It would just be really good if companies stopped avoiding tax. Most countries are already pretty much bankrupt - it's worth thinking about for every debt (US National Debt is $35.35 trillion!!) there is a rich person on the end of it with the loan as an asset earning interest.
If companies avoid tax and rich people avoid tax it means more tax for normal people who work for a living.
This is a very naive way of thinking about debt. Cash has a time value. Cash now is worth more than cash later.
I have a mortgage. This mortgage is worth more than the cash I own. That doesn't mean I'm bankrupt. The mortgage is paid on a fixed schedule over 30 years, and during those 30 years I'll have a home and be able to accrue other assets. If I didn't get a mortgage then I would still be saving for my home.
The same is true with the US balance sheet. It has accrued 35T in debt, but it's used that to fund it's operations. Those operations generate more for the US. As long as the US has enough to pay it's obligations over the next few decades there are no issues
That of course doesn't change the fact that tax loopholes can be problematic
I think it's rarely valid to compare countries' economics to your own personal finance, macroeconomics are a lot more complicated. Example: for employed people, going into (or avoiding) debt generally won't affect their yearly wages, but analogously it can for countries (e.g. well spent debt can stimulate economic growth).
> Example: for employed people, going into (or avoiding) debt generally won't affect their yearly wages, but analogously it can for countries
While I do agree that personal finances are a bad analogy for state finances, that is not an illustrative example as to the reasons. An employed person can absolutely improve their yearly wage by going into debt, be it for investing in education to aspire to better paying positions, buying a car which increases their employment catchment area, or even —for a flexible definition of wage— investing in setting up a business.
The downside of state debt is the downward spiral.
If you spend 1/2 your tax income on just servicing the debt, that means either fewer services for people, or borrowing yet more, just to keep things going.
If you borrow more, then it gets even worse.
I really prefer that 1/2 my tax bill doesn't go to interest payments.
Let's say a city builds a bridge that doubles its tax income by opening up a lot of economic opportunities. It pays for this with a 35 year bond. During these 35 years, the entire additional income that the bridge generated goes towards paying off the bond. After the 35 years the bond is paid off and the city enjoys permanently raised tax income (not to mention better economy for residents).
Was there a problem that the city spent 1/2 of tax income on just servicing the debt?
I could go into a lot of reasons, but I'll keep it simple.
It is incredibly rare for governments to break that cycle. This has been demonstrated over and over. Thus, there is no end in 35 years. There is just perpetual 50% taxes to interest on debt.
This means that as it is a persistent state, not perpetually losing 50% tax revenue would make an enormous difference.
Think of it the other extreme though. Imagine governments never borrowed and only used actual 'cash' to build things. I suspect that virtually nothing would have been built over the past 200 years and the world economy would be 1% the size it currently is.
I think you are right in that governments (probably?) shouldn't be funding day to day spending anywhere near as much as they do with debt. This has been a more recent (post WW2) phenomenon with huge expansions of social security programs. But capital expenditure virtually has to be paid with debt.
It's easy to say with trillions of dollars of debt funded infrastructure debt is too high, but imagine the counterfactual - would you be happy with virtually no infrastructure but no debt?
Think of it the other extreme though. Imagine governments never borrowed and only used actual 'cash' to build things. I suspect that virtually nothing would have been built over the past 200 years and the world economy would be 1% the size it currently is.
200 years ago had vastly different taxation methods than today, so I'll stick to the last 100 years.
Your point is countered, by the fact that governments build roads, bridges, and more without any debt or by borrowing money. I think you are underestimating how large a budget governments of all levels have, especially when 50% of it is being used to finance debt. That 50% of tax income, literally disappearing to pay only interest on debt, instead could (for larger cities) literally be used to plop down cash for a bridge in one year.
A lot of this could be solved by better allocating taxation to its intended purpose. There are gas taxes, but often those taxes are appropriated into a general budget. Far better if those taxes were only used for roads, and adjusted accordingly.
(Even if you decide that some gas tax should be an 'environmental' tax, a portion of that gas tax can be allocated as 'road tax', and the above still gels. This could also be a 'tire' tax, or a 'register your car' tax, the method does not matter.)
