The NIMBY Tax

Nimbyism (Not In My Back Yard) is a pretty well documented phenomena. While people may be broadly in favour of wind farms, a third runway at Heathrow, badger culling, or nuclear power, general support turns quickly to vehement rejection when people find out the new Sellafield is going to get built at the end of their road.  A couple of recent newspaper articles seems to indicate Nimbyism has now found its way into the tax/spending argument.

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In a BBC documentary produced towards the end of last year a selection of people around the cities of Britain were interviewed on their opinions of their own social situations and on who should pay more tax. The answer was almost universal; everyone thought they were struggling and paid too much, and they all thought the people in the next bracket up should do more.  This view was repeated (albeit with increasing eloquence) from the £8,000 / year part time supermarket lackey to the £80,000 a year professional financial services managers. The only people to offer an alternative view were the super wealthy (i.e. multi-million annual income) for whom taxation was, by their own admission, "entirely voluntary." Interestingly the super-wealthy seem split between those who really do pay their full tax bill out of a sense of social responsibility, and those who don't pay anything and avoid talking about the issue.

Although at the time this didn't elicit much from me aside from a slightly exasperated sigh, a recent Daily Telegraph article interviewing a financial services professional earning 'high 50,000s' made me reconsider this issue.

Sometimes "people" think things because they are narrow minded, ill informed, media led, naive, or otherwise lacking. Particularly in the field of politics instinctive and emotional reactions to the main political parties seem to triumph over reasoned argument or policy specifics. Rarely however, the national zeitgeist actually gets it right. I think this might be just such a time.

As I've said for a long time everyone really does pay too much tax.

As the BBC and DT have shown, people are even starting to realise this, although its a slow, slow trudge up the slippery slope of realisation. (Just as a thought experiment on this imagine you earn £18,000 per year gross, pay student loan deductions, and save £100 per month - how much do you pay in tax? Answer at the bottom). Unfortunately we aren't out of the woods yet however, people still misunderstand why everyone is paying too much tax.

To try and illustrate this I'm going to resurrect my intrepid islanders who seem to have been unexpectedly popular; Spike, Timmy and Jonny. They are joined in their tribulations this time round by Sammy and Andy.  Rather then create another island I've set this one in a frontier village (this gets a bit complicated by the end so bear with me).

Timmy, freshly reincarnated from his island-based doom, arrives on the frontier first and picks out the best land for farming. Using his tools, knowledge and start-up funds he builds a farm and becomes not only self-sufficient but surplus producing.

Second along comes Jonny, he's heard there’s good farming in these parts and also sets up his own fields and orchards. He's not quite as capable as Timmy, but he still gets by and makes a small surplus each year.

Next comes Sammy. Sammy can't farm, but he's got useful skills (let's say blacksmith). So rather then setting up a third farm he becomes the village smith. He charges Timmy and Jonny for his services, and since they can only pay him out of their surpluses he is the poorest of the three, however, the farms both become more productive because of the repairs and improvements Sammy can make to their tools, and in the winter the two farmers both put aside some of their store to help the smith.

Fourth is Andy. Now Andy doesn't really have any skills, he can't farm, he can't smith, he can't thatch. But... he does have some fighting experience.. so what happens?

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Zero out of ten if you said anything involving police, army or anything else 'happy liberal'.

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Andy of course takes over. Threat of violence is the basis of all state authority, and one guy with a sword is a pretty big threat to two farmers and a smith who has to get bailed out in the winter. Andy gets both of the farmers to pay him a part of their produce each year (more from Timmy since he has the better farm), and gets Sammy to build and maintain his house and equipment.

We now have a functioning mini-economy. We have two producers (Timmy and Jonny), a service industry (Sammy), a welfare state (Timmy and Jonny helping Sammy out in the winter), taxation (anything Andy takes), and a government with an army (Andy).

Now along comes Spike.

To start off with Spike goes to work for the farmers, after all with the need to support Andy and the new tools from Sammy, they can make use of the extra hands, so Spike goes to work. Any initially this works, both of the farmers make bigger surpluses, give some to Spike, some to Andy and make some extra themselves. This is how an economy is supposed to work - each member increases overall productivity, and that extra production gets split between the various stakeholders.

But then Spike gets bored and decides he doesn't actually want to work for the farmers anymore, and he can't work for Sammy since he doesn't have the skills or abilities to help out in a forge. So instead he goes to Andy, and he tells Andy that if Andy doesn't make sure he continues to get his share of the farm output he's going to help Timmy, Jonny and Sammy throw Andy out.

