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wonderpup

A Question For The Laffer Curve Fan Club

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According even to the Greeks themselves paying taxes in Greece is a minority occupation- so while in theory taxes might be quite high, in practice they are very low, since so many avoid paying.

So here is the mystery- why is Greece not a rich and thriving economy as it benefits from that low rate of effective taxation?

And before someone jumps in with a variation of the claim that Greeks are just 'lazy' or somehow genetically predisposed to not work the facts do not bear this out:

According to the latest Eurostat statistics, the Greeks work 40.6 hours a week, most of all 27 EU member states. That says nothing about productivity and efficiency — which is lower — but it does say something about the alleged laziness of the Greeks. According to OECD figures of 2009, the Greeks are the only ones among western countries who exceed the line of two thousand working hours per year

http://roarmag.org/2011/06/greek-debt-crisis-international-media/

So without resorting to racial stereotyping the entire Greek nation can anyone explain how a low tax regime in Greece has failed to bring forth the cornucopia of wealth as predicted by all those who claim low taxation is route to national prosperity?

Or could it be that simply shovelling money at people will not in itself produce the predicted effect?

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According even to the Greeks themselves paying taxes in Greece is a minority occupation- so while in theory taxes might be quite high, in practice they are very low, since so many avoid paying.

So here is the mystery- why is Greece not a rich and thriving economy as it benefits from that low rate of effective taxation?

And before someone jumps in with a variation of the claim that Greeks are just 'lazy' or somehow genetically predisposed to not work the facts do not bear this out:

http://roarmag.org/2011/06/greek-debt-crisis-international-media/

So without resorting to racial stereotyping the entire Greek nation can anyone explain how a low tax regime in Greece has failed to bring forth the cornucopia of wealth as predicted by all those who claim low taxation is route to national prosperity?

Or could it be that simply shovelling money at people will not in itself produce the predicted effect?

I don't think the laffer curve shows that low tax automatically means high productivity, it shows that high tax means low productivity.

Very obviously when you get to keep your income you don't have to work as hard. Also very obviously if some tosser keep stealing what you make, you soon down tools.

Hope this helps. :)

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According even to the Greeks themselves paying taxes in Greece is a minority occupation- so while in theory taxes might be quite high, in practice they are very low, since so many avoid paying.

So here is the mystery- why is Greece not a rich and thriving economy as it benefits from that low rate of effective taxation?

And before someone jumps in with a variation of the claim that Greeks are just 'lazy' or somehow genetically predisposed to not work the facts do not bear this out:

http://roarmag.org/2011/06/greek-debt-crisis-international-media/

So without resorting to racial stereotyping the entire Greek nation can anyone explain how a low tax regime in Greece has failed to bring forth the cornucopia of wealth as predicted by all those who claim low taxation is route to national prosperity?

Or could it be that simply shovelling money at people will not in itself produce the predicted effect?

how do you know their taxes are low?

maybe with them avoiding it it is average, or still high.

you dont know the base it started at to say them paying 20% less or whatnot is low

the lower the cost of someting the more you trade it, and trade is by in large productivity and productivity is wealth

BTW productivity is the only real form of wealth, you have some stored wealth but that is the real deal

everything else is moving chairs around. so are the greeks more productive.

does taxation even impact productivity?

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The obvious suggestion is that so much of Greek economic activity is directed at gaming the system that there is little left over to create wealth.

And many of the ways to game it are barriers to sensible economic organisation. Employing people and remaining competitive becomes a massive ball-ache, for example.

In fact, Laffer curvers might argue that Greece is the living demonstration of what a high tax system might look like (I wouldn't agree, there are more complicated reasons for Greece being a mess).

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how do you know their taxes are low?

I didn't say they are low- just that in practice they are not collected. So in practice they are a low taxation economy in which people get to keep most of what they make- so why is Greece not a thriving economy?

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I didn't say they are low- just that in practice they are not collected. So in practice they are a low taxation economy in which people get to keep most of what they make- so why is Greece not a thriving economy?

Perhaps it is.

Perhaps the results of the market aren't what you think they should be, which just makes you wrong.

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That's not what Laffer's hypothesis states. But putting that to one side and addressing the low tax growth argument, I don't think anyone would seriously say that was enough in and of it's self for increasing GDP. Growth theory is an enormous subject, and gun to head no one really knows what causes growth. But we do have some idea of what destroys it; perverse incentives, tax incidence, the lack of the rule of law, weak institutions, insecure property rights, the poverty of human capital (education, trust, specialisation) being just a few examples. By that reckoning Greece was never going to be a successful anything.

