Europe is More Progressive

[BeFell]

http://www.businessw..t/05_39/b3952079.htm

Well apparently people in Europe are starting to realize that their socialized tax structure that places most of the tax burden on the higher wage earners has somewhat stunted the growth of their countries. Coupled with the fact that the tax system in most European countries is extremely complex and full of loopholes governments are also finding that those who should be paying higher taxes have many legal means of avoiding it. So what is becoming the increasingly popular call towards fixing the problem? *gasp* A flat-tax. Apparently the fomer soviet countries which have enacted a flat tax system are growing a much faster rate than their more socialized neighbors and some are starting to take notice.

Could it be, are Europeans smarter?

[MortifiedPenguins]

well what do you expect. the more socialist a country is the less profit it will in turn recieve. it's give and take. for example, do you want to build a damm that helps with energy concerns or do you want to help with education.

[greenlite]

Course they're smarter. But it's difficult to compare Europe and the United States. There exist great cultural differences here and over there. So much more has affected their culture.

[AapoJoki]

If this is accurate, my country won't fortunately have to wreck our welfare and social security by changing into flat-tax and giving the rich more money.

This horror-scene has mainly been happening in the eastern Europe for now. Ever since the collapse of Soviet Union, the people in these countries have been very keen on jumping on capitalism, so this was to be expected. If any political party suggests it in western or northern Europe, they're going to suffer a massive loss in the elections.

[BeFell]

At 10/4/05 06:30 PM, fenrus1989 wrote: well what do you expect. the more socialist a country is the less profit it will in turn recieve. it's give and take. for example, do you want to build a damm that helps with energy concerns or do you want to help with education.

What the hell are you talking about? Going along with the point I think you're trying to make, it doesn't have to be give and take. If you ease the tax burdens then the economy will have more room to grow increasing the tax revenue and making everyone happy. A tightly reigned economy has nowhere to go but down meaning no money for social programs.

At 10/4/05 06:47 PM, Aapo_Joki wrote: If this is accurate, my country won't fortunately have to wreck our welfare and social security by changing into flat-tax and giving the rich more money.

This horror-scene has mainly been happening in the eastern Europe for now. Ever since the collapse of Soviet Union, the people in these countries have been very keen on jumping on capitalism, so this was to be expected. If any political party suggests it in western or northern Europe, they're going to suffer a massive loss in the elections.

Actually quite the contrary has been true in recent elections. While Finland may have a strong economy other European nations such as France and Germany have been sagging in no small part due to their outrageous tax system. As for the Soviet countries that have adopted the flat tax their economies are growing at a much faster rate than their western nieghbors.

[FRIMA]

I'm not sure that a 'flat tax' always guarantees growth.

There are lots of factors wich can allow an economy to grow fast.

[lapis]

At 10/4/05 08:19 PM, BeFell wrote: Actually quite the contrary has been true in recent elections. While Finland may have a strong economy other European nations such as France and Germany have been sagging in no small part due to their outrageous tax system.

No, their economies aren't growing because of the lack of innovation and because their social security systems have grown too expensive. Other factors might be slow recovery from the recession that started in 2001 and high oil prices. I seriously, very seriously doubt that adopting flat tax will suddenly boost up their GDP growth rates up to 4% or more.

As for the Soviet countries that have adopted the flat tax their economies are growing at a much faster rate than their western nieghbors.

But that isn't because of the flat tax, the Eastern European nations are just recovering from Soviet state-controlled production and that's why thy're growing. Look at the graph. Are the growth rates of the nations that did adopt flat tax (Blatic states, Georgia, Slovakia) significantly higher than the growth of those with traditional tax systems (Azerbaijan, Kazakhstan, Tajikistan)? As for Russia, there are also other reasons for their growth. From the CIA factbook: Although high oil prices and a relatively cheap ruble are important drivers of this economic rebound, since 2000 investment and consumer-driven demand have played a noticeably increasing role. Note that the words "flat tax" aren't mentioned.

Low taxes for businesses in a nation benefit their economies because it makes it more interesting for businesses to settle there. But we're talking income tax here, and I only view flat tax as an excuse for the rich to get even richer. A small boost for the economy does not justify the income disparity (look at Russia) that follows.

[punisher19848]

At 10/4/05 06:16 PM, BeFell wrote:
Could it be, are Europeans smarter?

If they are so much smarter, why haven't they found a way to restore the glory of their empires yet?

