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Taxing Growth

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22 pointsIncerto61 comments

The problem with the UK tax system is not that it is progressive. In fact, once you add NI it is not all that strongly progressive.

The problem is that complexity of tax law, the number of loopholes, incentives, refunds....

The really big problem is that people on low incomes do not have an incentive to work because the loss of benefits means they are barely any better off from working. That is a strong argument for UBI, or at least a much slower rate of loss of benefits so people keep more of their income.

There are a lot of imprecise and misleading claims made here, for example:

> people who are talented, people who are wealthy, people who have capital, people who have entrepreneurial skills, they can move.

Talent, wealth, and entrepreneurial skills are not the same thing. Wealth is often inherited, talented people may be employed and not all talents are all that portable. While capital can be moved the assets that it is tied up in cannot - you can see your business and move, but that just means someone else buys your business. A wealthy person does not have to live where their investments are.

Read a comment some stories back, that all loss of benefits should be gradual on a curve, never with cliffs. So that you'd pay a few hundred thousand in taxes and get a benefits check for 1 dollar, or pound or whatever.

The UK does not have many cliffs, but the curve is too steep.

There is also a very high effective marginal for high earners in certain circumstances (particular range of incomes, have children). People complain about his as well as the steep loss of benefits. Its very rarely the same people complaining about both.

This is llm hallucination too? Old ideas and goes back to a system that was in place in the 1800’s. It didn’t go well. Who are these people that peddle this every 20-30 years or so? Opportunist.

Flat tax and dregulation. Pretending like they are new ideas.

Gosh, they have statistics! By a man. A man from Goldman!

"I was quoted by a man from Goldman's in the mansion house, that in Hong Kong it cost them $70 to onboard a client. In the UK, it now costs them $10,000 to onboard a client just because of the regulation."

Well I'll be darned!

It’s probably because of bureaucracy at Goldman - know your customer checks are pretty cheap and there’s APIs that can do it.

"Locals" in HK that do the roles like KYC grunt work make a fraction of their equivalent in London (or their expat boss in HK).

In the US about twenty years ago, there was a minor movement for a flat sales tax that would replace all other taxes. I lived in Georgia at the time, which was the epicenter of support for the idea. Proponents got themselves stuck in a metaphoric tarpit when they wouldn't accept that most people's way of calculating sales tax was different than what they promoted. At least in the US, if there's a 7% sales tax, it means if you buy something for a dollar, you pay seven cents in tax. Their flat sales tax would have been 30% using this method, but they wanted to promote it as being only 23% since $0.30 is 23% of $1.30.

I'm sure there were other reasons why it failed, but for the people I knew who supported it, claiming it to be a 23% sales tax instead of a 30% sales tax was a hill they were willing to let the whole thing die on (and it did die). Lots of people who casually supported it at first when they heard 23%, lost interest when it was clarified what that really meant. The difference between 23% and 30% isn't all that great but if you're going to overhaul the tax system, trust in those who are doing it is needed.

Laughing aloud at the thought of the average paycheck to paycheck consumerist blowing a gasket when they see a $24k tax bill for their $80k pickup truck.

Every time someone shares something it has to be new, otherwise it's not worthy of your attention? Couldn't you at least provide some constructive criticism why the argument falls short in your mind, instead of the sharing the first knee-jerky reaction that popped up in your head that just touches the surface?

> Couldn't you at least provide some constructive criticism why the argument falls short in your mind […]

For the flat tax, which is tax cut for the rich:

> This paper uses data from 18 OECD countries over the last five decades to estimate the causal effect of major tax cuts for the rich on income inequality, economic growth, and unemployment. First, we use a new encompassing measure of taxes on the rich to identify instances of major reduction in tax progressivity. Then, we look at the causal effect of these episodes on economic outcomes by applying a nonparametric generalization of the difference-in-differences indicator that implements Mahalanobis matching in panel data analysis. We find that major reforms reducing taxes on the rich lead to higher income inequality as measured by the top 1% share of pre-tax national income. The effect remains stable in the medium term. In contrast, such reforms do not have any significant effect on economic growth and unemployment.

