Forgetting about the elections for a moment

“No nation has ever taxed its way to prosperity.” Discuss.

  • slug

    A stable country, with a well educated workforce, and a good health service are prerequisites to prosperity, and more fundamental to it. There is more to economic policy than low company tax; remember that companies don’t pay tax in the end, people pay tax.

  • Glensman

    I agree entirely tih Slug. Ireland is one of the richest countries in Europe apprently- but the health system is bursting at the seams.

  • Henry94

    slug

    A stable country, with a well educated workforce, and a good health service are prerequisites to prosperity

    That’s like saying you need a house and a car before you get a job. The debate about tax comes down to finding rates that will keep enterprise going while providing the state with the cash to do what it needs to do.

    The debate includes the question of what the state needs to do.

  • Dougal

    Strongly disagree with this assertion.

    What do the Romans ever do for us?

    Don’t we have the Romans to thank for the tax system?And just look at how prosperous they became! I fully accept that they had an accomplished army behind them but even the soldiers receive a pay packet…, from the taxes.

  • Dougal

    * SORRY * correction

    Of course that should read

    What DID the Romans ever do for us?

    ‘Serves me right for trying to be a unny b*****d!!

  • middle-class taig

    Sweden

    The Netherlands

  • slug

    “That’s like saying you need a house and a car before you get a job. ”

    Not really – if you mean those are consumption items rather than investments.

    A good education system is an investment in human capital and shifts out the supply curve. It was a necessary condition for Irelands economic success. A good health system also an investment in human capital.

    Likewwise a stable system of law, rather than being consumption, is neessary for property rights to be established, a prerequisite for investment.

    Low tax isn’t a panacaea and I think it would be wise to remember that companies don’t pay taxes, people do.

  • mickhall

    As they say in the polling game, it is the way the question is put that is important, as Fair deal knows only to well. What is prosperity, two thirds of the population living a comparatively well off life style whilst one third live out their lives in poverty, and for a great many of them ignorance. Now any fool would know how you answer this question may well depend on whether you are one of the haves or have nots.

    Slug is correct in what he writes, myself I would prefer to live in one of the northern European countries rather than the USA, this is not simply a question of the amount of tax one pays, although it is relevant, but what ones government spends the tax revenue on.

    For example the US is well able to afford health care at point of need for all its citizens, yet it chooses not to do so for ideological reasons. The UK could have a health and education program equal to the best in the EU, it does not because it prefers to waste billions of pounds of Tax revenue of nuclear weapons and maintain a bloated military which when push comes to shove, is inadequate to do the job it is asked of them.

    What better example of this foolishness does one need than Blair and Brown believe it will be more popular to give young squadies a 9.2% pay rise whilst limiting young nurses to 1.5% followed in Nov with another 1%.

    To conclude, simply be taxing the population at a high rate will not in itself make the country or nice place, but if these taxes are spread across the spectrum in a sensible way and work to the benefit of society as a whole, then it will undoubtedly make the nation a better place. If anyone doubts this they either have lived a sheltered life, or where not born in the 1960s or have no knowkedge of what life was like for the majority prior to the introduction of the NHS.

    As a rider I feel it is time we were to legally able to opt out a percentage of our taxes going to the military on moral grounds. [plus also other areas]

  • Henry94

    mickhall

    Wasn’t it great for the northern european countries that the USA picked up their defense tab for the latter half of C20th allowing them to spend money on social programms.

  • kensei

    You’ll find in Africa states that have low tax or you can get away with not paying it, few regulations and low wages. They are bastions of prosperity. Wait, no, the other one.

    Clearly more than tax matters. And in many cases, the precise level of taxation and public spending is dependent on political rather than economic choice – there are fairly wide tolerable bounds in terms of tax regime.

