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Tax

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... maybe slightly off topic, but hopefully related.

Something's been buging me for a few days now:

If we all paid no/less tax would we be better off or would costs inflate to fill the amount of money we're all paid. Or would we get paid less? I'm ignoring public services, society and related standard of living.

For example:

I get paid 100 and 50 goes to govt. Food costs 10 and Rent cost 40.

If no tax would food cost 20 and rent cost 80 or somehow would I end up 50 better off?

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It's a double edged sword, the free marketeers would have you believe you'd get better services at lower costs.

This of course is complete crap, but it's nice to keep saying it.

However having the state control everything certainly does lead to higher taxes which stops innovation.

Ideally what you need is a balance between the two, so far no one has really succeeded, the free market gets greedy and govt gets corrupt with power.

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... maybe slightly off topic, but hopefully related.

Something's been buging me for a few days now:

If we all paid no/less tax would we be better off or would costs inflate to fill the amount of money we're all paid. Or would we get paid less? I'm ignoring public services, society and related standard of living.

For example:

I get paid 100 and 50 goes to govt. Food costs 10 and Rent cost 40.

If no tax would food cost 20 and rent cost 80 or somehow would I end up 50 better off?

Simply put, rent (land price) will (roughly) expand to collect the surpluses left in the hand of producers - if producers are left more, the price they have to pay a landlord to remain productive will rise. This unique and hidden feature of the economics of rent / land is what gives many of us the false impression that free market policies do not help workers (they can't preserntly, because rent is in the way).

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... maybe slightly off topic, but hopefully related.

Something's been buging me for a few days now:

If we all paid no/less tax would we be better off or would costs inflate to fill the amount of money we're all paid. Or would we get paid less? I'm ignoring public services, society and related standard of living.

For example:

I get paid 100 and 50 goes to govt. Food costs 10 and Rent cost 40.

If no tax would food cost 20 and rent cost 80 or somehow would I end up 50 better off?

No tax = no fiat money = no inflation.

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I think there is some law about this, but basically some/most of the benefit would be swallowed up in extra consumption, met by price increases.

A good example is house prices, they were teetering along nicely - and affordable - then the credit tap was turned on and hey presto property bubbly, little to do with the now debunked supply-demand arguments, but people had access to more money in the form of credit, the media and speculators lit the blue touch paper and bang - boom then bust.

Unfortunately, for the British we no longer not seem to have a culture that recognises thrift or regards it as a virtue.

Should the culture change to one that is more thrifty, financially sensible and risk averse then a lower tax regime may not lead to the benefit being lost.

We actually, need both savings and consumption. But most of all we need to live within our means.

Perhaps at this moment in time, tax cuts will end up paying off debt. In my opinion not a bad thing.

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... maybe slightly off topic, but hopefully related.

Something's been buging me for a few days now:

If we all paid no/less tax would we be better off or would costs inflate to fill the amount of money we're all paid. Or would we get paid less? I'm ignoring public services, society and related standard of living.

For example:

?

I'm no economist but my own behaviour would be that if there was no tax there would be more incentive to earn so your equation might look like this:

I get paid 100 and 50 goes to govt. Food costs 10 and Rent cost 40.

If no tax I would earn 200, food cost 10 and rent cost 40

150 gets spent employing a cook and a cleaner allowing a life of leisure and reducing unemployment, hence the need for tax in the first place.

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If we all paid no/less tax would we be better off or would costs inflate to fill the amount of money we're all paid. Or would we get paid less? I'm ignoring public services, society and related standard of living.

Yes, assuming you ignore the complete breakdown of society, the rioting, the killings, the mass starvation, and all that kinda stuff, yes, the chances are inflation would eat up the extra disposable income.

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Or to generalise: money achieves value because people accept it as payment.

Of course.

Real money is something people actually want, fiat money they are forced to accept bit don't really want.

Big difference.

It's the difference between freedom and slavery, in fact.

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I'm no economist but my own behaviour would be that if there was no tax there would be more incentive to earn

A totaly baffling statement

My incentive to work is the tax taken from me?

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Real money is something people actually want, fiat money they are forced to accept bit don't really want.

What, in this context, is "real" money?

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Tax is a fact and always will be.

In any sizable community there will be a central authority, the larger and more complex the community the larger and more complex the state will become as there are increased numbers of sectional interests that lobby for their own advantage. The central authority will tax in order to sustain itself and to develop the community and maximise taxes and so on.

Take away the state and let the war of all against all commence, see how you like them apples.