Andy, believing this to be credible threat (four against one is starting to get a bit hairy), agrees to give Spike some of the produce he takes from Timmy and Jonny. Of course, in time Andy decides he doesn't want to give up his own standard of living so Timmy and Jonny will just have to cough up more in tax, and Sammy is just going to have to maintain Spike's house as well as Andy's.

We've now got through to something, that seen at a distance and in dim light, is a super rough approximation of the current economy. In particular a significantly sized class that isn't government, doesn't work, and use the threat of overthrowing the government to keep itself supplied at the expense of the rest of the society.

A bit later Timmy, Jonny and Sammy met up in whatever passes for a pub in my 5 man frontier town. Timmy complains that he has to give up more from his farm then Jonny has to give from his, and Jonny should do more to help. Jonny in turn complains that Sammy isn't get his tools fixed fast enough and he needs to do more to fix up equipment faster and to a higher standard. Finally Sammy complains that he is getting less for his services because the two farmers have to give most of their surplus to Andy and Spike now, and so he is having to work faster, and do more, but he is getting paid less.  The three all go round in a circle blaming one another, or occasionally blaming Andy for taking so much off them.

Spike meanwhile, lounges on, doing no work, paying no tax, but indirectly causing all the problems of Timmy, Jonny and Sammy.

I'm not going to end this one with actual mass death. (Though obviously the solution is a Timmy, Jonny, Sammy uprising, kicking Spike out (possibly of the land of the upright and breathing), and requiring Andy to actually do something in exchange for his share of the farming output). Instead I'm going to link this back to my original point about Nimbyism.

Everyone really is paying too much tax.

The problem isn't the tax, or the government, or other taxpayers (all of whom are paying tax as well).

The problem is everyone and anyone who wants something for nothing in the form of state support. To whatever extent you want the country to provide healthcare, education, defence, roads, bin collections, pensions and so on, your Spike.

Welcome to the welfare state...


/Z


EDIT: In answer to the 18,000 question, the maths goes something like this;

£18,000 gross,
Income tax, national insurance and student loan is deducted at source leaving;
£14,574.04
You presumably live somewhere and therefore pay council tax. The average council tax bill for 12/13 in England is £1,201, leaving;
£13,373.04
Let's say you drive a car, that's probably £60-80 a year in VED, plus about 50% of your cost of fuel. Some serious guesswork later (average 10 miles per day at 25 mpg) implies an annual fuel bill of, at current prices, £900, or £450 in tax, including tax say £520;
£12,853.04
Now take out the £100 a month saving (£1200).
Means your disposable income is about;
£11,653.04.
But of course you get taxed on that as well, I'm not going to run the whole thing out but an average VAT of 20% would mean a final post-tax spending power of
£9,322.43.
Adding your savings back on (since you do get to keep that for now)
£10,522.43.

So your total tax bill, after consumption, on £18,000 is about £7,477, or 42%.

All You Can Eat

Sometimes small issues give a better insight into the opinions of the masses then grand events. Everyone is becoming increasingly jaded with politics, and most people are so woefully unaware of economic theory (much less reality) that opinions are little better then 'a man in the pub said'. But when some trivial matter comes to the nation's attention there is an unfettered ability to see and hear what people think without any macroeconomic or geopolitical ignorance coming into play.

The issue that caught my eye today was to do with a two men and an 'all you can eat' Mongolian restaurant. The advertised deal was simple; you paid a set amount (£12 I think), and you could then supposedly eat all you wanted from a buffet. By implication it seemed that you could get a jug of water for free but other drinks were charged normally, and that there was a voluntarily 'service fee' some people choose to pay.

This seemed a fairly standard set up, and I've partaken at similar venues throughout my student career and as a 'productive' member of society. It neatly avoids the problem of "who pays what" when the bill comes in large groups, and ensures that you don't go home hungry. The complaint for the two protagonists in this instance though was that they had been asked to leave their 'all you can eat' buffet of choice, and then banned for life, on the basis that they ate too much. In an interview with the owner the reason given was that the restaurant was a business, and it didn't help things when people came in and ate more than everyone else.

Fairly confident that the community feedback from this article was going  to be universal condemnation of a restaurant that offers 'all you can eat' (AYCE) and then kicks people out for eating too much, I was stunned, not to mention slightly nauseated, to find that the actually the main popular opinion coming through was that "people like that (meaning the complainants, and with an unspoken caveat of over-weight people) are a disgrace," various other offenses were laid at their door, including putting other people of their food by eating too much, ruining things for everyone else and so on. Less than half of the comments took the view that a restaurant advertising 'all you can eat' didn't have much of leg to stand on if people ate more than had been budgeted for.

