because for all practical purposes, it's identical, and available. Why pay more for the more expensive one? That's a highly price-elastic item.

On the other hand, suppose you need a particular medication to stay alive. If the price goes up, will you stop buying it? Quite so. Price isn't the issue. That's an inelastic item.

Like any economic theory or principle, it's got problems and like any analogy, if you push it too far, it starts to creak and groan. But essentially, it holds true for many products.

Now think about tax revenue. If you tax inelastic products, the effect is to put the price up. And the fact that they are inelastic tells you in advance that demand will not change much .... or if it does, not for long. It might blip down, but then it settles back more or less where it was. So tax revenue rises, but behaviour remains essentially unaltered.

And when you're looking at the effect of a change in tax revenue from a tax change, you have to consider not just the rate at which that tax is charged, but the volume of items it's charged on. If you increase price and demand falls sharply, you'll actually end up with less revenue because 90&#37; of not much works out at less than 40% of a very large amount. Governments discovered that in relation to income tax marginal rates. If you hoist the marginal rate too high, revenue goes down because you remove the incentive for people to do the work in the first place if they give 90% of the rewards to the taxman. Or they just pack their bags and leave the country.

So ...... tax policy is determined by what works. And it's fair to say that you can deduce the intent from the action.

If you want to discourage smoking, or boozing, or driving, you don't regularly increase the tax rate just a little bit. You slap a whopping, swinging great increase on in one go. Cigarettes, booze and petrol are highly inelastic items, and if you want to alter behaviour, any rise has to be large enough to alter affordability. It has to be about whether people can pay it, not whether they're prepared to or not. They are things that people find it very hard to cut down on, either because there's often no real (or short-term) alternative (cutting your mileage may mean changing job), or because of a physiological addiction (like smoking), or just because it's something that people REALLY enjoy, like smoking and drinking.

So, when you increase tax on those items, you KNOW it'll cause a lot of whinging and moaning from the people, but you also know, especially if the price hikes are small and frequent, that it'll cause little change in demand. Revenue will go up because price-demand is inelastic.

Therefore, it's a fundamental tenet of tax policy that :-

• if you want to raise revenue, you raise rates on price-inelastic items, because demand will not change (or not much, anyway)
  
  
• if you want to change behaviour, raising tax will work for price-elastic items
  
  
• if you want to change behaviour on price-inelastic items, tax is not the mechanism. You have to use other methods.

The government are currently discussing proposals explicitly aimed at reducing the number of smokers, especially among kids. These include removing cigarettes from display in supermarkets, corner shops, etc. Also, perhaps, banning cigarette machines in pubs. Those are the kind of measures you have to use if the intention is to alter behaviour. Or, do that in combination with tax hikes so extreme that people simply can't afford it and have to change behaviour.

But feeding tax hikes into the price of those items, bit at a time, drip...drip....drip over time not only doesn't change behaviour (by much), but it is explicitly designed to not change behaviour.

In my opinion, the notion that tax rates hikes in booze, fags and petrol is aimed at changing behaviour is patently ridiculous. For a start, governments have been clobbering those items for decades, WAY before such health or environmental issues had any meaning. And they were doing it to those specific items (and a few others) precisely because of price-inelasticity of demand. Any suggestion that it's about health or environmental concern is a governmental smokescreen.

[usxhe190]

government = incompetent.

why? they never earned the money and they are too dumb to realise this.

[Gr44]

^ Yes, good post. Couldn't have put it better myself

( Saracens's )

[TheAnimus]

Whilst not something i find myself normally needing, i was appalled a few years back now when i had to buy tampons. There is VAT on them.

So no VAT on minichedders, yet VAT on tampons.

As well as been inelastic pricing, tampons (and things like condoms) are ment to have a certain brand loyalty because people don't like to shop around for them, its embrassing. As such people don't look at the price normally, instead blindly buying the brand they know.

[malfunction]

@Saracen - Thanks for the eloquent reply - a much better explanation than I was about to give when I read SiM's comments

[SiM]

If you want to discourage smoking, or boozing, or driving, you don't regularly increase the tax rate just a little bit. You slap a whopping, swinging great increase on in one go. Cigarettes, booze and petrol are highly inelastic items, and if you want to alter behaviour, any rise has to be large enough to alter affordability. It has to be about whether people can pay it, not whether they're prepared to or not. They are things that people find it very hard to cut down on, either because there's often no real (or short-term) alternative (cutting your mileage may mean changing job), or because of a physiological addiction (like smoking), or just because it's something that people REALLY enjoy, like smoking and drinking.

Sorry to say that you have wasted your time writing that long reply to "educate" me, but I have done more economics than you have unless you have done a straight BSc/MSc in economics

So are you saying a 60&#37; tax on inelastic good won't effect demand? Of course it will, not as much as an elastic good, but if it is not perfectly inelastic then there will be an effect. This is only part of their strategy the rest is a different topic from taxes, but they also regulate the supply amongst other things (which you mentioned too). I think you are assuming that these goods are more inelastic than they actually are...

Regardless, demerit goods will cause more problems if untaxed (or lowly taxed)... You think binge drinking is bad. It would be much worse with 50p pints. I think taxes on booze and cigs should be higher!
There are also negative externalities associated with these goods. Private individuals usually do not factor these into their consumption decisions so taxes are there to fix this.

They are things that people find it very hard to cut down on, either because there's often no real (or short-term) alternative (cutting your mileage may mean changing job), or because of a physiological addiction (like smoking), or just because it's something that people REALLY enjoy, like smoking and drinking.

Tube/train/bus...?
Smoking can be cut down with a little will power. There is also free NHS support to aid this too and its quite successful if you actually do it.

To summarise: taxes are good (I will be a higher rate tax payer in 3 months). Trust me, I'm an statistician (and part time economist)