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Thread: Oxfams report on economic inequality

  1. #16
    Senior Contributor DOR's Avatar
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    One of the basic philosophical questions of fiscal economics is that of taxing earnings, savings/investment, spending or a mix of two or all three.

    The best thinking is that an optimal economic development scenario is not the same for a developing economy as for a more developed one. When an economy is “young” in a developmental sense (low incomes, young population), taxing consumption more than earnings, savings or investments, encourages capital accumulation that supports overall economic development.

    When a country is more mature – richer, older – it is thought to be better to tax earnings and savings in line with consumption. Taxing investment is not generally useful in the sense that it doesn’t generate much revenue.

    Taxation, to be useful, needs to be –
    Neutral. It fairly distributes the burden while minimizing disincentives.
    Fair. It is vertically equitable, which is to say it falls on a very broad base, rather than just hitting easy targets.
    Effective. It must produce significant revenue, and in a timely manner.
    Certain and simple. It needs to be transparent, predictable and intelligible.
    Flexible. It needs to be capable of adjusting to technological change, commercial developments and other changes to the economy.
    Competitive. It should not ignore the impact on international positioning or competetiveness.
    Stable. It should generate predictable revenue streams largely isolated from short-term economic fluctuations.

    For a broader discussion, see http://www.info.gov.hk/archive/consu...1/condoc-e.pdf

    - - - - -

    Back to Apple. What is the advantage or disadvantage to (a) taxing Apple’s sales on the day they occur, and remitting the money within a month or quarter; (b) taxing Apple’s profits when they are recognized, and remitting the money annually or over an even longer time period; and (c) taxing Apple’s retained earnings after some multi-year period, providing the funds are not used for dividends, stock buy-backs or some other tax dodge?

    In short, if there is to be taxation, why should it not be up front, at the point of sale?

    - - - - -

    That makes sense but I am not trying to suggest people shouldn't pay significant tax, only that in many instances we have gone past that. And concurrently others are paying virtually nothing.
    The US government takes far less out of the economy than almost all other OECD governments. And, as Mitt Romney famously said, 47% don’t pay taxes" … which is a pretty high rate by rich world standards. Mainly, that’s because the US has no national retail tax.

  2. #17
    Senior Contributor Doktor's Avatar
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    Quote Originally Posted by DOR View Post
    Not my figures; I was just quoting.

    The assertion -- which is highly questionable -- is that 8 men own as much as 3.6 billion people. There's no where I can see that asserts that's everyone in the world, just the poorest 3.6 billion.
    No, it says that 8 men hold half of the world wealth and the other half is held by 3.6 bn people. I get what they want to say, but ffs when making an argument, make it right (no pun intended).
    No such thing as a good tax - Churchill

    To make mistakes is human. To blame someone else for your mistake, is strategic.

  3. #18
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    Quote Originally Posted by DOR View Post
    One of the basic philosophical questions of fiscal economics is that of taxing earnings, savings/investment, spending or a mix of two or all three.

    The best thinking is that an optimal economic development scenario is not the same for a developing economy as for a more developed one. When an economy is “young” in a developmental sense (low incomes, young population), taxing consumption more than earnings, savings or investments, encourages capital accumulation that supports overall economic development.

    When a country is more mature – richer, older – it is thought to be better to tax earnings and savings in line with consumption. Taxing investment is not generally useful in the sense that it doesn’t generate much revenue.

    Taxation, to be useful, needs to be –
    Neutral. It fairly distributes the burden while minimizing disincentives.
    Fair. It is vertically equitable, which is to say it falls on a very broad base, rather than just hitting easy targets.
    Effective. It must produce significant revenue, and in a timely manner.
    Certain and simple. It needs to be transparent, predictable and intelligible.
    Flexible. It needs to be capable of adjusting to technological change, commercial developments and other changes to the economy.
    Competitive. It should not ignore the impact on international positioning or competetiveness.
    Stable. It should generate predictable revenue streams largely isolated from short-term economic fluctuations.