  • seabhac siúlach

    One could say the 12.5% corporation tax makes the 26 counties a low tax country…but one must ask low tax for whom?
    Compared to a similar sized economy, e.g., Denmark, the 26 counties has done well out of this corporation tax rate, attracting a lot of direct foreign investment. However, could one really compare a high taxation country like Denmark to the 26 counties and say Denmark is less prosperous? I believe not. One may indeed ask, what does one mean by prosperity…if one means, excellent public transport, clean hospitals, no waiting lists for medical care, etc., then a higher tax country like Denmark is clearly more prosperous than the 26 counties. If, on the other hand, one measures prosperity as merely the accumulation of further wealth in the hands of the few (and ignore the awful state of the public services) then the 26 counties is also prosperous, but it is a prosperity that spread very narrowly…
    One must also mention the nature of taxation…in the last 10 years, in the 26 counties, indirect taxes on the individual have increased by large amounts, e.g., taxes on fuel, cigarettes, tolls and VAT…
    These are hidden taxes that punish the more poorly paid at the expense of the better off by charging all sections of the society equally, irrespective of ability to pay. This is different to direct taxation, where the 26 county govt. can claim to have lowered taxes…however, generally this is of benefit only to the better off sections of society, e.g., the reduction of the upper rate of tax from 42 to 41%.

  • Henry94

    kensei

    What African states do you have in mind and how do they compare to high-tax African states?

    Ghana:
    The top personal income-tax rate is only 30 percent, but that rate is encountered at an income threshold of $5,400 per year. The 20 percent rate hits at $2,700 and the 15 percent rate hits at $270 per year. In addition, Ghanians pay a 12.5 percent Value Added Tax VAT. There is also a “wealth tax,” currently suspended, but which could come back at any moment. Even the cloud of a wealth tax discourages the accumulation of wealth.

    Tanzania:
    The top income-tax rate is also 30 percent, but that rate is encountered at $800 per year of taxable income when the currency conversion is made to dollars. On top of this huge bite out of such tiny income, Tanzanians pay a 20 percent VAT on the goods and services they buy.

    Cameroon:
    The top personal income-tax rate is 60 percent, which is encountered at a threshold of $12,842 at the current exchange rate. The 30 percent rate is met at $3,424 and the 15 percent rate at $1,200. The VAT takes another 18.7 percent.

    Mozambique:
    The top personal income-tax rate is 40 percent at $3,500, 27 percent at $1,750, and 15 percent at $438. The VAT is 17 percent.

    Zimbabwe,

    The top tax rate of 45 percent is encountered at a little more than $500 annual taxable income, and there is a 30 percent surcharge on top of that!! A tax on a tax! The sales tax, which is said to be converting to a VAT, is at 20 percent for practically all machinery and 15 percent for motor vehicles and most goods and services.

    These are, of course, not the only taxes in these five countries. There are dozens and dozens of other business taxes and licensing fees in each. IMF economists and Nobel Prizewinners may tell you the reason there is so little tax revenue coming into the tax coffers of their treasuries is that the citizens avoid the taxes by cheating. This is nonsense.

    The reason there is no tax revenue to support IMF spending projects is that these high tax rates cannot allow capital to form internally, much less attract investment from abroad. Why would anyone risk capital in an economy where the smallest success is confiscated? If you begin an investment footrace facing a series of hurdles, each of which take another big bite out of your production, you can see before you begin that nothing will remain at the finish line.

    http://www.finalcall.com/artman/publish/article_1163.shtml

  • Henry94

    Social Welfarism even in Scandinavian countries leads people to conclude that an easy life on the dole is better than work. It’s an understandable conclusion and I could easily agree with it myself. But as more and more people opt for the contemplative life the system becomes unaffordable particularly when the supply of children starts to dry up and populations go into the kind of demographic death spiral we are seeing in Europe.

    Yes you can bring in immigrants but some of them won’t find your cartoons very funny and they too opt for the dole in large numbers.

    People can feel socially secure in Denmark—at least for now. People don’t get rich from welfare but they can live a comfortable life. Practically all people are eligible for one program or another. But the system is unsustainable in the longer run. In the early 1970s only about 300,000 people of working age lived full-time all year on government welfare. Today it is about 900,000. The population size has remained unchanged at around 5 million. In the not too distant future, more people are going to be pensioners and fewer people will be working age. At some point, the trough will be empty.

  • I’m going to blog this later, but it’s worth listening to the Stratagem Panel Economy discussion with John Simpson and Jamie Delargy at BTR. Rough start (as ever!), but very relevant to this thread. You can even hear their reaction when I read FD’s post to them.

  • Frustrated Democrat

    There is not a problem with taxation, the problem is when Governments levy taxes to institute progroms that are not directly related to the good of all of the people.