After my initial shock at this response blew over, I have, on reflective consideration, realised I shouldn't be surprised. This is exactly the phenomena I described in the previous post 'Don't Read It, Sign It!' - the fault can't lie with the person/business making an offer they can't honour, it must lie with the person/business that has the audacity to expect that people/businesses stick to their stated agreements.  For future reference I'm going to refer to this concept as Gobian Responsibility (after the restaurant that inspired this).

For definitive purposes;

Gobian Responsibility holds that responsibility for a hurt lies not with the individual or corporate suffering the harm, even when they, in full knowledge and without coercion, agreed or actively undertook the activity or decisions which lead to the harm. Responsibility must therefore lie with a third party, involved in, profiting from, or extraneous to the incident.

Socialist politicians (or at least their Labour and Lib Dem equivalents) have spent a great deal of time and effort to mould a national narrative based on Gobian Responsibility. The matter of AYCE restaurants is a worrying indication that we, the people, are actually starting to buy in to. At least of part of this is no doubt the beguiling simplicity of a system that says nothing bad that happens to you is your fault - it’s always the fault of someone else.

Here are some examples for consideration;

1.) The London Riots
Genuine Cause; Masses of people seeing an opportunity to get something for nothing and deciding to take it, even if it meant stealing from others. Exacerbated by a break down in the credible threat of force offered by the police (this is actually the foundation stone on which every human civilisation going back to the Stone Age is based - lethal violence wielded by some form of rule-setting authority).

Gobian Cause; 'Society' (meaning people who work, earn money to buy things, own shops, houses, cars and so on) not giving enough to those who choose not to work and therefore have less things.

2.) The Credit-Crunch
Genuine Cause; The cost of capital being driven down due to political pressure, at least in part due to the British obsession with home ownership. As a result many people and organisations were able to take on loans or other financial obligations they couldn't, in all honesty, ever hope to honour. When this level of unserviceable debt reached a large enough level it led to financial institutions (banks) either refusing to lend more money to unviable entities, or to call in the collateral securing defaulted loans.

Gobian Cause; Bankers refusing to continue to lend out vast sums of money to zombie-corporations which should have already collapsed so they can pay themselves vast sums in bonus.

*Footnote on this: Banker-bashing is something of a personal hatred of mine since it is exactly the sort of narrow minded political point scoring that ensures economic recovery is all but impossible. To clarify briefly on a few points;
a.) The proposed tax on bonuses is, (optimistically) expected to raise £2 billion. This will cover the costs of social security (pensions, unemployment benefits and so on - excluding health care and education) for 4 days.
b.) The 'we need to make things' myth; it's true that not everyone in the world can sell insurance. This is not the same as saying that no-one in the world should sell insurance, or that insurance and banking do not have a value-adding place in an economy. (The fact that much of banking and insurance infrastructure developed to service the needs of the expanding commercial empires since the Venetians should tell you something).  Given that we now existing as part of a global economy there is no reason at all why a financial services industry operating at a global level is not a sustainable basis for the national economy.
c.) Some banking product isn't "fair" (charges, salaries, overdraft fees etc.); it is still relatively easy in the UK to get a free bank account. Assuming all you want to do is get paid your salary electronically, make various direct debit payments, have somewhere to safeguard your money, use ATMs, pay on debit card at the supermarket, use internet shopping then most major banks will provide this service completely free of charge. Anything other than that almost certainly means you want some form of borrowing (overdraft, credit card, loan, mortgage and so on). This, in all forms, is a contractual obligation in which you get an upfront wad of cash, in exchange for a series of repayments or conditions to which you are fully aware before signing up for anything. You get all the money to begin and the banks take all the risk. If you don't like the conditions, don't get the loan. Remember - you do not have a right to anyone else's money - including a bank's.

3.) National Debt of £2,311 billion
Since I rarely pass up an opportunity to try and express the size of this problem how about this... the British national debt is, at current exchange rates, 198% the combined national output of every country in Africa combined.

We owe nearly double the amount that 14% of the global population earn in a year.

Genuine Cause; a succession of neo-liberal and socialist governments elected since the end of the second world war on a mandate to build, expand and violently oppose reduction in, the 'welfare state,' combined with overwhelming popular support for such activities.

Gobian Cause; The richest not paying enough tax.


As long as the political and social narrative continues to be based on this version of 'responsibility' we will continue to have politicians who break election promises (after all it's not their fault), a criminal justice system designed to help criminals (after all it's not their fault), a social system designed to redistribute wealth away from the successful and to the failing (after all it's not their fault), and all you can eat Chinese restaurants that kick people out who want to eat all they can (after all it's not the restaurant’s fault you thought that advertisement was genuine).

So whose fault is it?

/Z