Friday, June 06, 2008


Vehicle Excise Duty or Car Tax is the annual fee for putting your car on the road. At the last budget the Chancellor doubled the tax on the cars with the greatest carbon emissions. It was already higher for new cars, but he has extended the tax to all cars up to those that are 6 years-old. Now I should declare a non-interest in this in that my cars are respectively 8 and 17 years-old and won't be heavily taxed, but it does seem to me unfair to retrospectively tax someone for a decision made 6 years ago. It is also a strange decision for a Labour government since poorer people are likely to have an older car, and previously the tax weighed more heavily on those rich people who changed their cars every couple of years.

There are two reasons for taxation. The first is to raise revenue for goods and services we have in common: the Armed Services, public buildings, schools and hospitals, the police and prisons etc. On this basis the fairest taxes are those which insist that those who have more pay more. Income tax is the best example.

The second reason is to change behaviour. Years ago we had a purchase tax of 33% on luxury goods. Since most luxury goods came from abroad, this not only helped the trade deficit (since it discouraged spending abroad) but also concentrated our minds on buying essentials rather than fripperies. Now we have VAT which adds 17.5% to the price of everything except food, children's clothes and educational materials. This is a little more unfair since it taxes essentials that even the poorest must have like domestic heating and transport. The best examples of taxation to change behaviour are taxes on tobacco and alcohol. There is clear evidence that the more expensive cigarettes are the less they are smoked. In the past there have been attempts to discriminate between different types of alcohol. Wine has been heavily taxed (foreign and drunk by the middle classes), but beer (the working man's tipple) and whisky (Gordon Brown is Scotch) less so. Now the booze culture is getting out of hand and the last budget raised taxes on these significantly. The rise in VED is an attempt to make is use cars that produce less CO2. Oil at $135 a barrel is already doing that, but some 53% of the cost at the pump is government taxation. It doesn't carry much weight at OPEC when more than half the oppressive cost of fuel amounts to taxation.

I do not buy into anthropogenic global warming. The world seems to have been cooling since 1998 and if its true that there were grapes growing in Greenland in the Twelfth Century, the theory seems shot with holes. I do believe in markets, though. What is happening just now is largely caused by panic in the futures market creating an oil bubble just as we had a property bubble last year. The oil price will collapse and speculators will get their fingers burnt as usual. By that time the originators of the bubble will have got out of the market. Here's a warning: don't invest in this market; it is already too late.

Nor do I think it worth converting my car to LPG, which is 50% cheaper than petrol and only 15% less efficient. At today's prices it would take me 6 years to recoup the investment. It might make sense if you can pick up an already converted large car that is guaranteed to last, something like a Mercedes, or if you were given such a car it would probably be worth spending the £1750 on the conversion (less if you can do it yourself).

In the meantime why not tax things that it would really be desirable to stop: a large tax on pointed knives, for example, or a much greater tax on vodka-laden soft drinks, or a tax on having a baby if you're not married (instead of the incentive of a local council-provided two bedroom apartment), or a tax on the take-away food wrappings that comprise so much of our street litter. What would you like to tax heavily? I welcome suggestions.


Anonymous said...

Here in the USA, more taxes are aimed more at 'social engineering" than 'economic engineering", or so it seems.

If I thought that "sin taxes" really worked I'd be more enthusiastic, but i wonder how much they pump up the underground economy? On the other hand, perhaps taxing drugs (after legalizing them) and weapons and the like more heavily might generate more revenue and pare down their use.

I don't know how it's done in the UK, but in the US the "tax code" gets ever so complicated as politicians bend their ear to lobbyists (though our constitution does grant the lobbyists the right to do what they do) and try their hand from time-to-time at social engineering or vote collecting via taxes.

My wife's grandfather used to say that the proper missive was "don't tax him, don't tax me, tax the guy behind the tree". I think he captured the spirit of how many people feel about the necessary but ugly burden of paying taxes.