[0wnage-Incarnate]

At 10/5/05 02:07 PM, lapis wrote: Low taxes for businesses in a nation benefit their economies because it makes it more interesting for businesses to settle there. But we're talking income tax here, and I only view flat tax as an excuse for the rich to get even richer. A small boost for the economy does not justify the income disparity (look at Russia) that follows.

Pwn4g3. I couldn't have said it better. Kudos to you. Thank you for helping dismantle some of the fallacies of a certain group of macroeconomists.

[LegendaryLukus]

At 10/5/05 04:39 PM, punisher19848 wrote:

At 10/4/05 06:16 PM, BeFell wrote:
Could it be, are Europeans smarter?

If they are so much smarter, why haven't they found a way to restore the glory of their empires yet?

Well I think we've learned that colonies really aren't worth the bother. I know you think that Imperialism is a good thing, and I respect the opinion, but the European colonisers will never go back to Imperialism.

Hey we've still got the Falklands.......suck it, Argentina. But seriously, aside from that, we have had our time as Imperialist powers.

[Jimsween]

The growth of Eastern Europe ahs nothing to do with a flat tax. The growth of Eastern Europe has obvious reasons, Eastern Europe already had hte infastructure, they just needed stable governments again, and now they have it. Theres no evidence that a flat tax is the reason for it.

And at that, there is absolutely no evidence nor an argument that a flat tax increases economic growth. None at all. Theres no reasoning in the slightest. Okay, so its a tax cut for the rich, so the rich spend more, but on that tame token its a tax hike for the middle class and poor, so they spend less. If anything, giving more money to the poor and middle class will promote economic growth better than giving it to the rich, because the poor and middle class are much much more likely to spend it than the rich, the rich are more likely to save it.

I really want to hear how you could justify a flat tax under the guise of promoting economic growth, really.

[jmaster306]

Lets see what were the countries like in 1990

Western Europe: Fully developed countries
Eastern Europe: Shithole of a failing communist regime

Lets see what they are like now

Western Europe: Still fully developed countries
Eastern Europe: Rapidly developing countries

Yeah, screw the fall of communism followed by a completely new, open market. It must have been those flat taxes that were responsible for the growth.

[Memorize]

Of course, if something great happens due to something that a political party likes (a.k.a. Republicans and Flat Tax), the opposing party will refuse it had anything to do with that great thing happening.

[BeFell]

I'm not the one connecting the dots here guys, it's economists and writers at Business Week and the Wall Street Jounal, I just summarized. If you want to argue try addressing some of the points made in the source I linked for everyone's conveniance. Those are the words with the pretty gold color and the underline.

But tax simplification is clearly in the air. The platform of Germany's CDU, which Kirchhof now says he supports, calls for cutting the top personal income tax rate from 42% to 39% and eliminating tax shelters. France's center-right government says that it plans to reduce the number of tax brackets from seven to five, lower the top marginal rate from 48.1% to 40%, and limit individual deductions, starting in 2007. By yearend, Spanish Finance Minister Pedro Solbes is expected to propose cutting the top personal income tax rate, now 45%, and reducing the number of tax brackets, now five. Greece, after cutting the country's corporate tax rate, now is looking at reducing and simplifying personal income taxes as well.

What's driving this interest all of a sudden? It's a competitiveness issue, says Paul Mylonas, chief economist at the National Bank of Greece. "Our neighboring countries are reducing taxes, which provides them with a more attractive business climate."

Slovakia is a case in point. The country has been intent on building an investor-friendly climate. So in 2004 it swept away 21 categories of personal income taxes, five tax brackets, and scores of exemptions and deductions, replacing them with a flat 19% rate. Slovak officials say that their flat-tax reform was crucial in securing a $1.3 billion investment last year by Korean auto maker Hyundai Corp., which is building a factory for its Kia brand cars in the city of Zilina. Total foreign direct investment in Slovakia last year was $13.6 billion, a sixfold increase since 1998. Slovakia's attractively low 19% corporate tax rate is a big draw, too. But, says Martin Bruncko, chief economic adviser to Slovak Finance Minister Ivan Miklos, "the flat [personal income] tax has made Slovakia more attractive for highly paid expatriate employees. That's important for companies looking at an offshore operation."

The fact is many western European countries are simplifying their tax systems and they are doing it in a large part due to the success of their neighbors to the East with flat tax systems. You can ignorantly bitch and moan about tax cuts for the rich all you want like some kind of Marx worshiping pundit but that doesn't change the fact that these countries are really and truly looking to promote growth in their economies through simplifying the tax system.

