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Subject: The Tax On Low Taxes
SYSOP    1/1/2013 7:46:39 AM
 
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VisigothCAS       1/1/2013 9:44:12 AM
Someone's a bad economist. Govenrment spending as a percentage of GDP does not equal a wealthy or even economically healthy nation. The more government takes in taxes the less there is for the private enterprise that generates tax revenues. This leads to calls for more taxes as politicians try to keep up the handouts they depend on for votes. Still higher taxes wither the economy even more. This keeps going around until the economy can't take anymore and it collapses. That's not a popular line of reasoning, but we're seeing it play out right now and will see the end results within a few years.
 
 
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PaulG       1/1/2013 3:30:19 PM
Visigoth,
 
Why do you suppose the Pakistanis are suffering such economic hardship if the govt takes so little of the GDP in taxes, thus leaving so much more for private enterprise?
 
Under your reasoning, shouldn't Pakistan be thriving as things now stand? 
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bikebrains    Payback Time   1/1/2013 5:46:23 PM
"In the 54 months since a democratically elected government took over from a military dictatorship in Pakistan the poverty rate has gone up (from 17 percent to nearly 25 percent) as has the percentage of Pakistanis who lack sufficient food (from 48 to 58 percent)."      If the government of Pakistan had not hidden Osama bin Laden in Abbottabad and if the government of Pakistan had not been involved directly or indirectly in the deaths of ISAF personnel and if the Government of Pakistan had not cut the supply lines to our brave troops in Afghanistan,  then I might have cared about Pakistan's problems.  But the situation being what it is, may I suggest that the consumer of the United States voice its opinion on the subject of the Government of Pakistan by boycotting all goods made in Pakistan.    That act will deprive Pakistan of three billion dollars per year. Payback is a bitch.
 
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Johnny       1/1/2013 9:12:25 PM
You're right. Someone is a bad economist. As a poster pointed out on a different website, saying
that the more government takes in taxes the less there is for the private sector is a myth.
Government spending AND taxes are part of the GDP.
Cut government spending on defense by say 80% and then see what happens to the economy.  
Another poster on website I mentioned earlier wrote "We already know that US taxpayers pay the
lowest rates of tax in the developed world.We also know that there are aggressive moves to lower
corporate tax rates ... Yet the problem in the US is that people and Corporations are paying
too little tax for the services they expect to receive."
 
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Skylark       1/1/2013 10:58:00 PM


Cut government spending on defense by say 80% and then see what happens to the economy.  
With Democrats in charge, it's a safe bet that we would soon see exactly what an 80% defense spending cut looks like.   And (FYI) the current administration could care less what that might do to the economy if they could use the resulting bureaucratic windfall to buy more votes.

 
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Tucci78    Economics in One Lesson   1/2/2013 9:51:04 AM
Writes Johnny: "Government spending AND taxes are part of the GDP," failing to appreciate that this reveals why this metric is inadequate as the sole (or even principal) assessment of an economy's viability.
 
By contrast, VisigothCAS is absolutely correct in observing that "The more government takes in taxes the less there is for the private enterprise that generates tax revenues," and PaulG asks a question far more profound than he understood when he snerked:
 
"Why do you suppose the Pakistanis are suffering such economic hardship if the govt takes so little of the GDP in taxes, thus leaving so much more for private enterprise?"  
 
What obtains in Pakistan is a diplomatically recognized nation-state in which government economic policy is raddled not only by corruption in public office but by perversity in principle as regards the effects of "regulatory" policies upon productive activities in the private sector.
 
It can be safely and reliably stated that just as "Taxes are not levied for the benefit of the taxed" (Robert A. Heinlein), government regulations are not imposed or operated for the benefit of the end-consumer they're allegedly enacted to protect. 
 
The preponderance of government regulations on economic activity are actively sought by the established actors (corporations) in the market segment to be regulated.  If they don't control the initial formulation of regulatory policies and implementation, they know good and ghoddam well that they will, by way of political influence, bureaucratic corruption, legal maneuvering, and superiority in technical knowledge.  This is a phenomenon well-known to good economists.  The term is "regulatory capture."
 
Such regulations confer enormous advantage on established market segment actors.  Those with a foothold in the field have superior knowledge, superior experience, superior human resources when compared against new entrants trying to compete. Innovation, flexibility, cost-efficiency - none of these matter as much in a government-regulated market as does "pull."  
 
Y'know.  Connections.  Owning or renting your own Senator or two.  The ability to influence senior appointments in the regulating bureaucracy.  What Heinlein referred to as "Breakages, Ltd." in his short story "Let There Be Light." 
 
If you're not familiar with that story, or with Heinlein, you're a mundane, and therefore barely useful as breeding stock. 
 
Gaining such advantages in a relatively smaller, even more hideously corrupt kakistocracy like Pakistan is correspondingly easier than doing the job in America's Mordor-on-the-Potomac. 
 
So it's not just corruption in the government, or the propensity of the Pakistani military to perpetrate a coup d'etat rather more frequently than the average NFL team makes a change in their uniforms, or the ability of well-"connected" Pakistani fat cats (a great many of them government thugs) to evade personal taxes, but rather what it is that the Pakistani government does in terms of intrinsically crippling the Pakistani economy with regulations that preserve the primacy of private-sector merchants and manufacturers with "pull," and thus suppressing innovation and other types of competition which would otherwise make quality of life better for the average Pakistani citizen and the Pakistani national economy more productive of wealth whence their government might derive tax revenues.  
 
