- For every pound of tax raised by the government an average of 2 pounds (Fred
Harrison) or 1 pound 30 (UK Treasury) is lost to the economy...
This surely depends on what kind of tax is used. In a rational taxation system
the rates would probably be set so that the same amount was lost for each
marginal rise in any individual tax, but we clearly live far from such a
Certain types of tax bring more into the economy than they take out. This is
true for example of green taxes, where the private loss to the taxed person is
offset by the reduction in environmental disbenefit. It's also true of
redistributive taxes, as the gain in welfare from one's private spending
decreases rapidly as one's wealth rises. (This follows immediately from the law
of diminishing returns, as where people's spending money is limited they will
clearly give greater priority to those goods/services which give a high return
in terms of welfare per unit spent.) I presume that it is part of the whole
thesis that this is also true of a land value tax.