    For a broader discussion, see http://www.info.gov.hk/archive/consu...1/condoc-e.pdf

    - - - - -
    Thanks

    Quote Originally Posted by DOR View Post

    In short, if there is to be taxation, why should it not be up front, at the point of sale?
    I'm not against this, only the idea that too little tax is paid. But help me to understand. In what form do companies pay at the point of sale at the moment?

    I assume the US states must have retail taxes if their is no national equivalent.

  4. #19
    Senior Contributor DOR's Avatar
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    45 US states, DC, Guam and Puerto Rico (10.5% VAT) levy a general sales tax ranging up to 7.5% (California), and adding in city/county sales taxes takes the total in some places up to 11%. Alaska, Delaware, Montana, New Hampshire and Oregon do not. States get considerable income from personal and property taxes.

    The federal government levies an excise tax on fuel, alcohol, firearms, tobacco and probably some other items or events that I can’t identify right away.

    Companies pay federal taxes on income and payroll. Depending on their activities, they may well pay others such as property taxes. Australia, Belgium, France, Germany, Japan and Sweden have higher headline profits tax rates than the US, but a lot depends on the methodology used to make such calculations. Most obviously, there are vast differences as to what is taxed, as well as the rates.

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    Quote Originally Posted by DOR View Post
    45 US states, DC, Guam and Puerto Rico (10.5% VAT) levy a general sales tax ranging up to 7.5% (California), and adding in city/county sales taxes takes the total in some places up to 11%. Alaska, Delaware, Montana, New Hampshire and Oregon do not. States get considerable income from personal and property taxes.

    The federal government levies an excise tax on fuel, alcohol, firearms, tobacco and probably some other items or events that I can’t identify right away.

    Companies pay federal taxes on income and payroll. Depending on their activities, they may well pay others such as property taxes. Australia, Belgium, France, Germany, Japan and Sweden have higher headline profits tax rates than the US, but a lot depends on the methodology used to make such calculations. Most obviously, there are vast differences as to what is taxed, as well as the rates.
    So if I have understood your posts correctly, what you are saying is that the easiest course if one wanted to hypothetically tax large corporations more effectively like Apple, would be to increase or in the case of the US national government create sales taxes that generated revenue from sales of their products?

    My other point is not a rebuttal to your idea, because I was the one who listed Apple, but many companies don't directly generate their revenue through retail, so won't many companies escape sales taxes...

  6. #21
    Senior Contributor Doktor's Avatar
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    Quote Originally Posted by tantalus View Post
    So if I have understood your posts correctly, what you are saying is that the easiest course if one wanted to hypothetically tax large corporations more effectively like Apple, would be to increase or in the case of the US national government create sales taxes that generated revenue from sales of their products?

    My other point is not a rebuttal to your idea, because I was the one who listed Apple, but many companies don't directly generate their revenue through retail, so won't many companies escape sales taxes...
    How about flat rate, no loopholes tax + customs + VAT?

    DOR, sales tax is nice, but one can only eat certain amount of food, wear certain pairs of shoes, be they wealthy or not. I would believe there is a sweatspot on personal consumption. Even more convinced on this looking at the tech managers outfit, where Jobs and Zuckerberg look like they only two shirts and one sweater.
    No such thing as a good tax - Churchill

    To make mistakes is human. To blame someone else for your mistake, is strategic.

  7. #22
    Senior Contributor DOR's Avatar
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    Quote Originally Posted by tantalus View Post
    So if I have understood your posts correctly, what you are saying is that the easiest course if one wanted to hypothetically tax large corporations more effectively like Apple, would be to increase or in the case of the US national government create sales taxes that generated revenue from sales of their products?

    My other point is not a rebuttal to your idea, because I was the one who listed Apple, but many companies don't directly generate their revenue through retail, so won't many companies escape sales taxes...
    It was a hypothetical response to the suggestion that corporate reserves be taxed, not a blanket fiscal policy.