Let's finish by quoting Henry Hazlitt, in his book Economics in One Lesson (1946): 
 
"The whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. The art of economics consists in looking not merely at the immediate but the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups. "
 
Try not to be as bad an economist as our government thugs want you to be, okay?
 
 
 
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PaulG       1/2/2013 1:07:32 PM

Tucci,


The original article identified the cause of the suffering of the Pakistani people as being the govt’s lack of funds due to nonpayment of taxes by the fat cats, to which fine Visigoth retorted that the Pakistani economy would be better off with lower taxes (its current situation), which prompted my own query.


The issue you raise of special interests controlling the govt is valid and too true, but it doesn’t bear on the assertion of the article, nor on Visigoth’s, with respect to the effectiveness of utilizing money of the fat cats in the form of taxes to help those at the bottom end of the scale.


Put another way, the article presupposes that the govt will use its tax revenue to help its poor citizens, and not use it and its power to serve its funders.


Signed,


Hopelessly-mundane-and-barely-useful-as-breeding-stock

Paul



 
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Tucci78    The benign Pakistani government (1 of 2)   1/2/2013 4:26:16 PM
 PaulG fails to appreciate the fact that I'd said nothing about the article (above), and for the good reason that like most observers adherent to the principles of good economics, I don't accept the notion that the wisest and most effective controllers of any polity's spending power are elected and/or appointed officers of government.
 
Such prehensile gentry are historically - broadly, deeply, thoroughly - incapable of the decision-making necessary to operate a division of labor economy to any level of efficiency or efficacy approaching what a market process free of coercion has invariably been proven capable of doing.  In the words of H.L. Mencken (who managed to put so much so aptly):
 
"The government consists of a gang of men exactly like you and me. They have, taking one with another, no special talent for the business of government; they have only a talent for getting and holding office. Their principal device to that end is to search out groups who pant and pine for something they can't get and to promise to give it to them. Nine times out of ten that promise is worth nothing. The tenth time is made good by looting A to satisfy B. In other words, government is a broker in pillage, and every election is sort of an advance auction sale of stolen goods."
 
Emphasis added, though in light of the 2012 general elections and the present shenanigans in the national capital, no emphasis should be necessary, should it?
 
Falling back yet again on Henry Hazlitt's Economics in One Lesson, VisigothCAS gains yet more support (as if he needed it) in this economist's note that:
 
"...the larger the percentage of the national income taken by taxes the greater the deterrent to private production and employment. When the total tax burden grows beyond a bearable size, the problem of devising taxes that will not discourage and disrupt production becomes insoluble."
 
This is not just good economic principle but - happily - plain goddam common sense.  See also the "fiscal cliff" and the idiocy of raising taxes in any recession, as instantiated in the Republican Party's absolutely insane Smoot-Hawley Tariff Act of 1930 and everything that our Kenyan Keynesian is trying to do in his quest to utterly destroy the U.S. economy.
 
Let's get to another common-sense understanding.  Government always serves the interests of "the fat cats" as its prime priority.  All else is undertaken (no matter how loud the squeals and caterwauls) at second and third and even further remove, and this has been the case since time out of memory.  Government is fundamentally evil, no matter that it might in some remote way be excused as an allegedly "necessary" evil, and evil people always batten upon government.  It is as natural as buzzards seeking carrion, and killing small children whenever they can get away with it.
- Continued - 
 
 
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Tucci78    The benign Pakistani government (2 of 2)   1/2/2013 4:29:31 PM
- Concluded -
 
There's no way for politicians (who get their jobs by winning popularity contests) and career bureaucrats (who advance themselves by sucking up to popularity contest winners) to achieve optimum - i.e., profitably productive - results when given control of economic resources, so it's obvious that except to the extent that those resources are kept out of the hands of politicians and bureaucrats - and those "businessmen" who screw their competition and diddle their customers by way of political influence - you have what the late Mrs. O'Connor had referred to as "The Aristocracy of Pull," writing:
 
"When you see that trading is done, not by consent, but by compulsion -  When you see that in order to produce, you need to obtain permission from men who produce nothing - when you see that money is flowing to those who deal, not in goods, but in favors - when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you - when you see corruption being rewarded and honesty becoming a self-sacrifice - you may know that your society is doomed."
 
Pakistani society - in which those "fat cats" are in many if not most cases government officials and therefore vested not only in normative (inescapably malpractitionate as well as malfeasant) control of the Pakistani economy but also personal peculations to divert government funds to their own bank accounts - is doomed.
 
More than just failure to collect tax revenues is afflicting Pakistan.  The rot runs far deeper, such that increasing the corruptocracy's tax take would get pretty much the same benefit as gathering up all the children of Pakistan and draining a half-liter of each little boy's and girl's blood into a sewer.
 
With that in mind, should we now discuss what's the absolutely certain intermediate and long-term outcome of this gaudy "fiscal cliff" fix being raindanced into existence by the thieves and charlatans convening as our great permanently incumbent Boot On Your Neck Party excuse for a federal government in the City of the Damned?
-30 -
 
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Reactive       1/2/2013 4:45:23 PM
^^ Excellent posts...
 
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