Thought for the day

Economically, there are two kinds of people/households in this world:

  • Those who pay more taxes than they consume.
  • Those who consume more taxes than they pay.

It’s a fairly arbitrary line to draw, and I wouldn’t want to make any value judgments based on it. It’s tempting to call them ‘wealth-generators’ and ‘wealth-consumers’, for example, but that’s too simple. Most teachers fall into the second group, but without them, we’d have fewer people able to be in the first group.

Those in the first group are typically creating value by selling products or services that people want directly. Many of those in the second are doing the same thing, but we buy their products and services via a distributor known as ‘government’. That, to a large extent, is what taxes are.

But I just thought it was an interesting thought experiment, if nothing more. What’s your family budget deficit? How much are you dependent on government subsidy?

And if you don’t like the answer, comfort yourself with the thought that, thankfully, not everything revolves around taxation! How does your balance sheet look in other areas?

  • Those who generate more happiness than they consume.
  • Those who consume more happiness than they generate.

That’s much more important.

2 Comments

Quentin

I think you are missing a key role of the state.

Over the last decade I’ve paid maybe £5000 for home insurance; and I’ve got nothing back. That doesn’t mean that I’ve paid more than I’ve consumed. I’ve contributed to a fund which will be there for me if I am unlucky enough to suffer a disaster. I regard that as money well spent.

With a welfare state there may be many people who for many years pay in more than they get out. But they are still getting enormous value from living in a society which protects the vulnerable.

Furthermore, you seem to be ignoring the lifecycle. Many of us consume more than we generate when we are very young or very old, and do the opposite in between.

Owen

Hi Owen – good to hear from you!

You are, of course, quite right – it’s a buffer… the answer to the question may vary over your lifetime, so it’s perhaps interesting to consider the total P&L over a longer period rather than the instantaneous balance!

And of course, it smooths out imbalances in other dimensions than just time. I had to contribute several hundred quid to the Olympics, which I didn’t see and cared nothing for. But then I’m probably a net beneficiary of the contributions others have made to museums and art galleries when they would prefer to watch football matches.

And of course, it’s arguably the very definition of a civilisation that it allows and encourages things that cannot simply be reduced to practical or monetary value!

Anyway, it’s funny you should respond, since I was browsing through some old photos and movies yesterday and came across a brief video clip of you, several years ago, walking down Market St…

All the best,
Q

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