I agree though, that using government subsidies to support bad behavior is a bad idea and that some sort of extra tax penalty applied to such behavior makes sense...probably not to the politicans, however.

Have a good weekend,


Burke said...

Why should people who produce more have to pay more in taxes? Why is it "fair"? One can argue that they get more from govt and should pay more, but that's not what Dr. Hamblin seems to be advocating. He thinks it should be to advance supposed social goals.

But sacrificing individual rights to advance social goals is what socialism is all about, isn't it?And socialism is just another kind of slave society, one that forces the productive to spend their lives in servitude to the unproductive.

Terry Hamblin said...

Those who own more require more protection from the police and have more to lose from enemy action and therefore have more need of the army. They have a greater stake in an ordered society. They should pay more for that. But then consider whether you want to live a life in splendid isolation, somewhere in the mountains of Montana. Do so if that's your ideal, but most of us prefer to live in a society, and that means sharing.

I'm all for small government, but not if that means mafia rule. There is a minimum of protection and regulation that we all need and it has to be paid for.

As a relatively rich person I get more pleasure in helping those who are in need than I do in buying things that I don't care about or objects that give me a thrill for a short season. Of course I don't like paying scroungers and layabouts, but as I understand the Christian faith we should remember the widows and orphans.

Burke said...

In response to my comment, Dr. Hamblin wrote,

"...but as I understand the Christian faith we should remember the widows and orphans."

A view to be mandated by govt force?

When Nikita Krushchev visited the U.S. in 1959, he shocked the good Christians here by stating that communism puts the precepts of the Bible into practice better than capitalism. The
novelist/philosopher Ayn Rand wrote that God and capitalism don't mix.

I think they were both right.

And I can't forget Dr. Hamblin's first blog after he retired in which he recited several abuses and stated that he was so happy not to be working for the NHS anymore.

If socialized medicine works so poorly, why should we think a completely socialized society should work any better?

Anonymous said...

Yes, it's nice to remember that charity freely given is driven by philanthropic impulses, not stolen by the government as spent as the liberals would have it.

I do differ with you in that it is the poor who are more often victimized, and thus need assistance from the police than those who are relatively well off.

Or are there not slums and poor neighborhoods in Britain?

Terry Hamblin said...

The poor are certainly more often victims. Why is that I wonder? Could it be that they live in areas where the police are less concerned for their well-being? I have several working-class relatives. I am often astonished by the disdain with which the police treat them compare with the respect that they show me. Perhaps because of the fact that I pay more towards their wages than the poor do?

For most of the well-off the civil system that they pay for works well; not so for the poor.

Marxism was another Christian heresy, of course. Karl Marx, though Jewish, was the son of Lutheran parents. He wrote in the context of Victorian England when unrestrained Capitalism had brought misery. Read Charles Dickens to see what life was like.

Communism has proved to be a busted flush. Governments can't run anything properly - certainly not a health service. Neither can you enforce equality on people.

Capitalism is certainly the driving force of Western civilization. It was also the driving force of the Mafia. Without regulation it just becomes a protection racket. Too much regulation stultifies it.

The heart of man is desperately wicked, I'm afraid. If I believed in the inherent goodness of mankind I would be content to let things run. The American legend of the Wild West is the story of unrestrained Capitalism. There is a strong link from the OK Corral through Eliot Ness to Enron.

Burke said...

Dr. Hamblin writes,

"The American legend of the Wild West is the story of unrestrained Capitalism."

Not really. This is a common socialist myth, one of many similar ones. Capitalism is the absence of govt force in the economy. Virtually every abuse laid at the the hands of capitalists has really been some using govt force to get advantages others didn't have, which is not capitalism. The railroads practically owned the California legislature, for example, and were corrupt. But that's not capitalism. Some railroaders succeeded honestly.

Saying that capitalism should be "restrained" is saying that some should deal with others by force rather than trade.

You should read some Ayn Rand, Dr. Hamblin. She may change you mind about a few things.