The Robin Hood Tax has been a fascinating example of emotion defeating logic and fact. As it invariably will.
I’m a Conservative, so I’m instinctively inclined not to support increases in tax, let alone new taxes. That’s not to say I don’t recognise the need for tax and (some) of what it funds. But the support the Robin Hood Tax is attracting surprises me. Well, actually, it doesn’t.
I’m not in the least bit surprised because I can see the emotional appeal. Let’s have a tiny tax on nasty people that raises lots of money for good things. Who can possibly disagree?
Many have. Pointing out that such a tax would require unprecedented international co-operation to work and if only a few countries didn’t participate those levying the tax would be at an economic disadvantage. Or that the hundreds of billions of pounds the tax would raise would have to come from somewhere, this isn’t new money (despite the assertions of actor/economist Bill Nighy) and however banks deal with it the effects will be felt.
But these sorts of arguments will never defeat the raw emotional appeal of hurting the evil bankers. And, let’s be fair, that is the point. It is presented as a way to get back at bankers without causing pain elsewhere. It’s about vengeance.
So why stop with 0.005%? If part of the argument is that it’s so small they won’t notice then why not double it. Then you raise twice as much. In fact, let’s go for 1% – that’s still tiny but you’d raise 200 times more and might hurt those evil evil bankers.
The thing I dislike about the whole campaign is the inconsistency of it. On one hand it’s something that will make bankers pay, on the other they won’t even notice. On one hand it won’t affect the economy or markets, but on the other it will take hundreds or billions of pounds out of the markets.
But this goes unnoticed because of some clever labelling. Associating it with Robin Hood, and the idea of taking from the undeserving and giving to the needy is brilliant, (even if it does overlook that Robin Hood was really about fighting an oppressive state that was eroding civil liberties, they were fighting the same John that was forced to sign Magna Carta at Runnymede). It means that it’s not just economists and politicians talking about it, but now celebrities can jump on the bandwagon. They couldn’t do that if it were the ‘The Genghis Khan Tax’ could they?
It’s a bad idea. But great marketing.
I have always hated politicians (present company excepted) who spoke about Tobin taxes because they rarely properly understood the idea. I hate it even more now its called a Robin Hood Tax because its making something that is quite difficult to understand even more unintelligible. The principle aim of these kinds of taxes is to increase the cost for short term investors – in effect rigging the market in favour of long term investors. It is not a cash raising measure per se but a behaviour modifier – or “nudge” if you prefer. It was initially suggested in the context of currency trades to stop the daily dash from one currency to another in search of quick gains that had adverse impacts on the “victim” states – although now, ppl think the idea might be applicable to any transaction where speculators may operate. My principle issue with the robin hood tax is that – if the policy is successful and the rate of the tax set appropriately then the revenue raised under it should be low to insignificant – so why should we promise an insignificant or low amount of money to important good causes? I’m yet to hear a satisfactory answer to this question.
Thank-you for the flattery.
You make (as ever) a very good point, and one that reinforces my central objection, that this is not so much a campaign about raising revenue for any particular issue, or about modifying the behaviour of the markets but about getting back at the nasty bankers.
I always dislike it people criticise celebrities for jumping on bandwagons (even though I did it with my reference to ‘banker/economist Bill Nighy’) because if we restricted opinion or commentary to experts only we wouldn’t be a democracy (or have blogs, though that might not be a bad thing). But this one I really do dislike, no-one really seems to understand even the simplest aspects of it, either the potential benefits or the potential pitfalls and therefore latch on to the marketing message.
As you point out, one of the consequences of tax is to modify behaviour somewhere along the line. I don’t think the tinkering with the VAT rate did much to modify consumer behaviour, but given the lack of price changes on 1 January 2010 I think it did mean that businesses spent the latter part of 2009 adding 2½% to their prices so they could ‘absorb’ the increase for their customers (and hopefully modify customers’ behaviour in January as they took advantage of ‘frozen’ prices). Robin Hood will either change the way the markets work, in which case it will mean a different economy and small tax revenues, or be absorbed as a cost of business. The problem with business costs is that someone, somewhere, will end up paying them.