There is a lot of nuance with taxation, but quite literally throwing 50% of tax revenue away just to pay interest to bankers is very poor form.
I want to add here that, as a Canadian, this isn't a "team" thing in the mental sphere of US politics. And regardless, every single government in the US, federal, state, and often city engages in this practice, regardless of political bent.
This is a "governments love to give things to get votes" problem, which covers all political spheres, and harms us all.
Which country spends 50% of tax income on interest payments? UK spends 8.4% (which is much higher than it used to be because of higher interest rates at the moment - was historically half that).
The US fed government is at ~20% from a quick google, which again is much higher because of interest rates (which again are to come down). Canada spends 10%
Where are you getting this 50% from? For comparison, Walmart spent $550m or so on net interest in their last quarter - out of $8bn operating income, so not a huge difference in the private sector.
capital has upkeep costs, yes, but it seems trivial to look up infrastructure spending, debt service costs, GDP, tax burden, for various tax jurisdictions.
these things are pretty well studied. taxes do go down.
When I look at my federal and provincial government, I see 50% or more being spent on interest only payments. I've seen that number fluctuate a bit, but it's always been between 30% and 50%, if not higher at times.
When you look at the US fed, you see the same sort of thing.
That's demonstrated, therefore, over and over.
I'll put it another way. If Canadian federal and provincial governments weren't paying 1/2 their yearly tax revenue to interest payments on debt, I'll repeat that.. only interest payments, not principle, all of the funding issues with health care, and the military would be gone.
Put yourself in the same situation. Imagine you decide to spent 1/2 your post-tax income on only interest payments. You never make headway on the principle. So the debt is never going away. Now if times are tight (after all, why did you borrow to start with?!), how much worse are you with half your money gone to do absolutely nothing of value?
That's what many of our governments are doing.
In times of economic boom, some frugal governments pay off debt. They reduce that figure. But here's the kicker...
When times are bad, typically interest rates go up. So not only are you paying more as a government for those interest only payments, you have less tax revenue in a recession.
Frankly, I think it should be illegal for governments to borrow money. It's too tempting to gain votes. Politicians often don't care about 20 years from now, they care about the next election, and will tell themselves wild stories about how it will all be OK.
you don't have to convince me that governments are doing dumb shit, but it's not because of debt. it makes sense to borrow when it's cheap. especially for a state. (because when it's cheap it means inflation is low anyway. and arguably when it's too cheap it's imperative for the state to stimulate the economy.)
a lot of things should be "illegal", but since voters don't care legislatures don't either. :/
the obvious problem is the ROI on that debt. (hence the usual opposition to financing rich folks' tax cuts with debt, or subsidizing projects that are not sustainable financially, giving money to wasteful municipalities, etc.)
> Was there a problem that the city spent 1/2 of tax income on just servicing the debt?
Actually, yes.
Let's say I went to the Casino, put all my money on black and won. Great. Was there a problem that I risked all my money in the casino? There surely was.
The thing is, financing investments via bonds means that only parts of the citizens are actually financing it with their private money (and also enjoy the benefits like interest). But the city could also just make a contract over the 35 years with recurring payments instead of paying all upfront. And then it could simply raise the tax (if necessary) to pay the additional payments. The difference is that now all citizens pay for it rather than just a small share.
This is accurate, regarding preferences for optionality, and how our economy currently works. But I think it's worth questioning the expectation that giving up that optionality deserves compensation, whether morally or practically (resulting in compounding "money-on-money returns", usually at low risk if sufficiently diversified).
The Italian economist Silvio Gesell noted, that no other good besides currency works this way. Every other good with a use value (food, houses) tends to lose value over time (entropy being fundamental to the universe), and/or, to carry risk (a share of stock which represents unpredictable ROI). There is course an exception in land, which doesn't intrinsically depreciate, but whose value trends upwards thanks to location value (and which can be addressed separately via Georgist land tax).
Gesell proposed a "demurrage currency" [0], which gradually loses value as it is held: the idea being, rather than being entitled to a return, retaining high long-term optionality is actually a privilege that one should have to pay for, since the real-world value it represents is depreciating. And the incentive to invest (whether at high or low risk) instead becomes to break even (with the rate of demurrage tracking what we currently call the discount rate).
