« SSRN Tax Professor Rankings | Main | GAO: Tax Preparers: Oregon's Regulatory Regime May Lead to Improved Federal Tax Return Accuracy and Provides a Possible Model for National Regulation »
September 16, 2008
Johnston: Maybe Tax Cuts Are Not the Road to Economic Salvation
David Cay Johnston has published The Prospering Swedes, 120 Tax Notes 1085 (Sept. 15, 2008):
Sweden is the epitome of high taxes. It is one of only two modern countries where taxes account for more than half of the GDP (the other is Denmark). The tax take in Sweden and Denmark, as a share of the economy, is 85% greater than in the United States, according to the OECD.
Surely, then, America must be prospering while Sweden and Denmark sink into a pit of economic despair. ...
Could it be that our secular religion that teaches that taxes are evil and tax cuts are the road to economic salvation is wrong? Could it be that the Swedes, and the other northern Europeans, know something that we could learn from? Could it be that the economy does not revolve around tax cuts? There will be more on this in future columns.
September 16, 2008 in Tax Analysts | Permalink
TrackBack
TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d8341c4eab53ef010534a80145970b
Listed below are links to weblogs that reference Johnston: Maybe Tax Cuts Are Not the Road to Economic Salvation:
Comments
All other things held equal, I'll take the tax cuts. All other things are not equal, though. There are way too many important variables involved to limit our comparative economic analysis to the existence of tax cuts.
Posted by: David Adams | Sep 16, 2008 1:41:01 PM
Much depends on what we tax.
As Henry George (1839-1897), the author of a (currently) much-neglected book on political economy, Progress & Poverty, put it:
"It is obvious that all taxes come from the product of land and labor. There is no source of wealth other than the union of human exertion with the materials and forces of nature. But equal taxes may have very different effects on production, depending on how they are imposed.
Taxes that reduce the rewards of producers lessen the incentive to produce. Taxes based on the use of any of the three factors of production -- land, labor, or capital -- inevitably discourage production. Such taxes introduce artificial obstacles to the creation of wealth.
The method of taxation is, in fact, just as important as the amount. A small burden poorly placed may hinder a horse that could easily carry a much larger load properly adjusted. Similarly, taxes may impoverish people and destroy their power to produce wealth. Yet the same amount of taxes, if levied another way, could be borne with ease. A tax on date trees caused Egyptian farmers to cut down their trees; but twice the tax, imposed on land, had no such result.
Now, taxes on labor as it is exerted, on wealth as it is used as capital, or on land as it is developed will clearly discourage production -- much more than taxes levied on laborers whether they work or play, on wealth whether used productively or fruitlessly, or on land whether cultivated or left idle."
[That's from a recent abridgement of P&P, available online at http://www.henrygeorge.org/pcontents.htm)
What we tax matters greatly. When we tax that which we shouldn't tax, we get negative effects. And equally important and more ignored, when we fail to tax that which ought to be taxed -- what the classical economists called "LAND" -- we get very undesirable effects. We ignore their wisdom at our peril.
See http://lvtfan.typepad.com/ and http://www.answersanswers.com/ for more on the wisdom of the classical economists with regard to taxation, justice, efficiency and prosperity.
Posted by: LVTfan | Sep 17, 2008 2:09:25 PM