[jmaster306]

At 10/6/05 12:43 AM, BeFell wrote: The fact is many western European countries are simplifying their tax systems and they are doing it in a large part due to the success of their neighbors to the East with flat tax systems. You can ignorantly bitch and moan about tax cuts for the rich all you want like some kind of Marx worshiping pundit but that doesn't change the fact that these countries are really and truly looking to promote growth in their economies through simplifying the tax system.

Actually there is something nice about such a simple tax system. Unfortunately for a government with as massive of spending as ours, it would seem that a flat rate tax system would put too much pressure on people with low incomes. Unlike some liberals, I actually maintain that our government is way to large and wasteful. I'm sorry, but I actually downloaded the national budget the other day, and it's just ridiculous the amount of redundant and pointless programs there are. So ideally if the government were to downsize to a point where a flat tax system would become feasable, I'd say that would be a great stride forward.

However back to reality, I think I'd shit my pants if the government actually were to work that smoothly. This is something I really doubt would ever happen, but it is an ideal to strive for.

[lapis]

At 10/6/05 12:43 AM, BeFell wrote: But tax simplification is clearly in the air. The platform of Germany's CDU, which Kirchhof now says he supports, calls for cutting the top personal income tax rate from 42% to 39% and eliminating tax shelters.

Kirchhof nearly cost Merkel her neck, especially since he refused to debate about his revolutionary tax reforms. And even Kirchhof didn't support a full flat tax. He proposed three brackets of 15%, 20% and 25%. Now I have no problem with simplifying the bracket system by reducing the number of brackets, I do however oppose a one tier system where a single mother with a call centre job pays relatively as much tax as a millionaire.

As for economic growth, it's positive effects are minimal at best. The mentioned Hyundai factory would have been build in Eastern Europe because the wages for factory work there are lower there, even if there wasn't a flat tax. Flat tax could be used by nations like Slovakia and Czech to draw businesses away from each other when there's nothing else to excel with. And I posted a graph before that didn't indicate that the flat tax countries had such a higher growth rate than the other countries. They're recovering, that's why they're growing so fast. And like you quoted from you article:

Slovakia's attractively low 19% corporate tax rate is a big draw, too.

By the way, the article was from businessweek. Of course they favour it, businessmen are always the ones who pay the most in a bracket-based system. That's why the words "income disparity" aren't mentioned. They don't mention the viewpoint of the people who benefit from the brackets (naturally), but the politicians who decide about the tax system have to take the social costs into consideration.

And the article also mentions this:
There's no guarantee, of course, that flat taxes would work as well in Western Europe as they have in the countries to the east. In the former Soviet bloc, most of the countries that enacted flat taxes gained revenue as people who had worked in the shadow economy began reporting their income and paying taxes. The former tax dodgers figured that with rates so low, it was no longer worth running the risk of breaking the law. Moscow, which introduced a flat tax in 2001, saw its income tax revenues more than double in real terms from 2000 to 2004.

You can ignorantly bitch and moan about tax cuts for the rich all you want like some kind of Marx worshiping pundit but that doesn't change the fact that these countries are really and truly looking to promote growth in their economies through simplifying the tax system.

Because we all know there is no middle ground between flat tax and communism.

[BeFell]

At 10/6/05 10:12 AM, lapis wrote:

At 10/6/05 12:43 AM, BeFell wrote: But tax simplification is clearly in the air. The platform of Germany's CDU, which Kirchhof now says he supports, calls for cutting the top personal income tax rate from 42% to 39% and eliminating tax shelters.

Kirchhof nearly cost Merkel her neck, especially since he refused to debate about his revolutionary tax reforms. And even Kirchhof didn't support a full flat tax. He proposed three brackets of 15%, 20% and 25%. Now I have no problem with simplifying the bracket system by reducing the number of brackets, I do however oppose a one tier system where a single mother with a call centre job pays relatively as much tax as a millionaire.

Well all of the proposals I read mentioned starting taxation at around $22,000 so that means the poor won't be taxed. Also a person paying 10% on $30,000 dollars would pay $3,000 dollars where as a person paying 10% on $1 million would pay $100,000. Now I don't know what kind of math they do where your from but $3,000 is not relatively as much as $100,000. In fact it's 33 times more.

As for economic growth, it's positive effects are minimal at best. The mentioned Hyundai factory would have been build in Eastern Europe because the wages for factory work there are lower there, even if there wasn't a flat tax. Flat tax could be used by nations like Slovakia and Czech to draw businesses away from each other when there's nothing else to excel with. And I posted a graph before that didn't indicate that the flat tax countries had such a higher growth rate than the other countries. They're recovering, that's why they're growing so fast. And like you quoted from you article:

Slovakia's attractively low 19% corporate tax rate is a big draw, too.