    1. Should we renew our neuclear weapons?
    2. Should we be in Iraq?
    3. Should we have a bloated fat cat civil service with inflation proof pensions?
    4. Should we pay doctors massive salaries compared to the average professional?
    5. Should be have such a large social welfare budget?

    I could go on ad infitum with the list of questions but even these questions are sufficient to question the basis of our Government’s spending policies. I question whether any of our recent Governments represent the public at large or whether they represent doctrinaire solutions that are suited to a narrow poltical creed.

    Taxation is good, doctrinaire taxation is bad.

  • mickhall

    Social Welfarism even in Scandinavian countries leads people to conclude that an easy life on the dole is better than work.

    Henry,

    This is simply untrue, especially if the system is administered sensibly, [this is vital] and it is part of an overall system of good education, health care, housing, public transport etc. The fact that the US had few of these, is why their welfare system partially failed ,although the main reason was ideological.

    You write, “But the system is unsustainable in the longer run'”
    rubbish with respect as there is no real evidence of this, but a lot of twaddle spoken about it. The same goes for good pensions, whether private or public. The main problem with private pensions was that companies began to lick their lips at getting there greedy finger into them.

    Oh finally the US may have been the backbone against a threat from Eastern Europe, real or imagined, but they did this out of self interest, although to be fair to them they were a great help after WW2 in the rebuilding of western Europe.

    The example of Germany post WW2 shows just what a farce US policy in Iraq is. There were over 1 million troops occupying Germany and it took the Marshal plan to rebuild the western part.
    How many troops does the US have in Iraq, just over 100K front-line.

    To conclude there has been no better system of government put into practice by human kind than incorporating social reformism with regulated capitalism and you know my politics. As it provides what most people want, work, housing, good education, healthcare and personal freedoms that provide opportunities.

    One of the great tricks of neo liberal economics is to convince people that it can provide a low tax economy, when what in reality happens is the tax base shifts so the burden is taken up via direct taxation by those least able to pay, whilst those who benefit most from it pay less that they can afford.

    It is a nasty scam perpetrated on the less well off economically by the greedy economically rich, whether private or corporate.
    One only has to look to Africa to see the victims of neo conservative economics.

  • Greenflag

    ‘One only has to look to Africa to see the victims of neo conservative economics. ‘

    Indeed . The people of Botswana arguably the most conservative (economically) run country in Africa enjoy the highest per capita incomes and have had the fastest rate of economic growth on the continent since the 1980’s .

    Meanwhile next door neighbour Zimbabwe which in 1978 had a GDP per capita three times that of Botswana now enjoys the distinction of being one of the poorest if not the poorest country in Africa . But then Mr Mugabe’s Marxist Leninist Scientific Socialism was ever just a long impressive sounding slogan which covered the advancing state of kleptocracy in that poor benighted country.

    When I asked an employee (Matabele) one day what was the meaning of Marxist Leninist Scientific Socialism he replied

    ‘It’s a long word meaning starvation ‘ Mugabe is presently spending 300 milion dollars on his birthday party . At the same time the vast majority of Zimbabweans can’t afford to pay for a bus ticket from a month’s earnings assuming they are lucky enough to be among the 20% who still have a job !

    Henry94’s point that

    ‘People can feel socially secure in Denmark—at least for now.’ hits the nail on the head with the emphasis on ‘at least for now ‘. The Scandinavian model worked in the 1970’s and well into the 1990’s but is now increasingly under strain as is the case in many parts of the developed world where the advancing geriatricisation of the population is leading inevitably to higher taxes and costs for health care . Those who chose a higher standard of living at the expense of having children will sooner or later see that higher standard eroded . With any luck and good timing they may evade the harshest personal consequences if they depart this mortal coil before the system implodes .

    Ireland i.e the Republic is a little behind in the geriatric stakes but as can be seen from the declining birth rate (below population replacement levels and increasing reliance on immigrant labour we are well on the way to having the same problems as the USA and/or UK/Germany/France etc.