I have no idea if such a concept is practical in a trans-national, growth-dependent global economy (with deflationary crypto-currencies as a BATNA!); if anything, I'm fairly confident it's not. But it's at least worth thinking about: that it's not at all axiomatic that holders of value should be entitled to compensation for "forgoing consumption" (not only because the wealthy don't necessarily need such an incentive, but also because increased consumption can mean an increase in the velocity of money, and more total value created, per the multiplier effect, and the "hotel riddle" [1]).
>The mortgage is paid on a fixed schedule over 30 years
But now imagine that you are never allowed to pay it off: you only pay the interest. And the debt will be passed to your children, and their children. This is the US Govt debt.
In feudal times, you worked for your lord and master. If you didn't pay, armed men would come and take your stuff. In modern times, you still work for your lords and masters, and if you don't pay, armed men will come and take your stuff. How they did this was to create an income tax, and then have their cronies in the house and senate spend more and more and never "pay off the mortgage".
In modern times, the lord and master is older generations (or soon to be old generations) that vote for greater and greater benefits and lower taxes for themselves.
> This is a very naive way of thinking about debt.
Well it’s how this economist and Citibank’s former number 1 trader describes our debt based money system. So maybe you’re the naive one here. Please watch this video and enlighten yourself: What is Money? https://youtu.be/_gcNMu40jqs
> As long as the US has enough to pay it's obligations over the next few decades there are no issues
This is rather my point, as more wealth is transferred from individuals and governments to the rich (who the tax system is largely optional for) there simply won’t be that tax take to support the debt.
> It would just be really good if companies stopped avoiding tax.
It would be great if everybody just stopped committing crimes, or being rude even when legal, altogether.
But what are our alternatives other than just waiting for everyone to just do this? Also, how will everyone know how to just contact me to just find out when using the law to avoid taxes when you can is just evil, when it's just the smart thing to do, or when avoiding a tax is just justice, hard-fought and well-deserved?
It would also be just great if it were autumn all year, and if alcohol and sugar were just good for you.
>there is a rich person on the end of it with the loan as an asset earning interest.
About half of treasuries are held by the Fed or foreign investors which largely means other governments and foreign companies. Most of the rest are owned by pension funds, banks, local government, insurance companies, etc.
>> there is a rich person on the end of it with the loan as an asset earning interest.
> About half of treasuries are held by the Fed or foreign investors which largely means other governments and foreign companies. Most of the rest are owned by pension funds, banks, local government, insurance companies, etc.
So what? That doesn't mean you shouldn't think about it in terms of a rich person, like the GP suggests.
The modern capitalist system is a very slippery thing to think about, and there are all kinds of traps to mislead people. For instance, facts like the one you point out can draw people away from understanding the truth behind scenarios where the rich are the group that greatly disproportionally benefits while not being the group that benefits the most in absolute terms.
On a related note: IMHO the 401k is one of the greatest propaganda coups in the history of democracy. You have vast swaths of the public owning tiny, insignificant slivers of the overall pie; while the rich own big, disproportionate slices. But then the public votes to increase those tiny, tangible slivers by trading much more valuable but less tangible things.
There is no such slippery-ness or slippage. The system is fundamentally assessable with basic accounting and Econ 101. No, the 401k is not a coup. No, class-warfare advocates cannot fundamentally create value, improve the economy, or the better state of individual well-being—-either temporarily or permanently—-by wealth transfer, and their efforts typically result in gross infringement of human rights. Typically in history these wealth transfers have greatest negative impact against the middle- and lower- tiers of wealth. The study of the encomiendas in Columbia is perhaps somewhat insightful.
Economy is a prime example of a field where a bit of knowledge is worse than no knowledge, and nothing is more deranged than someone who has completed Econ 101, and thinking they now understand the world:-P
Most economists don't understand the world, only their theory of it. A theory which in many experiments has been show to be bonkers. Albeit useful bonkers in certain, limited, circumstances.
That's not even the same thing. The govt is bankrupt because it keeps printing money to get out of previous debt and other poor choices. The companies are following the rules and taking advantage of loopholes in the system.
