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Man, if people keep being realistic our whole economy might collapse

Submitted by Prometheus 6 on April 3, 2005 - 6:26am.
on

Of course, it WILL collapse if we don't...

Quote of note:

...reform based on a notion that taxes are bad for the economy is just that: a notion not backed by strong evidence. And the costs of ignoring experience in favor of hope can be high: mounting deficits, decaying infrastructure, inadequate investment in public education and research.

So the next time that some proponent of tax reform promises king-size economic benefits, there's reason to be skeptical. Like a second marriage, a new tax system can't work miracles.

Do Taxes Thwart Growth? Prove It

By ANNA BERNASEK

TAX reform, like a second marriage, is the triumph of hope over experience. The United States has just gone through the most sweeping tax cuts since the 1980's, but hardly anybody is satisfied. President Bush contends that we need still-lower taxes in order to prosper. Alan Greenspan, the Federal Reserve chairman, is suggesting a radical shift to a consumption tax. And the Republican Party has taken aim at the entire tax system.

At the heart of such antitax sentiment is this belief: Taxes are bad for the economy. And who would disagree, especially as April 15 nears?

There's just one problem, though. Despite the widespread notion that taxes harm the economy, no one has actually been able to back that up. It's not that taxes have no effect; they are a major part of the American economic system and affect planning and behavior in many ways. Taxes influence who wins and who loses in a competitive society. But over all, there is surprisingly little evidence that tax rates are an important factor in determining the nation's economic prosperity.

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Then how is the economic grow
Submitted by DarkStar on April 3, 2005 - 3:39pm.

Then how is the economic growth of Scotland, after huge tax breaks, explained?

Same way our economic growth
Submitted by Prometheus 6 on April 3, 2005 - 4:16pm.

Same way our economic growth took place without them...a myriad of reasons that defy the simplistic analysis we seem to be stuck with.

Then how is the economic grow
Submitted by James R MacLean on April 3, 2005 - 9:02pm.

Then how is the economic growth of Scotland, after huge tax breaks, explained?

Part of the problem with this analysis--commonly cited by advocates of "lower taxes at all costs"--is that it ignores too many other really crucial ways in which taxes influenc economic growth.

One: lower taxes will be a drag on the economy if they lead to higher public debts. Higher debts could (a) increase the cost of borrowing, making government less efficient; (b) cause investors to expect a catastrophic change in policies, such as a sharp tax increase or reduction in basic government services, in response to the inevitable budget crunch; (c) if the taxes are accompanied by drastic reductions in services, as has occurred in most US states since the 1980's, then the composition of the economy shifts away from labor intesnive sectors, to resource extraction and inductrial services--both of whuich are terribly-compensated, insecure jobs for workers and both of which have largely explained the political shift to the anti-labor right in the USA.

Anyway, I could also be ignoring the ironic context of Darkstar's comment:

The Scotsman (cached):

Budget measures fail Scotland

(Westminster, 16 Jan '05): The Chancellor's Budget contains nothing to turn Scotland's economy round, nothing to stimulate higher growth or higher wages and nothing to give young Scots new opportunities at home, says Alex Salmond.

SNP Leader Alex Salmond MP has criticised Gordon Brown for producing a Budget package that misses the mark for Scotland and which relies on high North Sea Oil revenues to fill the black hole in Britain's finances.

Commenting Mr Salmond said:

"The Chancellor began with a boast about British economic growth that doesn't apply to Scotland and ended with a promise on pensioners travel that already happens in Scotland. It was a Budget that clearly missed the mark.

"It is as though the Chancellor is oblivious to Scotland. There was nothing today to turn Scotland's economy round, nothing to stimulate higher growth or higher wages and nothing to give young Scots new opportunities at home...."

Taxes have nothing directly t
Submitted by DarkStar on April 3, 2005 - 10:04pm.

Taxes have nothing directly to do with government spending.

It appears that the more money coming into the government, the more the politicians have to spend and the more they will spend.

Part of the past economic turn around that Scotland has had is due to companies coming in to do business, which if I read properly, is due to the much lower tax rate. Or, at least, that's the cause for the increased foreign investment.

James is an economist and is
Submitted by Prometheus 6 on April 3, 2005 - 10:23pm.

James is an economist and is being very, very nice to you.

Taxes have nothing directly t
Submitted by James R MacLean on April 5, 2005 - 8:07pm.

Taxes have nothing directly to do with government spending.

It appears that the more money coming into the government, the more the politicians have to spend and the more they will spend.

You understand these statements contradict each other.

Historically, the existence of large and persistant deficits proves that elected officials typically spend the money and then raise taxes. Lucky for you, too. The alternative is economic stagnation and unemployment.