borat52

If anybody holds the opinion that higher taxes are good for the economy then this website goes in to detailed analysis on the relationship between tax levels and growth based on the US economy:
http://taxesandgrowth.ncpa.org/hot_issue/growth/

interesting to note:
"A study that examined data from 1950 to 1995 found that:

Under the optimal tax rate, workers would have been producing $107,900 in per capita output in 1995, much more than the actual figure of $54,100. "

The conclusion of this independant organisation of economists is that in the long term lower taxes actually increase tax revenues because the economy grows so much faster that a lower percentage on this bigger number is actually more in terms of dollars than a high percentage of a smaller number. Of course as well as a overall higher tax revenue, the people earn way more money.

warrenm2

They're not the only people saying it - check out http://www.adamsmith.org/pdf/flattaxuk.pdf

_Meridian_

iTrader: (1)

Ah, the Adam Smith Organisation: not even slightly biased there then. Actually, no-one apart from right-wing Americans actually believe that theory any more - it has about as much credibility as Trickle-Down.


M

warrenm2

if you agree with the concept of benefit trap then you should agree with the idea that cutting taxes will actually increase the number of people paying tax, (because people are less incentivised to avoid it, avoidance costs money too). Whether that increase (in numbers paying) offsets the amount of taxation lost through lower rates is the real question, studies such as these seem to show it will. Unless of course you know otherwise Meridian?

_Meridian_

iTrader: (1)

Because the whole theory is based on the assumption that rich people will hand over more tax (by avoiding less) if you drop tax rates. Why would they do that? They got rich by not paying tax, and they're not going to start pay more just 'cos you drop the tax rate a bit - they went to a lot of trouble to avoid paying tax. Take a look at the lengths Rupert Murdoch anf his company go to avoid tax for instance. Tax take went up during Thatchers time because the economy overall grew - that's it.


M

warrenm2

as I mentioned above Meridian, avoiding tax costs money, eg to avoid inheritance tax people will often set up trust funds, to avoid corporation tax, companies often set up overseas/other kind of offshore companies effectively for tax purposes only. This costs time, effort, accountancy fees and other professional fees to set up. People would only do that if its cheaper than the alternative. If you lower taxes, then these options are no longer cheaper than the alternative, and they just pay the tax, because ITS THE CHEAPEST THING TO DO.... Although I take your point on the global financial situation affecting a countrys economic performance, however why do you think the global position changes though? Because of rule changes - but thats another discussion!

borat52

Not only that, but more importantly businesses can turn a profit in times of low taxation, so generally more businesses exist as the costs associated with running the business are lower than they were before.

The idea that people get rich only by avoiding paying tax is also a little off centre. Many rich people have, and do get rich by taking greater risks and working much harder than the standard, but wage guaranteed, 9-5 entails.

Getting your own business off the ground usually means you face bankruptcy if it goes wrong, a risk many are not willing or able to take.

borat52

I dont wish to dwell on a political point here, but Tony Blair would have us all beleive than under mrs thatcher every person in the country suffered from the greatest recession ever and the economy collapsed rather than grew. Once again another example of how politics seems to be degrading into who can best present their opinion as fact, rather than having a sensible factual discussion of historic events.