It is a generally accepted fact that the simplified tax systems of these countries draw businesses and investment. More businesses and investment means a stronger economy.

By the way, the article was from businessweek. Of course they favour it, businessmen are always the ones who pay the most in a bracket-based system. That's why the words "income disparity" aren't mentioned. They don't mention the viewpoint of the people who benefit from the brackets (naturally), but the politicians who decide about the tax system have to take the social costs into consideration.

What social costs? Most of the countries that switched to a flat tax saw an increase in the amount their treasuries took in meaning they can go on happily providing their social programs.

And the article also mentions this:
There's no guarantee, of course, that flat taxes would work as well in Western Europe as they have in the countries to the east. In the former Soviet bloc, most of the countries that enacted flat taxes gained revenue as people who had worked in the shadow economy began reporting their income and paying taxes. The former tax dodgers figured that with rates so low, it was no longer worth running the risk of breaking the law. Moscow, which introduced a flat tax in 2001, saw its income tax revenues more than double in real terms from 2000 to 2004.

Um yeah, flat taxes generate more revenue.

You can ignorantly bitch and moan about tax cuts for the rich all you want like some kind of Marx worshiping pundit but that doesn't change the fact that these countries are really and truly looking to promote growth in their economies through simplifying the tax system.

Because we all know there is no middle ground between flat tax and communism.

And flat taxes don't neccessarilly mean big breaks for the rich while the poor get screwed.

[Jimsween]

At 10/6/05 12:43 AM, BeFell wrote: I'm not the one connecting the dots here guys, it's economists and writers at Business Week and the Wall Street Jounal, I just summarized. If you want to argue try addressing some of the points made in the source I linked for everyone's conveniance. Those are the words with the pretty gold color and the underline.

The problem is there are no points or arguments that support that a Flat tax promotes economic growth more than a progressive one does. Theres some that lowering taxes promotes it, but everyone knew that already. The only possible one is that a progressive tax, being so complicated, confuses people enough so that they are too scared to buy things or make money.

The fact is many western European countries are simplifying their tax systems and they are doing it in a large part due to the success of their neighbors to the East with flat tax systems. You can ignorantly bitch and moan about tax cuts for the rich all you want like some kind of Marx worshiping pundit but that doesn't change the fact that these countries are really and truly looking to promote growth in their economies through simplifying the tax system.

Find me one argument that simplifying will promote growth, if an argument is too hard to compile, just state some evidence.

What I really see, is that Western Europe is LOWERING THIER TAXES to promote economic growth. The simplification is more to cut out loopholes the rich are using, which says more about the writing abilities of the senators than the idea of a progressive tax system.

Progressive tax is fine, the best system there is, both for equality and economic growth.

[BeFell]

At 10/6/05 11:27 PM, Jimsween wrote:

At 10/6/05 12:43 AM, BeFell wrote: I'm not the one connecting the dots here guys, it's economists and writers at Business Week and the Wall Street Jounal, I just summarized. If you want to argue try addressing some of the points made in the source I linked for everyone's conveniance. Those are the words with the pretty gold color and the underline.

The problem is there are no points or arguments that support that a Flat tax promotes economic growth more than a progressive one does. Theres some that lowering taxes promotes it, but everyone knew that already. The only possible one is that a progressive tax, being so complicated, confuses people enough so that they are too scared to buy things or make money.

Find me one argument that simplifying will promote growth, if an argument is too hard to compile, just state some evidence.

One low income tax rate paid by all but the poorest wage-earners, who are exempt. No loopholes for the rich to exploit. No graduated rates that take a higher percentage of income from people who work hard to earn more. No need for a huge bureaucracy to police fiendishly complex tax laws.

But, says Martin Bruncko, chief economic adviser to Slovak Finance Minister Ivan Miklos, "the flat [personal income] tax has made Slovakia more attractive for highly paid expatriate employees. That's important for companies looking at an offshore operation."

most of the countries that enacted flat taxes gained revenue as people who had worked in the shadow economy began reporting their income and paying taxes. The former tax dodgers figured that with rates so low, it was no longer worth running the risk of breaking
the law. Moscow, which introduced a flat tax in 2001, saw its income tax revenues more than double in real terms from 2000 to 2004.

But a flat or streamlined tax code could still go a long way toward restoring public trust in the tax system by wiping away loopholes and cutting out mounds of red tape

The fact is many western European countries are simplifying their tax systems and they are doing it in a large part due to the success of their neighbors to the East with flat tax systems. You can ignorantly bitch and moan about tax cuts for the rich all you want like some kind of Marx worshiping pundit but that doesn't change the fact that these countries are really and truly looking to promote growth in their economies through simplifying the tax system.