* https://eprints.lse.ac.uk/107919/

* https://en.wikipedia.org/wiki/Trickle-down_economics

But the episode has just as little behind their claims. Tech sector is up. Why? Because of deregulation. Ok, how? Nah, moving on to classic cars.

Ok, share those opinions, views and perspectives then, instead of just attacking the surface of "Well, nothing here is new so no one should care".

The quality of discourse on HN has been nearing the bottom of the barrel (read: mostly indistinguishable from Reddit) since the pandemic. It’s very rare these days to see citations or even arguments that explain personal reasoning. Just like Reddit and Facebook, commenters mostly write what they think or feel as if it were unyielding fact, and the most common denominator (read: boring, derivative, often oversimplified assumptions) rise to the top via the voting system.

> The quality of discourse on HN has been nearing the bottom of the barrel (read: mostly indistinguishable from Reddit) since the pandemic

That's very much not true, and it's also a tale as old as HN at this point. Since I started commenting on HN in 2010 sometime, the quality had stayed more or less the same, and hasn't drastically dropped in quality like Reddit has done as it grew. Also, the amount of comments that complain that HN is turning into Reddit seems to have stayed at the same level of frequency too, fwiw.

The constructive criticism is that this has been the economic policy of the US for the last 40 years.

It's been a disaster that's lead to wealth consolidation not seen since the gilded age while bringing back old terrible concepts (such as company towns [1]). It's wrecked the middle class.

The fact is, tax isn't what gets in the way of company growth and innovation. It shockingly is actually the opposite. When you have buybacks, low taxes, and easy mergers and acquisitions, it encourages companies to behave in manners not good for the company but good for the owners of the company. That means sending money to stock buybacks, buying out competition, suppressing wages, and cutting corners which overall kill quality. That's because the name of the game is capturing as much money as possible.

High tax and strong corporate regulations like we had in the 50s, 60s, and 70s changes the perspective of companies. If you give a company owner the choice to spend a dollar in taxes or spend it on employee benefits, they'll spend it on employee benefits. But leave a loophole for how they can circuitously capture that dollar for themselves and they'll do that every time.

The tax cut and deregulation era of Reagan, Clinton, Bush, Obama, Trump, and Biden has been a trainwreck that has lead us right up to the problems we have today. Nothing is affordable and the unrestrained capitalism has made it more expensive than ever just to live with everything getting worse year over year.

This guy pretends like the economic policy he's proposing isn't what we've been running and that's why it's so laughable dumb.

[1] https://en.wikipedia.org/wiki/Pr%C3%B3spera

Pushing for flat tax, but no mention of Andorra or Isle of Man. Guess those aren't considered growth centers to support their argument

Well they clearly haven't flat tax deregulated enough! /s

Its not flat enough

The only line flat enough for industry to not come back asking for more cuts will be the flat strike through line on any taxes that they pay.

I would like to introduce a concept - negative taxation - you (the taxpayer) pay us a royalty for gracing you with our presence.

you're describing subsidies

I think we can presume they know that and are just continuing the fun slightly snarky framing. There are also minor differences in implementation between negative taxes (credits beyond obligations which can happen in the US though they're very, very rare) and subsidies.

> It’s core argument is simple: in a world where talent and capital move easily […]

I'm not sure about the talent part: unless you're strictly talking about remote work, going to a new country is not what I would think of as "easy".

> Doug explained why a staged path to a 20% flat tax […]

It seems to me that flat taxes ignore the marginal utility of every new dollar of income.

What exactly is having the top income earners keep more money gotten society? It seems like not much besides more inequality (which has probably helped fuel political dissatisfaction):

* https://eprints.lse.ac.uk/107919/

* https://en.wikipedia.org/wiki/Trickle-down_economics

I'm pretty sure that wealth accumulated by the very rich at the expense of the poor is bad for total economic development because we drastically under-estimate the value of properly developing human beings.

