19
Feb
10

A worthwhile Canadian blog

First of all, I’m most remiss in only having linked to Marko’s blog yesterday.  That embarrassing error has since been corrected, but since I imagine that at least two-thirds of you read TMW anyway I’m having a hard time getting worked up about it.

On the other hand: Holy shit, y’all need to have a read at Worthwhile Canadian InitiativeNow.

(I thank Eric Crampton for the pointer.)

I took a not-entirely-random browse through their archives, and came up with the following:

(I have a bit of a beef with this post, in that it posits the Laffer curve as a univariate function with a single maximum and no global minima in the range [0%, 100%].  I think they’re probably right in every way that matters, but I will be dipped in chocolate and thrown to menopausal Baby Boomers before I make their assumption.  For one thing, I imagine the Laffer curve has pretty strong hysteresis, which means it varies with time as well as tax rate.  But still, they look to be right in every way that matters, and the point about kids choosing careers supports my quibble and their point.)

Next we have this post, which inspired, well, this post:

See, this is why we can’t have nice things low child poverty rates:

Progressive Person: How do we raise the tax revenues we need for the social programs we want to implement without tanking the economy?
Economist: Consumption taxes. Theory says that consumption taxes such as the GST are the least-disruptive way of generating tax revenue, and available evidence appears to be consistent with the theory.
PP: But consumption taxes are regressive!
E: Yes, but we can correct for that using targeted transfers to low-income households so that they aren’t worse off; that’s what the GST rebate is for. And there will still be lots left over to fund those social programs.
PP: But consumption taxes are regressive!
E: I know. But they introduce fewer distortions than the alternatives, and we can recompense low-income households for their lost buying power.
PP: But consumption taxes are regressive!
E: I’m not disputing that point, but there’s more to the analysis than that. Okay, let me explain the effects of the various forms of taxes…
<15 years later>
E: …and so we see that a consumption tax accompanied by direct transfers to low-income households is the most effective way of generating the tax revenues you want.
PP: But consumption taxes are regressive!

Now, I’m a good anarchocapitalist and I want to fit in with all my anarchocapitalist friends*, so I hate taxes as evil coercion an’ all that.  But since we’re going to have taxes no matter how many guns I buy, I’m keenly interested in making tax policy as efficient as possible.  So given that Canadian progressives have built a country where voluntary charity is seen as puerile and (shudder) American, I’m interested in finding a taxation regime that at least has the goddamn common courtesy to give us a reach-around.  And, as with the above, one of the truly delightful things about WCI is their efficacy in explaining in language that even progressives can understand why tax schemes designed to abuse the rich fail abysmally to generate revenue needed for useful social programmes.

And while I’m at it:

I thought this would be especially obvious to the sort of person who thinks of any fat-cat corporate manager type as a cartoonish cross between Snidely Whiplash and Scrooge McDuck:

If the owners of the firm can pass the tax along in the form of higher prices, lower wages and/or reduced employment while maintaining the same after-tax rate of profit, then the burden of the corporate tax is borne entirely by workers and consumers. And if firms must compete for investment in an integrated global capital market – as is the case of firms operating in Canada – then that’s exactly what will happen. Even if they’re not the ones who write the cheque to the Receiver-General, the people who really pay corporate taxes are consumers (in the form of higher prices) and workers (in the form of reduced wages and employment). For more on this point, see Who pays corporate taxes? and Why progressives should support reducing corporate tax rates.

I have an image for that one, too:

How much more fucking obvious does it have to get?

And better directed to my above point:

Subtitle: Ed Broadbent means well, but he’s a fucking moron of nation-destroying proportions.  RTWT.

Furthermore and specifically to the point of “why corporate taxes don’t do what you want them to”, we have this:

In particular:

It is typically the case that those who advocate increasing corporate taxes intend for them to be paid by the owners of capital. The analysis goes as follows: Corporate taxes are applied to profits, and since profits are distributed to their owners, corporate taxes are borne by capitalists.

But that’s far from being the end of the story, at least, not in a small open economy such as Canada. The rate of return on investment is determined by the world supply of savings and the world demand for capital, and since Canada has only a small share of the world capital markets, what happens here has essentially no effect on that world rate of return. If an investment project in Canada can’t generate that rate of return, there are any number of others that can.

[…]

So how can firms increase their pre-tax profit rates? They can

  • raise prices in order to pass the tax increase onto consumers, or
  • cut costs – notably wages and/or employment, or
  • both.

Who pays for corporate taxes? Not owners of capital, even if they were the original target – they still get the world rate of return. The people who really pay are consumers and workers.

(There’s an excellent example in one of the first few articles I cited about highly-ranked soccer football players in Europe.  Those footy stars, while extraordinarily well-compensated, don’t give a fuck about tax rates: if taxes go up, their pay will necessarily go up to compensate — or they’ll leave for another better-paying team.)

And finally, easily one of my favourite blog-post titles EVAR:

By now the answer should be facepalmingly obvious, if you believe what I’ve written and quoted above.  But the best part of  that post is the last sentence of the first comment (enough indirection for ya?):

The only way you’ll get anywhere is to get Paul Krugmann to give you support.

Yeah, good luck with that.

——

* Yes, I did that on purpose

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