    What is becoming increasingly clear is that in the face of exponentially increasing health costs/immigration issues/ and out of control government expenditures in developed countries and the imminent prospect of the non sustainability of systems – the traditional high tax versus low tax or left wing v right wing arguments cannot provide the answer. Add in the financial interests of Insurance companies , Drug companies , the medical and legal professions and the whole army of voodoo claptrap purveyors from holistic medication to chiropractors and you begin to see the enormity of the problem . Mary Harney I’m sure could paint the real picture better than most.

    We do know that public sector expenditure can both promote and retard economic development . We know that certain levels of income taxation hinder capital accumulation by individuals with a negative effect on new business start ups!

    At base the American /Bushean solution appears to be to make people responsible for buying their own health care . The philosophical basis here is that people will not waste their money and that the whole medical/drug/health complex will heed market forces . The same rational is used in the pensions debate -i.e people need to fund and manage their own retirement funds . The corollary to this is the notion that if people have everything provided for them in these areas (cradle to grave ‘security’) then many will just sit on their rear ends and say why work ? It’s certainly plausible even if in societies such as Scandinavia that did not happen or not yet anyway .

    But then Scandinavia is a high income society . The American concept of ‘the working poor’ is not seen or accepted . In Ireland we are between both of these systems as is the UK .

    To those on the extreme right the answer would appear to be obvious . Thise who are ‘poor’ should pursue advanced degrees in medecine /health care / investment funding / and pension management that way they will be able to both fund their health care needs efficiently and be able to afford to retire with dignity ? Am I missing something here ?

    The Scandinavian model takes away the need for the ‘working poor’ to have to bother with the need for these self improvement skills .

    Personally I favour a national health service similar to what the Republic and Britain enjoy . Yes it has it’s faults and it certainly needs overhaul and it needs to be sustainable . We can’t afford the USA system where it’s estimated that very soon 20% of American GDP will be spent on health issues !

  • mickhall

    greenflag

    You go on about the European welfare system not being sustainable as if it was fact, but give no evidence as to the reasons why despite almost all the counties of western Europe managing to provide the welfare state for its people sucsessfuly.

    The rich and powerful spit such lies so that dim wits believe them and refuse to demand what is their right in any decent society. They cannot take back the likes of the NHS from us, as we will not stand for it. So instead they attempt with their lies to frighten future generations into accepting less than is their right, or make sure state health care does not become a possibility within Africa etc.

    You obviously have no direct experience of Private health care in the USA, as it is the most inefficient imaginable and is on a par with the scams operated by private health care in med holiday resorts, when you go in with a head ache and spend a week in hospital having every expensive test under the sun as they know your holiday insurance will pick up the tab. Far from private health care in the US making people responsible for their health care, 40% are unable to meet the insurance payments[do you realize what the premiums are for a family of four] Think about you own statistic of 20% which amounts to a massive rip off.

    If employers fail to offer health care workers and their families have to rely on third world standards of public health care. Incidentally this system of private health care is detrimental to the economy as once people work for a company that provide health insurance, they rarely move on in search of a better job or return to education to improve their prospects etc.

    By the way if you are holding up Botswana as an example for africa to follow god help Africa and why you thought the need to bring Marxist Leninism into the debate is beyond me, or could it be that you have got it into your head that the welfare state amounts to extreme socialism, wonder who put such crap into your head?

    Perhaps I have been a little rude, but if the riches country in the world cannot provide free health care at the point of need for its people, what does that say about those who lead it and all they say?

  • Greenflag

    mickhall,

    Did you actually read the last paragraph in my post before you started ‘shooting’ ?

    ‘By the way if you are holding up Botswana as an example for africa to follow god help Africa

    I am . And no, God is not helping Africa or anywhere else, but the Botswanans have done relatively well since obtaining their independence from the UK in 1966 . No civil war – consistent economic growth -the highest in the world for a few years (12% ). It’s per capita income and GDP per capita is approx 20 times that of it’s neighbour Zimbabwe. As for general health care in Botswana -it’s probably the best in Africa . The Aids epidemic in the Southern African region has of course had a negative effect on all countries but Botswana has coped better than most others .Zimbabwe continues to lose many of it’s doctors to the west and to wherever they can escape as that country continues it’s downward spiral to economic oblivion.

    ‘So instead they attempt with their lies to frighten future generations into accepting less than is their right’

    Health care has to be paid for . It’s not FREE! Doctors , nurses , hospital orderlie’s , consultants administrators , health insurance company’s staff, VHI , etc etc etc will not work for nothing . They are either paid by the public purse through general taxation or privately through the private sector . The money in short does not grow on trees. So the choice is the people’s .