We see enormous flourishing in society whenever labor is given more power for whatever reason (usually mass deaths) because this increases the amount of resources which flow towards raising children, who then become productive members of society. In times of weak labor power, average people are squeezed tight and less resources flow to children, which fucks shit up.

I think we are seeing that right now in the U.S. - education is nickle and dimed to shit, wages aren't enough to support children, let alone let them flourish, and the general "vibe" is so bad that people don't even want to have kids.

Meanwhile rich people are richer than ever.

I think a problem is to think that people become rich at the expense of the poor. This is not a zero-sum game.

This leads to the erroneous assumption that making the rich less rich will make the poor less poor. That's obviously not the case.

It isn't a zero sum game, but people still get rich at the expense of the poor, sometimes. There are different ways to accumulate wealth and some are better for society than others.

I object to the observation "wealth isn't zero sum" being used to sop up every possible objection to the way the system currently works.

> This leads to the erroneous assumption that making the rich less rich will make the poor less poor. That's obviously not the case.

Taking more money from the poor makes them more poor.

Taking more from the rich 'harms' them less because of the margin utility of money: taking $1k from someone making $160k is qualitatively different from someone making $60k. Taking 20% from someone making $160k ($32k) is qualitatively different than taking 20% from someone making $60k ($12k).

So if you want to have X revenues for funding government, you can take it from those who have more marginal need of it, or those who have less.

You'll note you've not rebuked what you've quoted from my previous comment, you've argued something different altogether, and used tautologies and fallacies, too.

It not even related to the original comment I replied to about becoming rich the exoense of the poor...

I've argued that, given the need to fund government, the point of marginal tax rates is to not to make the rick less rich, but to not make the poor any more poor, but rather to take the money from those who can better afford to have it taken from.

I.e., to take money from those who have (more) money.

> In 2015, Douglas McWilliams of the Centre for Economics and Business Research, which is based on Old Street, authored The Flat White Economy: How the Digital Economy Is Transforming London & Other Cities of the Future.

> Now, let me just quote some statistics. We have the most successful tech sector in Europe. The reason why is we are outside the Digital Markets Act, the Digital Services Act, and the AI Act, which are three European acts which heavily constrain tech growth in the EU. As a result, the thing that I call the flat-white economy ...

Digital Markets Act (2022), Digital Services Act (2022) and AI Act (2024) - these regulations are obviously totally different to the UK versions - Digital Markets, Competition and Consumers Act (2024), Online Safety Act (2023).

The reason why something was worthy of a book in 2015 is something that happend in 2022 / 2024, the car in the car section must be a delorean. There are a lot of good reasons, making stuff up makes me wonder about the validity of the remainder of the arguments.

> Finally to perhaps lighten the mood, rather than the usual book recommendations, the three of them discuss their favourite cars.

I'm sure they're talking about the 8 million dollar Porto Embargo or whatever, but I would love one day to hear a podcast discussing the genius of the Toyota Corolla. Safe, affordable, available, reliable. I've had friends with Toyotas that were about to fall off their base from road salt rust but the engine and transmission still worked perfectly.

Pretty amazing that you can be of modest or lavish means and still own a really solid car that everyone can fix. A lot funner than hanging out in the repair shop waiting for a specialist to fix a blown turbo headgasket.

Or maybe no one with interesting thoughts on anything would invest anything in a nation where if post anything online that might be slightly controversial you might go to jail and not even have the protection of a jury to balance out the overreach of government.

That and other things that are transforming it into a nanny state make it a hell no.

But yeah, it's nice you are lowering taxes and regulations on those who fall in line.

It's amazing how every economic issue can be solved by demanding less of the rich and powerful and demanding more of the poor.

GDP per capita has been declining in the UK and this is indeed a big issue (people are getting poorer) hidden behind the marginal growth of the overall GDP created by high immigration. This is linked to a long-standing productivity problem.

Some of the ideas bring us back to the Brexit debate. Being outside the EU allows a freedom of action but, depending how far deregulation and law taxes are taken, that also means retaliatory barriers from the EU, which is still the largest trading partner (41% of exports, twice the volume to the 2nd export market, which is the US).