    The easiest to collect, the broadest and largest source of government revenue is an across-the-board retail / sales / VAT / GST / consumption tax. If it is done well, so that someone on a very limited income isn't kicking in the same amount as a billionaire, it can also be equitable. The best way to achieve that is through direct rebates to lower-income households.

    A VAT or GST can effectively tax corporations by its application to their inputs.
    Need a computer? Pay the tax on it.

    To avoid cascading effects, each tax entity above the final consumer level collects tax on its sales. It then deducts taxes paid on inputs and sends the net to the government. If it is a really, really bad Trumpesque company, it may end up with more tax paid than collected. In that case, it gets a refund.

    If you don't sell retail, collect the tax from your wholesale customers.

    = = = = =

    Doktor,

    How about flat rate, no loopholes tax + customs + VAT?

    DOR, sales tax is nice, but one can only eat certain amount of food, wear certain pairs of shoes, be they wealthy or not. I would believe there is a sweatspot on personal consumption. Even more convinced on this looking at the tech managers outfit, where Jobs and Zuckerberg look like they only two shirts and one sweater.
    A flat (corporate) tax is already in place. To have a flat personal income tax would be enormously unfair and, at the rates needed to collect the same amount of revenue, prohibitively high. ADD: "prohibitively high" means it provides enormous incentives to dodge paying it.

    Eliminating loopholes such as deductions for mortgage interest or capital investment is always the theoretical dream dashed on the rocky shores of congressional special interests.

    Bill Gates may wear the same shirt everyday, but the goods and services that went into building his $125 million mansion -- which would have generated $2.5 million in taxes, at a 20% rate -- would have generated 125 years worth of taxes on annual spending of $100,000.
    $100,000 x .20 = $20,000 x 125 = $2,500,000
    Last edited by DOR; 11 Feb 17, at 11:54.

  8. #23
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    Quote Originally Posted by DOR View Post
    Companies pay federal taxes on income and payroll. Depending on their activities, they may well pay others such as property taxes. Australia, Belgium, France, Germany, Japan and Sweden have higher headline profits tax rates than the US, but a lot depends on the methodology used to make such calculations. Most obviously, there are vast differences as to what is taxed, as well as the rates.
    There's the Tax-to-GDP ratio as a traditional statistical method for such comparisons - that is however highly flawed in comparisons of in particular western and eastern hemispheres since most metrics lump in mandatory personal insurances of individuals where they are obligatory, while often completely ignoring below-federal-level taxation.

    Name:  taxgdp.jpg
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    If you go for actual, deep-level tax revenue in the USA (state and local taxes) you end up at a tax-to-GDP ratio at exactly that 34.3% OECD average; if you exclude obligatory insurance schemes for European countries most end up in the same region - slightly below - with some particulars such as Germany arriving at a 20.5% ratio.

    It should be obvious from the above chart why multinational companies chose Ireland for tax basing btw. Or why there's factories in Mexico beyond just the cheap labour.

  9. #24
    Senior Contributor DOR's Avatar
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    Comparing taxes across jurisdictional lines is fraught with dangers. If my business is wholesaling widgets, and there's a VAT in place, the tax I pay on widget parts is deducted from the tax widget retailers pay on my products.

    But, if there's no VAT, and only a final sales tax, it's a different calculation.

    Capital gains? Taxable in the US but not in Hong Kong.

  10. #25
    Senior Contributor Doktor's Avatar
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    Quote Originally Posted by DOR View Post
    It was a hypothetical response to the suggestion that corporate reserves be taxed, not a blanket fiscal policy.


    The easiest to collect, the broadest and largest source of government revenue is an across-the-board retail / sales / VAT / GST / consumption tax. If it is done well, so that someone on a very limited income isn't kicking in the same amount as a billionaire, it can also be equitable. The best way to achieve that is through direct rebates to lower-income households.