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In fact, Laffer curvers might argue that Greece is the living demonstration of what a high tax system might look like (I wouldn't agree, there are more complicated reasons for Greece being a mess).

Take a look at this:

The scale of Greek tax cheating was at least as incredible as its scope: an estimated two-thirds of Greek doctors reported incomes under 12,000 euros a year—which meant, because incomes below that amount weren’t taxable, that even plastic surgeons making millions a year paid no tax at all.

The problem wasn’t the law—there was a law on the books that made it a jailable offense to cheat the government out of more than 150,000 euros—but its enforcement. “If the law was enforced,” the tax collector said, “every doctor in Greece would be in jail.” I laughed, and he gave me a stare. “I am completely serious.”

One reason no one is ever prosecuted—apart from the fact that prosecution would seem arbitrary, as everyone is doing it—is that the Greek courts take up to 15 years to resolve tax cases. “The one who does not want to pay, and who gets caught, just goes to court,” he says. Somewhere between 30 and 40 percent of the activity in the Greek economy that might be subject to the income tax goes officially unrecorded, he says, compared with an average of about 18 percent in the rest of Europe.

This would appear to be low tax paradise-yet that promised tsunami of wealth does not appear?

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Take a look at this:

This would appear to be low tax paradise-yet that promised tsunami of wealth does not appear?

The laffer curve doesn't promise a river of wealth if you cut or don't pay taxes. In fact it doesnt promise anything at all, it's just a (verfified by lots of evidence) theory.

The laffer curve just points out the obvious truth that if you impose high taxes, then any wealth created soon vanishes.

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Perhaps the results of the market aren't what you think they should be, which just makes you wrong.

Wrong about being right that low effective taxation does not seem to have the stimulative effect claimed for it by the neo liberals?

According to the theory constantly pumped out by the American right Greece ought to be a dynamo of economic activity- instead of which it's a basket case- does this not bother anyone?

It looks on the face of to be a massive fail for the idea that simply letting everyone keep their money will automatically create economic success.

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Wrong about being right that low effective taxation does not seem to have the stimulative effect claimed for it by the neo liberals?

Neo liberals are lying shysters.

According to the theory constantly pumped out by the American right Greece ought to be a dynamo of economic activity- instead of which it's a basket case- does this not bother anyone?

It might well be a theory spouted by those people, but it's not the laffer curve theory. I think you are confused or mistaken.

It looks on the face of to be a massive fail for the idea that simply letting everyone keep their money will automatically create economic success.

The laffer curve doesn't say any such thing though. So maybe it'd help your argument to not strawman it and find the actual theory you are railing against?

But maybe the greek economy is fantastic - how do you know whether something is working or not economically? Which is better - tractor production or days off in the sunshine, and how can you tell?

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That's not what Laffer's hypothesis states. But putting that to one side and addressing the low tax growth argument, I don't think anyone would seriously say that was enough in and of it's self for increasing GDP. Growth theory is an enormous subject, and gun to head no one really knows what causes growth. But we do have some idea of what destroys it; perverse incentives, tax incidence, the lack of the rule of law, weak institutions, insecure property rights, the poverty of human capital (education, trust, specialisation) being just a few examples. By that reckoning Greece was never going to be a successful anything.

The laffer curve is cited as supporting evidence in the wider grand theory that just letting people spend their own money will result in a wealthy society overall- but as you point out this theory is little more than a cartoon used to justify low taxation- the reality of economic growth is far more nuanced and complex- but I guess Fox News just doesn't do complex or nuanced.

The implications of the failure in Greece of a low tax regime implies that the role of the state in wealth creation is far more important than the neo liberals wish to accept.

Edited by wonderpup

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Take a look at this:

This would appear to be low tax paradise-yet that promised tsunami of wealth does not appear?

With respect you've missed my point. The economics effects at the high end of the Laffer curve are about tax revenue decreasing despite higher stipulated rates, as economic activity is directed away from production and towards tax avoidance. It's not about tax collected being high, quite the opposite.

There is a lot of the above happening in Greece.

Now, I don't know if the Greek tax code is particularly penal in theory, perhaps not. But there are other very high non-deductible costs to doing business in Greece (bribes, basically) that might make the rates effectively punitive.