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A totaly baffling statement

My incentive to work is the tax taken from me?

You have never heard of the Laffer Curve then.

By your logic you would work hardest if you were taxed at 100%. I would call that baffling.

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A totaly baffling statement

My incentive to work is the tax taken from me?

I think the point being made is: higher taxation means lowered incentive to earn. And, by implication, lower taxes means higher incentive to earn.

So, whilst I see and agree, I do want to point out that the act of changing a tax rate might inject (or remove) incentive to earn in a short/medium term. But the effect of a tax rate change will diminish over time. People 'learn' a level of dissatisfaction with the current tax rate that is indicative of their perception of the value they get for their money spent on taxes.

Taxes as a way of collecting a pot of money together to pay wages in the relatively low-risk (protected?) employment world is an altogether different reason for taxation and increasing/decreasing it. Garner more taxes and employ more people in the public sector to soak up some of the chaos that ensues when the private sector wobbles (and unemployment temporarily (?) rockets).

Arguments about whether taxes are the only determinant in the **perceived** value of cash (present and future) are futile and short sighted.

The government can do much more for incentivising folks (and, arguably, faster) by convincing them they are getting value for money. Spending money on lining MP's pockets (a very loud expenditure of amounts of money that are RELATIVE TO THE WIDER ECONOMY very small) is a very very bad way of convincing folks in the perception that they are getting lots of value for their money is not the right way to go about it!

The value of money is the velocity of money. I can carry 400 GBP in my pocket but if I am stuck out in a desert then 400 GBP means nothing to me in terms of a drink of water.

Aidanapword

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You have never heard of the Laffer Curve then.

By your logic you would work hardest if you were taxed at 100%. I would call that baffling.

I misread your statement - sorry for the confusion

I read your earlier post as "If there were no tax there would be NO incentive to work"

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I think the point being made is: higher taxation means lowered incentive to earn. And, by implication, lower taxes means higher incentive to earn.

Yes, and i agree completely

I misread the statement i quoted; you are preaching to the choir here, sorry to waste your time.

Edited by Stars

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What, in this context, is "real" money?

Anything that people voluntarily accept as payment.

It's the voluntary part that makes money what it is in a free market.

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Suppose one hour of my time pays my company 12 pounds in income after costs.

After they keep £2 as profit and give me £10, I now pay taxes of (say) 50%, and so, I earn £5 per hour.

If I hire myself through the company, I now have to spend 2.4 hours working to pay for the one hour the company rents me out, and the largest part of their bill to myself is the taxman, 1.4 hours to be precise.

Tax takes a lot more away from you than you think!

EDIT: 1.4 hours is wrong, I think the tax on companies is 30%, so, the taxman takes 1.1 hours or so and you pay 2.1 hours. Still not a very good deal...

Edited by Cinnamon

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Anything that people voluntarily accept as payment.

It's the voluntary part that makes money what it is in a free market.

Sometimes I understand you and sometimes you seem on a different level or a different planet (not sure which).

People accept fiat money generally in preferance to other forms of payment because of the convenience. It has actually gone further and people are now happy with virtual fiat money such as debit cards or paypal.

No one forced them surely.

Personally it would suit me to be paid a few kilos of bullion each year because it would save me the trouble of buying it but most people who arn't saving would want something easier to exchange.

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So, whilst I see and agree, I do want to point out that the act of changing a tax rate might inject (or remove) incentive to earn in a short/medium term. But the effect of a tax rate change will diminish over time. People 'learn' a level of dissatisfaction with the current tax rate that is indicative of their perception of the value they get for their money spent on taxes.

It isn't a matter of perception, what really happens is that a certain class of producer costs (real estate) change over time to take away what the tax reduction has given producers. These prices take a little time to adjust and so, after a tax reduction there is a bonus period for producers followed by a period where the actual advantage of lowered taxes is no longer going to them but to the owners of real estate..

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Sometimes I understand you and sometimes you seem on a different level or a different planet (not sure which).

People accept fiat money generally in preferance to other forms of payment because of the convenience. It has actually gone further and people are now happy with virtual fiat money such as debit cards or paypal.

No one forced them surely.

Personally it would suit me to be paid a few kilos of bullion each year because it would save me the trouble of buying it but most people who arn't saving would want something easier to exchange.

Taxes are forced payments.

Fiat money only exists because of taxes.

Therefore fiat money is forced on people.

Now, they mnight voluntarily ue a similar paper/PC number money system, but that's not the same as being forced to.

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