What I really see, is that Western Europe is LOWERING THIER TAXES to promote economic growth. The simplification is more to cut out loopholes the rich are using, which says more about the writing abilities of the senators than the idea of a progressive tax system.

Yes they lowering the taxes but that could be just the begining. Big changes like these don't happen over night and they got the motivation to do so from flat-tax countries. Lowering taxes and simplificationg if I'm not mistaken are all steps twoards a flat tax system.

Progressive tax is fine, the best system there is, both for equality and economic growth.

No it isn't, it hinders competition which is the driving force of all capitalist economies. It is so complex that it requires large beuracracies to maintian it (the IRS, accounting firms) and motivates those with wealth to take it somewhere else.

[lapis]

At 10/6/05 06:22 PM, BeFell wrote: Well all of the proposals I read mentioned starting taxation at around $22,000 so that means the poor won't be taxed.

That's pretty high. Germany now has a $8,000 personal allowance, with 15% income tax in the lowest bracket. It's still only half of what my parents earn though, and we are around the median. But at least the really poor aren't taxed more heavily.

Also a person paying 10% on $30,000 dollars would pay $3,000 dollars where as a person paying 10% on $1 million would pay $100,000. Now I don't know what kind of math they do where your from but $3,000 is not relatively as much as $100,000. In fact it's 33 times more.

I said relatively, they still both pay 10%. The extra dollars the rich earn don't have to be used to buy primary goods, and can be taxed more heavily as a result.

It is a generally accepted fact that the simplified tax systems of these countries draw businesses and investment. More businesses and investment means a stronger economy.

A slightly stronger economy, I'm saying that the minor boost does not justify the increasing income disparity. The people with a median salary are the ones who get hurt, while the rich benefit most. That is if the economy doens't boom thanks to the tax revisions and I doubt that.

Critics of flat tax systems argue that many of the benefits are not yet proven and that the system is just a way of helping the rich pay less tax. There is certainly no conclusive evidence that yet proves flat taxes increase government revenues or boost growth.

There are also question marks over whether flat tax systems would have the same benefits in the mature and developed economies of Western Europe that they appear to be having on the transitional economies of former communist countries.
(Source)

What social costs? Most of the countries that switched to a flat tax saw an increase in the amount their treasuries took in meaning they can go on happily providing their social programs.

Um yeah, flat taxes generate more revenue.

These countries saw an increase in tax revenues because their economies were already growing. As for Russia, the article mentioned that the flat tax encouraged tax dodgers to actually pay; this is a lot harder in the West were tax evasion is much less of an issue.

And flat taxes don't neccessarilly mean big breaks for the rich while the poor get screwed.

If the flat tax results in an economic boom, then no. But I doubt it. If tax revenues stay about the same then only the rich will see the percentage in taxes they pay decrease while the middle incomes have to compensate for this.

[Jimsween]

At 10/6/05 11:45 PM, BeFell wrote: But a flat or streamlined tax code could still go a long way toward restoring public trust in the tax system by wiping away loopholes and cutting out mounds of red tape

What of any of that had anything to do with promoting growth? Maybe the expatriate thing, but really thats not as much a flat tax issue as it is a high tax issue, you could promote alot of growth if you eliminated tax altogether but that doesnt really make a flat tax better.

Yes they lowering the taxes but that could be just the begining. Big changes like these don't happen over night and they got the motivation to do so from flat-tax countries. Lowering taxes and simplificationg if I'm not mistaken are all steps twoards a flat tax system.

No not at all. You can have a very high flat tax, and they are lowering taxes across the board progressively which isnt making thier taxes more flat. And a complex tax system isn't neccesarily less flat either, you could have a very complex system with only a 3-5% difference in tax paying, or a very simple system (one equation instead of brackets) with a 50% difference.

No it isn't, it hinders competition which is the driving force of all capitalist economies. It is so complex that it requires large beuracracies to maintian it (the IRS, accounting firms) and motivates those with wealth to take it somewhere else.

How does it hinder competition?

The wealthy will go wherever taxes are low, that doesn't make a flat tax good at all, if you really want the wealthy just have the poor pay taxes.

You can't base your system around not pissing rich people off. We espescially cant do it. The third world will always be able to pay less and tax less than us, we cant win that battle. It's pointless to try. But that doesn't mean the rich people will always leave, our tax system is almost the same as many European countries, ones that are experiencing no economic growth.