    In the 1950’s when the NHS and similar systems were set up in Germany/France /Scandinavia etc average life expectancy was considerably lower than it is today. With these countries also experiencing lower birth rates through the same period you are now moving into a situation whereby a much larger aging population’s health care costs will have to be paid by a relatively smaller by comparison workforce . One solution being put forward to mitigate the extra cost is to increase the retirement age to closer to 70.

    I know little about the American system except to say that it appears to work for those who have ‘insurance’ but not for the 50 million or so (16%) of the population who don’t have private insurance . Hospitals do however have to provide emergency treatment -life saving treatment to any of the 16% who walk in the door . How the hospitals recupe their costs for this is not entirely clear but it’s possibly being paid for by the ‘insured’ through higher premiums . You can however be sure that insurance companies , medical professionals, drug companies and the legal fraternity will not lose out .

    ‘Perhaps I have been a little rude’

    Not at all Mick -I’ve been savaged worse by sheep 🙂

    BTW – I don’t think we disagree all that much re health care provision .

  • mickhall

    ‘Perhaps I have been a little rude’

    Not at all Mick -I’ve been savaged worse by sheep 🙂

    Greenflag

    I of course agree that whether public or private, health care has to be paid for, but the joy of the public system of health care,[state run or overseen] is that your credit card/whatever is not demanded at the point of need. It is this that makes it probably the most successful and loved state infrastructure, for it takes an enormous amount of worry and anxiety away from the individual, especially over their families health.

    You mentioned the raising of life span and few doubt that this is mainly down to the system of health care. Good health care is also a boom to the economy of any nation that provides it for its people, as statistic appear to prove.

    You are correct in that unless a way is found to get around future cost, then there could be difficulties due to the shrinking of the tax base. However this is not an insurmountable problem, as there are a number of ways governments can tackle it that do not centre on raising taxes alone; and most have already begun to do so. Admittedly these policies will not at first be universally popular, but needs must.

    The most obvious as you wrote, is raising the retirement age, people live longer so if they wish to have a reasonably comfortable old age, then they must pay for it by working until they are 70.[with the retirement age being raised in stages]

    By itself this will not be enough so another two areas need to be tackled, firstly immigration, countries like the UK and Ireland are far from over crowded, I do not have the statistics in front of me but I remembers reading Ireland had a larger population some time in the 19th Century than it has today.

    Immigrants are in the main fit and youthful, keen to get to work and earn some cash, both the UK and Ireland, due to the language make them attractive destinations to newcomers, imo these people will be a great boom to the UK and RoI and we should welcome them with open arms.

    I would add the proviso that government must be honest with the host community as to why the newcomers will bring advantages to them, and they must distribute the immigrants across the nation, and not allow them to end up within the Capital or in areas that already suffer from urban depravation. As it should not be just the working classes who pick up the short term tab for the newcomers arrival, as has happened in the past in the UK.

    The government should also have an open and fair system on immigration and cease all the nonsense that has gone on, with loopholes and pull allowing people to jump the Que etc. Also Asylum seekers should be differentiated from immigration, as it is totally different and the aforementioned has been one of the reasons why the likes of the BNP have been able to campaign successfully on this issue. If people come to this country they should have papers, unless they have a very good reason and they should ask for asylum at the port of entry. Where as non EU immigrants should gain permission for entry in their own country, not as happens turn up at a port of entry and claim asylum etc. The number of turks and kurds I have met of late who claim to be bulgarians or some such!

    Seems harsh but we need newcomers and thus we must be able to trust the system on this.

    Governments should also encourage couples to have children, in many cases couples do not have kids due to house inflation, as it makes it essential for both partners to work full time. Thus they cannot afford to take a break from work to have kids. The government must get to grips with this problem, not least by taxing till the pips squeak second homes and by to let [the old ones are the best] and bringing in schemes such as part purchase which centres around public housing.

    As to Botswana, I take your word as you are clearly better informed than I.

    All the best

    Baaaaaa.

  • Greenflag

    Mick

    Baaaaaa.

    Ewe might think that Mick 🙂