As others have pointed out, the Laffer curve doesn't say that low taxation is a sufficient condition for high growth, and the Greece economy has plenty of other issues.

Edited by mirage

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Wrong about being right that low effective taxation does not seem to have the stimulative effect claimed for it by the neo liberals?

According to the theory constantly pumped out by the American right Greece ought to be a dynamo of economic activity- instead of which it's a basket case- does this not bother anyone?

It looks on the face of to be a massive fail for the idea that simply letting everyone keep their money will automatically create economic success.

Is there anyone outside of the voices in your head who claims that? Even the most ardent minarchist would say low tax was a necessary but not sufficient condition for growth.

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The laffer curve is cited as supporting evidence in the wider grand theory that just letting people spend their own money will result in a wealthy society overall- but as you point out this theory is little more than a cartoon used to justify low taxation- the reality of economic growth is fart more nuanced and complex- but I guess Fox News just doesn't do complex or nuanced.

The implications of the failure in Greece of a low tax regime implies that the role of the state in wealth creation is far more important than the neo liberals wish to accept.

No, not really.

The state is a gun to your face and a thief at the door. It can only steal and take. Not produce anything.

Try it yourself. Go and get a gun and threaten people to get their stuff, see how much wealth you add to the humanities total.

Empiricism right there, proving you wrong.

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But maybe the greek economy is fantastic - how do you know whether something is working or not economically? Which is better - tractor production or days off in the sunshine, and how can you tell?

Why do you think that simple contradiction constitutes an argument? At this rate we will be reduced to 'Tis' Tisn't Tis ect ect.

What's the point?

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The laffer curve is cited as supporting evidence in the wider grand theory that just letting people spend their own money will result in a wealthy society overall- but as you point out this theory is little more than a cartoon used to justify low taxation- the reality of economic growth is fart more nuanced and complex- but I guess Fox News just doesn't do complex or nuanced.

The implications of the failure in Greece of a low tax regime implies that the role of the state in wealth creation is far more important than the neo liberals wish to accept.

Your last sentence doesn't follow from anything.

Why does it demonstrate that?

I would suggest that the Greek state is the single institution with most responsibility for ******ing everything up! It is systematically corrupt and has the entire population running around either hiding their wealth from it or attempting to gain some unaffordable patronage.

A recently linked article here mentioned that the Greek railway takes revenues of 100 million Euros.

The wage costs are 400 million (average 65k) and other costs a further 300 million.

It would be cheaper to put the passengers in mini-cabs, apparently. This is state-run.

A further gem was that every one of the 300 Greek MPs evades tax on their properties by stating that they are at exactly the outdated model value generated by the tax code, at which no extra tax is payable!

Now I'm no raving Injin here, but choosing Greece as an example where more state involvement might needed in the economy seems like a....brave.. choice.

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Why do you think that simple contradiction constitutes an argument? At this rate we will be reduced to 'Tis' Tisn't Tis ect ect.

What's the point?

You've made a strawman, 3 posters have knocked it down.

So I thought you might want a chance to show us your economic nouse and answer some basic questions about human values, economics and what does and doesn't constitue wealth.

In your own time.....

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No, not really.

The state is a gun to your face and a thief at the door. It can only steal and take. Not produce anything.

Try it yourself. Go and get a gun and threaten people to get their stuff, see how much wealth you add to the humanities total.

Empiricism right there, proving you wrong.

Wrong again on this point. I could easily nick a grand off some cocaine snorting bankster and go plant an orchard.

Wealth created. I know that you will then claim that whatever contravenes your arbitrary version of morality (which seems to be contingent upon property rights without ever defining their basis) can't be wealth creation by definition.

But then you will be wrong, by my definition. (and coincidentally, everyone elses').

Goodnight folks!

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Wrong again on this point. I could easily nick a grand off some cocaine snorting bankster and go plant an orchard.

You could but you can only lose wealth doing so.

Wealth created. I know that you will then claim that whatever contravenes your arbitrary version of morality (which seems to be contingent upon property rights without ever defining their basis) can't be wealth creation by definition.

Mo, it's obvious the banker loses his cocaine usage, which is wealth creation itself.

But then you will be wrong, by my definition. (and coincidentally, everyone elses').

Goodnight folks!

Goodnight.

Wealth is in the eye of the beholder, and if the banker earned his money then what he spends it on is the highest form of wealth available.