That will never work because the powerful will lobby the politicians to add some new loophole.
The only solution is to NOT have taxes, NOT have a government and then the market is fair for everyone.
Unless you are into anarchy / voluntarism you won't like this solution, so keep enjoying your broken system with increasing inequality between the top 0.01% who colludes with the government and the rest - while the middle class gets their money stolen to pay for both rich and poor.
Not having a government is the same as handing you society over to robber barons.
Your solution would end with the reintroduction of feudalism as the only way that the rich and powerful can hold on to their wealth without it being plundered by the rich guy next door.
Markets can only be fair if everyone in the market has the same degree of financial power. This can never happen in large scale anarchies. The only chance of it happening is by having strong regulation.
Companies and high net worth individuals will never stop avoiding taxes, and it’s naive to assume otherwise. If anything, tax laws need to account for this reality more aggressively.
While there is lots of tax fraud, I feel it’s probably a drop in the bucket. Countries will have to either cut back on spending or borrow until they collapse under the weight of their own inept budgeting.
Countries aren't bankrupt, they can't really go bankrupt if they use their own currency. Countries are not businesses they don't need to make money to be able to spend.
Tax shouldn't be seen as the countries income but as a tool for redistribution of wealth and to keep trust in the currency as a whole. If you don't have debt you don't have money, every printed dollar goes into the system and can be used in various things not only an asset earning interest
I think this is a cultural problem. Every accountant everywhere works under the implicit assumption that taxes are to be avoided. Imagine if having a large tax contribution was something to be proud of. Perhaps the government needs to advertise more what the money actually gets spent on. Government works on boring stuff like the culverts that are essential to stopping roads flooding. People have no idea of the work that goes into this and just assume roads don't flood. It's like that old thing where you think everyone's job is pointless/easy except your own.
A) These bankrupt countries are exactly why we should think twice about funding their spending habit, with reevaluation only when they address their spending habit
B) These companies are tax compliant, barring when the ECJ rules against them
C) if what you meant was equivalent taxation - no amount of taxation of profits or income would fill these bankrupt countries budget holes
D) the countries tell you exactly how not to pay tax, they incentivize certain transactions and tax the remainder of funds that weren't involved. (The ECJ overruled an entire country, with retroactive logic)
Taxes don't fund government programs. Taxes are a way to mitigate the buying power of private capital when it comes to bidding against government for things. Governments just create money supply for programs. It's not tax money. That's just an old cliche.
Not saying this was his intent, but this is part of Modern Monetary Theory (MMT) which says governments print money to provide services, and collect taxes as a matter of policy to legitimatize the currency, and for inflation and unemployment controls.
>Spending by a government that issues its own currency is nominally self-financing. *However, under a full employment assumption, to acquire resources produced by its population without potential inflationary pressures, removal of purchasing power must occur via government borrowing, taxes, custom duties, the sale or lease of natural resources, and various fees like national park entry fees or licensing fees. When these sovereign governments choose to temporarily remove spent money by issuing securities in its place, they pay interest on the money borrowed.* Changes in government spending are a major component of fiscal policy used to stabilize the macroeconomic business cycle.
Maybe governments need to stop spending 40-50% of the entire GDP?
For example, the US federal government + state governments spend about $10 trillion a year. The US has a GDP of about $25 trillion. And the US isn't exactly known as a high tax country. France is estimated to be at 58%...
The money might not vanish, but you're still working Monday through Wednesday for the government in France. It's as though the government was partly the business owner. The question this raises is whether the benefit for society in the long-term is actually worth it. The larger the share the government takes the less motivated people will be to make things better themselves.
Those numbers are not directly comparable. GDP is a measure of added value, not spending. Public sector spending may be ~50% of the GDP, but private sector spending is something like ~200%, making public sector ~20% of the total.
Why wouldn't they be comparable? It's a measure of how much government taxes take out of 'your' paycheck - tax receipts don't tell the whole story, because they don't show inflation caused by money printing. Government spending does.
