a. Richard Murphy does not believe in the existence of the Laffer curve, at all, in any circumstance. Empirical eveidence does not really interest him.

b. In order, as Compass/Murphy suggest, to raise the total tax rate on top earners from 34% to 55%, marginal rates well in excess of 60% will be required. Do you stick to your view that this is a sensible revenue-raising measure?

Here are a couple of progressive ideas I’d most like to see in the PBR
- a new focus on capital taxation, in particular on property. If it must be through Council Tax because Labour never grasped the nettle and changed it when they had the opportunity, then so be it. Who are all these people in the UK who own property equity worth £0.9 million (or even £0.5 million) but can’t afford a few thousand pounds of tax on their assets every year? I don’t believe they exist other than in the Daily Mail/ Express. And I struggle to understand how it is progressive to protect the owners of such assets from tax rather than those earning £20k with no assets
- some serious proposals to tackle inflation in executive pay. It is one of the most corrosive forces in our society, and far from being the product of market forces it is the product of a lack of market discipline and disfunctional institutions. Also, now is the only chance we will have to do anything about it until the next recession (which will probably be presided over by the Tories). New Labour has always exhibited a childlike fascination for and fawning attitude towards the rich so this is the last thing they will do anything about.

AJ – Thanks for your question. As you’ll see from my other comments, I agree with the totality of the Compass report except that (i) I would prefer the Lib Dem’s “Mansion Tax” to Compass’ council tax policy (this would avoid capturing the many people who have seen the value of their properties rise to c.£300k-£900k without any increase in income; and (ii) I would favour a domestic Tobin tax on currency transactions involving sterling, rather than on all bank payments (which would affect people receiving pay cheques or paying bill. What else would you like to see in the PBR?

You’re not setting the bar for success in the PBR very high.

On (1), it would be the turnaround of the century if Labour suddenly announced in the PBR that it considered the current projected level of deficits was a real danger and had therefore decided to accelerate the inevitable cuts in spending. That would mean Labour had started using Tory language, the probability of which I put at about 0 given both the main parties have settled into their respective positions across this dividing line for the forthcoming election. (Whether that dividing line is about anything more than language isn’t clear to me – nobody uses any numbers when they do their posturing on the fiscal position and when to tighten, yourself included.)

Reading this entry – and much else on the site – it does read a bit like a party line pretending not to be one. Do you actually support the Compass tax proposals, including where they run counter to Labour policy? What do you think of progressive proposals from parties other than Labour, for instance the Lib Dems’ proposal for taxing million pound homes?

I’m not arguing at all about the rest of the paper here (indeed, at one point on my blog I praise part of it. For they’ve used a proposal that the Adam Smith Institute has been pushing for years, that the personal allowance should be raised to the full time full year minimum wage, ie, £13k or so….although, of course, they don’t acknowledge where they got it from). Here I am arguing solely about the assumptions used to argue that the proposed rise in income tax on the top decile of families will bring in x billions of pounds.

Assumptions which are so far out of the mainstream that it’s entirely justified to question them.