Saturday, January 25, 2014

On the Insanity of Taxing Out of Debt

By the early 1990s, Sweden had a debt to GDP ratio of 80% - this, despite the fact that they were taxing the top earners at somewhere between 70 and 85% for over 20 years. Can we finally put to bed this idiotic assertion that taxing the wealthy a) is good for the economy and b) generates a significant amount of revenue?............................................................................P.S. And it isn't just me who thinks that Sweden's welfare state and their level of taxation were much too high in the '70s and '80s. The Swedish government thought so, too. I mean, why in the hell else would they have lowered taxes from 80-something percent to 50-something percent and their public spending as a percentage of GDP from 66% to 51% (the debt to GDP ratio ultimately dropping to 35%)? For the hell of it?

8 comments:

dmarks said...

(1) With taxation, the few in power forcibly take resources out of the economy, and use the purloined cash for their own purposes... which might or might not make sense.

(2) The rest of the money, that which is kept by the people, is used for what tends to make more sense and is more sustainable.

It's not rocket science that more cash in (1) and away from (2) is a problem. There is a need for taxation, of course. But it should be the minimum necessary to provide important government services. It should most definitely not be used to provide a massive slush fund for megalomaniac Keynesians in Washington who want to treat the US economy like their own personal box of Lego bricks. Ignorant, arrogant, fools meddling in matters which is really not their concern.

Will "take no prisoners" Hart said...

England from 1945 to the late 1970s is yet another example of socialism practically annihilating a nation's economy.

Rational Nation USA said...

You have only three choices; 1) cut spending (includes cutting overlap and ineffective programs, 2) raise taxes, 3) some combination of 1& 2.

We tend to forget that we are a republic. We elect representatives to represent our interests and act on our behalf. By this we understand in the broad sense to mean on behalf of the majority in our society while insuring individuals retain their civil rights and civil liberties.

Our government representatives and bureaucrata have a social contract with the people. It is often referred to as the General Welfare.

Take it from there guys, IMNHO this nation has lost the ability to distinguish what this all means. By nation I mean the People. We are so politicized and partisan we have lost our way.

dmarks said...

The way to reduce government AND reduce poverty is to focus government resources only on the needy (no more welfare the wealthy or bank industry bailouts, and institute sane/small compensation/pensions for the government sector) while also eliminating the corrupt part of the regulatory burden which serves no good purpose but does force companies to fire people and leave country.

I do hold both goals to be admirable.

Will "take no prisoners" Hart said...

I'm a proponent of the third option, guys (a mixture of taxes and cuts). But being that most economists from across the political spectrum have the ratio somewhere between 2.5 and 5.7 to 1, I strongly prefer that the cuts take precedent.

Rational Nation USA said...

I agree Will. Cut first, followed by tax increases to finish. Problem being not many have the political will or ntelligence to do both.

dmarks said...

See WD's latest comment at "Rational Nation". He doesn't want to tax us out of debt now, he now argues that infinite debt in itself is a great virtue.

dmarks said...

Will: I will agree with you that the cuts take precedence. I disagree that there is much need to raise taxes: because actual revenues resulting from taxation are near a record high.