It effectively indicates that you're working for the manor lord Monday and Tuesday (and Wednesday in France), and are allowed to work on your own field from Wednesday to Friday. At the extreme it is obvious that this would discourage work and starting businesses. If the government took 100% it wouldn't make sense to do anything (legally). Therefore the question is: at what percentage does this start happening too much?
This is an important question, because government budget as a percentage of GDP has been increasing over the last century. At the start of the 20th century this percentage was around 3-5%. Today it's around 40-60%. And it seems to be increasing even today.
People don't like austerity, but if our current system is built on an ever-increasing share of government spending of the economy, then eventually we're going to be hit with austerity x10.
They are not comparable, because the whole economy is ~250% of GDP when you measure it by spending. The government spends ~50% of GDP. Households spend ~70%. And businesses spend >100%. You should either compare government spending to total spending or the part of GDP produced by the government to total GDP. Either way, the government is ~20% of the economy.
Total spending is not something that gets reported very often. I've seen the numbers for Finland but not for other countries. In the US, consumer spending seems to be ~70% of GDP, but I can't find any numbers for business spending.
The welfare systems (in Europe at least) don't work. They work if you're old right now, but once the young people of today become old they won't get anything meaningful out of it. At least that's the impression I have and everyone else my age has.
And healthcare is unavailable anyway. Several month long waits to see a specialist.
About public healthcare it's pretty similar on Brazil! Many people can't pay for specialists, exams and etc. So, they have to go early morning (when it's dark yet), wait on long queues and many of them when finally is attended the local doesn't have more vacancies and need to go back another day.
I know multiple people whose cancer was successfully cured (or, at least, treated) in the healthcare system you can "unavailable". The systems in Europe typically focus more efforts on critical care (like cancers), and less so on mere annoyances, hence the queues for non-critical stuff. Compare that with the US, where for a sizable portion of population, treating their cancer leads to being bankrupt and homeless.
I'm not sure. I don't think anyone knows for sure, but obesity probably heavily factors into it.
53% of Europeans are overweight or obese. The same figure in the US is 72%. That's a 36% difference.
More than that, 17% of Europeans are obese (BMI >30) compared to the US's 42%.
The fact that the US has a life expectancy of 79.1 compared to the EU's 81.5 years with that kind of difference in obesity levels is actually surprising. You would expect it to be lower than that in the US.
> compared to the EU's 81.5 years with that kind of difference in obesity levels is actually surprising
It's probably considerable higher in EU15 i.e. if we exclude all the poor (currently or previously) ex-socialist Central and Eastern European countries that have a lot of baggage
Worse in some ways, better in others. The USA generally has higher 5-year cancer survival rates, and shorter waits for specialist visits and advanced imaging procedures. Of course there's a high variance in outcomes based on location and affluence.
> shorter waits for specialist visits and advanced imaging procedures
Those are not health outcomes, but merely services KPAs. The KPAs may be better, because a portion of population can't afford the services, so they don't have to be serviced at all.
Dont miss part 2, part 3,... and skip non health care related, you might not want to hear them.
And anyway, believe me that everyone rather waits in line (which is not really the case, if you are an urgent case, you trough the line), that not even go to the line as their medical insurance doesnt support the needed therapy as it would make their family bankrupt.
And yet, the only country in the world with more Americans living in it than the other way around is Australia.[1] Revealed preferences expose the truth that no number of videos with cherry-picked participants do not.
[1] That's on an absolute basis. Since the US has 20 times as many people as Australia, the odds an Australian will move to the US is still far higher than the odds an American will move to Australia.
Sure, you have quite a few USA citizens living in Australia talking about how messed up the USA is. You just need to study the material.
And feel free to show "cherry picked" material, where such amount of people are claiming otherwise. From the people that have left USA for more than vacations.
Did you?
Asking as I have always loved this Mark Twain quote, “Travel is fatal to prejuidce, bigotry, and narrow-mindedness, and many of our people need it sorely on these accounts. Broad, wholesome, charitable views of men and things cannot be acquired by vegetating in one little corner of the earth all one's lifetime.”
I regularly use it on local far right "peasants" in my country, that are sure, there is nothing better than their own turf while never stepping far away from it.
If companies avoid tax and rich people avoid tax it means more tax for normal people who work for a living.