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With respect you've missed my point. The economics effects at the high end of the Laffer curve are about tax revenue decreasing despite higher stipulated rates, as economic activity is directed away from production and towards tax avoidance. It's not about tax collected being high, quite the opposite.

There is a lot of the above happening in Greece.

Now, I don't know if the Greek tax code is particularly penal in theory, perhaps not. But there are other very high non-deductible costs to doing business in Greece (bribes, basically) that might make the rates effectively punitive.

As others have pointed out, the Laffer curve doesn't say that low taxation is a sufficient condition for high growth, and the Greece economy has plenty of other issues.

Whatever Laffer actually says it's use as a propaganda weapon in the tax debate is clearly to imply that high tax rates inhibit economic growth which is then extrapolated into the argument that low tax rates will bring that growth into being.

Non public sector wages in Greece are low ,effective taxation is low, so on the face of it all is in place for a booming economy.

But as you point out there is another factor at work- the Greek state is corrupt, inefficient and acts a a drag on enterprise. What this means is that wealth creation is not something that happens in spite of the state but in part because of the state- if that state is working properly.

Greece is actually proof that economic success cannot arise spontaneously just by cutting taxes- a claim made by the neo liberals. Without a sound and uncorrupted state in place the economy does not thrive.

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Whatever Laffer actually says it's use as a propaganda weapon in the tax debate is clearly to imply that high tax rates inhibit economic growth which is then extrapolated into the argument that low tax rates will bring that growth into being.

Low tax rates are a pre-requisite for growth. They just aren't the only one.

Non public sector wages in Greece are low ,effective taxation is low, so on the face of it all is in place for a booming economy.

But as you point out there is another factor at work- the Greek state is corrupt, inefficient and acts a a drag on enterprise. What this means is that wealth creation is not something that happens in spite of the state but in part because of the state- if that state is working properly.

The state is working properly. You just have idiotic notions about what a state does.

Greece is actually proof that economic success cannot arise spontaneously just by cutting taxes- a claim made by the neo liberals. Without a sound and uncorrupted state in place the economy does not thrive.

There are no sound and uncorrupted states. Their purpose is murder, their means theft. Only societies that keep their states limited in some way can prosper.

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You've made a strawman, 3 posters have knocked it down.

No- I made reference to a propaganda tool often employed to make a wider point concerning the economic benefits of low taxation on economic growth- you have mistaken the finger for the moon (again).

My argument is not about laffer but about the wider claim that it has been illegitimately employed to justify- that low taxation in and of itself will create wealth in an economy- my point being that Greece seems to contradict this argument.

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I would suggest that the Greek state is the single institution with most responsibility for ******ing everything up! It is systematically corrupt and has the entire population running around either hiding their wealth from it or attempting to gain some unaffordable patronage.

Right- so we can agree that simply not taxing people much will not bring about a healthy economy in the absence of a sound legal system and state.

Wealth creation cannot operate in a broken state because it requires a functioning state in which to exist. And one of the things a functioning state requires is tax revenue.

So the oft repeated fantasy of the american right that all they need do is 'starve the beast' and the result will be prosperity for all is just that, a fantasy. Greece is proof that private wealth alone is not enough to create prosperity.

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Whatever Laffer actually says it's use as a propaganda weapon in the tax debate is clearly to imply that high tax rates inhibit economic growth which is then extrapolated into the argument that low tax rates will bring that growth into being.

So were you asking about the Laffer curve or asking us to defend some unstated propaganda in your head?

Non public sector wages in Greece are low ,effective taxation is low, so on the face of it all is in place for a booming economy.

Look I mean this in the kindest possible way to all involved, but you are clearly not a "wonderpup", but a spastic who does not properly attend to replies. The Laffer curve says effective taxation is low when prescriptive taxation is too high.

But as you point out there is another factor at work- the Greek state is corrupt, inefficient and acts a a drag on enterprise. What this means is that wealth creation is not something that happens in spite of the state but in part because of the state- if that state is working properly.

No, you have not supported that inference at all. Wealth creation in Greece happens in spite of the state, and for all we know it might happen far better if there were a lot less state. We can't tell just by looking at Greece.

Greece is actually proof that economic success cannot arise spontaneously just by cutting taxes- a claim made by the neo liberals. Without a sound and uncorrupted state in place the economy does not thrive.

You seem to be so intent on tilting at your "neoliberals" that you have no interest in substantive discussion.

How unintriguing!

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