    A VAT or GST can effectively tax corporations by its application to their inputs.
    Need a computer? Pay the tax on it.

    To avoid cascading effects, each tax entity above the final consumer level collects tax on its sales. It then deducts taxes paid on inputs and sends the net to the government. If it is a really, really bad Trumpesque company, it may end up with more tax paid than collected. In that case, it gets a refund.

    If you don't sell retail, collect the tax from your wholesale customers.

    = = = = =

    Doktor,



    A flat (corporate) tax is already in place. To have a flat personal income tax would be enormously unfair and, at the rates needed to collect the same amount of revenue, prohibitively high. ADD: "prohibitively high" means it provides enormous incentives to dodge paying it.

    Eliminating loopholes such as deductions for mortgage interest or capital investment is always the theoretical dream dashed on the rocky shores of congressional special interests.

    Bill Gates may wear the same shirt everyday, but the goods and services that went into building his $125 million mansion -- which would have generated $2.5 million in taxes, at a 20% rate -- would have generated 125 years worth of taxes on annual spending of $100,000.
    $100,000 x .20 = $20,000 x 125 = $2,500,000
    DOR,

    Are you saying that people will dodge taxes because of the flat rate without loopholes and that it will be expensive to collect? How does that compare to the zeroes now? How is it unfair, when you will tax poorer less and richer more (since due to the loopholes they pay what, 4%?)
    No such thing as a good tax - Churchill

    To make mistakes is human. To blame someone else for your mistake, is strategic.

  11. #26
    Senior Contributor DOR's Avatar
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    Quote Originally Posted by Doktor View Post
    DOR,

    Are you saying that people will dodge taxes because of the flat rate without loopholes and that it will be expensive to collect? How does that compare to the zeroes now? How is it unfair, when you will tax poorer less and richer more (since due to the loopholes they pay what, 4%?)
    One of the principles of taxation is to keep the rates low enough, and the process simple enough so that people don't even bother to try to evade it. Higher rates or complicated procedures encourage evasion, reducing revenue and raising the cost of collection. All very counterproductive.

    A flat rate without loopholes has to be high enough to collect sufficient revenue to fund government [Greenland has a flat tax of 36% (44% in the cities)]. Otherwise, it is a flat loser (ha!). The $300 billion in corporate tax revenue the US collected in 2016 is about 20% of total government revenue, so it is clearly going to be missed. It is about 15% of total corporate profits ($2 trillion). If you were to design a US flat corporate tax, would you put the rate above or below 15% ?

    The loopholes that allow some richer people to pay less than some poorer people are not by theoretical design; it's just tax evasion by lobbyist. But, the "close all the loopholes" fantasy is nevertheless unrealistic. Those who advocate a flat tax are almost always those who advocate slashing government services deep into the bone, with little regard for the social consequences. While that is not related to a flat tax, and may be unfair to some proponents, it does make it very hard to separate the fiscal methodology from the political ideology.

  12. #27
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    It's a good thing we progressed from that state isn't it? No wait, it's still the same.

  13. #28
    Senior Contributor DOR's Avatar
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    Quote Originally Posted by servicesp12 View Post
    It's a good thing we progressed from that state isn't it? No wait, it's still the same.
    Welcome to the Board! Please introduce yourself here: http://www.worldaffairsboard.com/showthread.php?t=61571, and please also clarify your question a bit more.

    What do you think we have "progressed" from?
    And, why is (whatever it is / was) still the same?

  14. #29
    Senior Contributor Monash's Avatar
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    So, here's a 'good news' peek at the state of the world, just by way of counterpointing all the bad news we are confronted with on a daily basis.



    Name:  1c659d7d9a747fcd1d0bd3d7e2b760bc.png
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    Last edited by Monash; 08 Aug 17, at 02:48.

  15. #30
    Senior Contributor DOR's Avatar
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    Very well done, whoever did it.
    Putting poverty reduction at the top left drives home the massive improvements we’ve made.
    Trust me?
    I'm an economist!

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