> GDP per capita has been declining in the UK

not true:

https://data.worldbank.org/indicator/NY.GDP.PCAP.CN?location...

There were declines in 2009 andd 2020, for reasons that out to be fairly obvious, but overall consistent growth

> that also means retaliatory barriers from the EU, which is still the largest trading partner (41% of exports, twice the volume to the 2nd export market, which is the US

However, trade with the EU was declining as a proportion of total trade even before Brexit, is exaggerated by transshipment, and does not have as significant benefits as trading with economies with different strengths (i.e. more comparative advantage)

It is true [1][2]. I don't know how the graph you quote is calculated (no inflation?) but clearly the GDP hasn't grown 30% since 2020 (31,516 to 41,184), LOL. 6% growth a year would be a wet dream anywhere in the developped world. The GDP grew only 1.3% over the last 12 months and the population had grown 1.1% over the preceding 12 months... So at best economic growth barely exceeds population growth but overall it's flat to down.

[1] https://www.ons.gov.uk/economy/grossdomesticproductgdp/times...

[2] https://tradingeconomics.com/united-kingdom/gdp-per-capita

> However, trade with the EU was declining as a proportion of total trade even before Brexit

Yes, it has slightly declined, probably because of Brexit. The point is that it is one thing to say that we are "free" to do as we please, but the reality is not so simple if that means taking a massive hit on 41% of our exports! This is the whole Brexit story.

> the reality is not so simple if that means taking a massive hit on 41% of our exports

Is it actually 41%? Is it a massive hit? What is the economic impact of small trade frictions on a declining proportion of exports. The main reason for the decline is not Brexit, it is that the EU is a declining proportion of the world economy because Europe is the slowest growing region of the world.

> This is the whole Brexit story.

No, it really is not. Similar economies in the EU are doing about as badly as the UK so you cannot blame Brexit

> So at best economic growth barely exceeds population growth but overall it's flat to down.

One of the replies to my comment links to a graph at constant currency and is shows low growth so you might stretch to flat/stagnant, but definitely not down.

In your strange haste to prove me wrong you have not taken the time to read my comment.

Yes, currently 41% of UK exports go to the EU.

The point is that we have a deal with the EU for access. But that might change. If we went low tax/low regs the EU may very well retaliate by putting barriers to trade with us. This would seriously hurt our exports (a "big hit"...). Hence, reality of being "free to do what we want" outisde of the EU is not so simple.

This is the whole Brexit story because that has been the debate of "freedom" vs "alignment" and issues of access to EU market since the Brexit referendum.

> but definitely not down.

The graph shows a decline, as said and repeated... Obviously not over the long term but I never suggested that.

> The graph shows a decline

If you pick a time period over which that is true. That proves what exactly? European economies did badly in 2023?

> If we went low tax/low regs the EU may very well retaliate by putting barriers to trade with us.

The same applies to any free trade agreement, or exporting anywhere, as the US has recently proved.

The EU would also lose from higher trade barriers.

> but overall consistent growth

Gunna need to inflation adjust that one bud, its not decline, but it is not great.

https://data.worldbank.org/indicator/NY.GDP.PCAP.KN?location...

Thanks, I meant to link to a constant number.

It still debunks the post I replied to.

its not great, but very similar to the closest comparable economies: https://data.worldbank.org/indicator/NY.GDP.PCAP.KN?end=2024...

Why do you feel the need to "debunk" my comment especially when the data do show the decline of GDP per capita I mentioned? Of course you'll always be able to claim that I was wrong by picking a suitable baseline year... But why? My point was to highlight how the lack of growth is a big issue.

Do you have something constructive to discuss on the topic of the article?

> Why do you feel the need to "debunk" my comment

Because its wrong. Look at the graph. it shows some years of decline (Covid and the 2008 financial crisis) but overall there has been growth over the long term.

If you are now claiming "growth has been too low" I agree that the UK's economy, like other western European economies, has been stagnant with only 7% growth over the last decade.

Exactly as predicted you are now claiming that I am still wrong by picking a suitable timescale instead of discussing the point. As already said in another comment the graph does show a decline as 2024 is still below 2019, especially with a drop in 2023 (which corresponds to the highest annual population growth on record).

I don't know why you are doing that (using narrowest possible interpretation of what I wrote to "prove me wrong" and "debunk") but you are not commenting anything constructive or substantial.

OK, so your claim of decline is true if you carefully pick the right timescale. I do not think that approach is reasonable.

The UK economy (in common with other European economies) did badly in 2023 which proves what exactly?

I didn't pick a timescale, you did. I wrote that "the GDP per capita has been declining", which is has and you provided the graph that shows it. Obviously I meant currently/recently...

Again, what are you trying to achieve by attacking me so disingenuously?

That shows a decline compared to 2019: 35,193 in 2019, 35,108 in 2024. Overall GDP is up over the period because of population growth. All as per my original comment.

I am far more concerned that it is not meaningfully changed since 2007 - the year that iPhones came into existence.

we did have the financial crisis and covid in that time.

On the other hand, I think this chart shows a clear long term trend all the same: https://data.worldbank.org/indicator/NY.GDP.PCAP.KD.ZG?end=2...

A number of countries that implemented flat tax and simplified the tax code and reduced loopholes actually increased tax revenues (Estonia, Russia, Bulgaria come to mind). Those are not their only sources of tax revenue, of course - but interesting experiment (make it simpler and less loopholes and no insane concept of "tax returns").

I'm starting to believe "economic growth" is fiction. Just because an item has a higher price does not mean it's higher output. If we measure the value of things based on say the energy + labor cost to produce it, economic output (or GDP) will look very different. I'm not saying that's a good measure, but that there are other ways to look at it and the current one seems broken.

When Elon Musk says the only way to solve the US debt crisis is through automation and AI to boost GDP, it makes no sense. Government revenue has less and less to do with output and more to do with taxes on labor, so automation will make the problem worse. I'm not saying we shouldn't automate things, but that the ideas of cause->effect when it come to money are not very well thought out - yes, including my own.

They do adjust for higher prices (inflation) in GDP calculations though.

We will have to drastically change the tax base if automation really takes off. Every individual company or industry is rushing to flush out their workers but someone has to make money to buy their products eventually and I doubt they'll enjoy the level of taxes needed to maintain an economy if they all manage to dump their employees at the same time.

Can’t tell if satire. Maybe skipping to cars section.

They hit every one of the neoliberal memes:

* Prosperity gospel (as if developed economies have slow growth for want of just one more tax break on the wealthy. Just one more! That'll fix it right up!)

* Laffer curve invoked without any attempt to determine where on it current policy lies

* Saving the whales is killing the economy (they were spiders in this example -- point for satire?)

* Trying to sneak financial deregulation under the skirts of the above

* Opaque economic growth model with self-serving result presented as factual

* The rich will leave (as if the pressure isn't coming from their pumped assets and a firesale wouldn't fix this)

* Tut-tutting about debt to pretend at fiscal conservatism

* 100% attention on upper class concerns, 0% on lower class concerns

* Upper-class conservative-coded hobby talk free of any concern that it might give away the above

I think they were earnest and just wildly out of touch, though, given all the allusions to 15 year old economic discussions. That's when these memes were at their peak. They simply don't understand the credibility hit they have taken since then. I'd love to see a conversation between them and Gary Stevens. These memes are his origin story.

Another political post on a tech news website. Closing the tab for the day.

Economics and politics affect tech, tech affects economics and politics.

> Please write a transcript of an interview with an imaginary economist who considers that neoliberalism doesn't work because we haven't been far enough and blame any sort of regulations. Don't mention any material constraints like the availability of cheap energy sources. Don't mention libertarianism. Please also provide a prompt for the TTS model (the discussion needs to sound serious and academic).

Lol how is this #1

Because topics like these always attract some Very Smart People to comment and engage in order to share their Very Correct Opinions on macroeconomics and politics.

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