4 ms·

The US experienced massive growth in the 50s and 60s while having very high tax rates. The US, until recently had a higher corporate tax rate than many European

by m12k 6y ago

The US experienced massive growth in the 50s and 60s while having very high tax rates. The US, until recently had a higher corporate tax rate than many European country - the latest US tax cuts brought it down to the same 21% that my native Denmark has. I'm sorry, but this 'deregulation and low taxes will fix everything' myth has been so thoroughly debunked by now that I'm sad to see it rearing its ugly head in an otherwise thoughtful and fact-based forum like HN. What is it with this obsessive focus on supply-side economics, and complete disregard for the demand side? If the middle class has no money to spend, it doesn't matter how cheap the goods are to produce. And China, if anyone, has shown how protectionism, and making sure outside companies can only reach your internal market if they play by your rules, and favoring national companies over international ones, is a winning strategy in the 21st century.

logicchains 6y ago
>The US experienced massive growth in the 50s and 60s while having very high tax rates. The effective rate actually paid by the top 1% was around 42%, which is not much higher than now: https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/ https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/. . The US had also emerged as pretty much the only unbombed industrial country after a global war, giving it a significant advantage. >so thoroughly debunked by now Debunked where? Here's a random paper I found showing a strong correlation between economic freedom and GDP: https://mpra.ub.uni-muenchen.de/49220/ https://mpra.ub.uni-muenchen.de/49220/ . https://www.cato.org/sites/cato.org/files/pubs/efw/efw2019/efw-2019-chapter-1.pdf https://www.cato.org/sites/cato.org/files/pubs/efw/efw2019/e... also has a graph on page 18 showing a strong relationship between economic freedom and income per capita. >What is it with this obsessive focus on supply-side economics, and complete disregard for the demand side? Demand is a factor in short-term market dislocations, but demand cannot create long-term economic growth. Growth requires that some of the value created be saved and invested, in order to increase capital, and no amount of demand will compensate for a long-term fall in investment.
- m12k 6y ago
  > The US had also emerged as pretty much the only unbombed industrial country after a global war, giving it a significant advantage Ding-ding-ding - you hit the nail on the head! The US' competitive advantage and special position in the world, including all those fortune 500 companies, doesn't come from its special adherence to laissez-faire capitalism, it comes from other historic advantages. The supply-side trickle-down cult didn't start until the 70's and incidentally real median purchasing power in the US has been in decline ever since. > Debunked where? Here's a random paper I found Here's a very non-random book I found: https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce... Also, do I really need to remind you that correlation is not the same as causation?
  - logicchains 6y ago
    >Here's a very non-random book I found: https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce... According to Wikipedia, that book makes the argument that economic equality will grow over time. It doesn't show that countries with more economic freedom grow slower. To copy from the "Criticisms" section of that wiki page: " According to Financial Times columnist Martin Wolf, he merely assumes that inequality matters, but never explains why. He only demonstrates that it exists and how it worsens.[36] Or as his colleague Clive Crook put it: "Aside from its other flaws, Capital in the 21st Century invites readers to believe not just that inequality is important, but that nothing else matters. This book wants you to worry about low growth in the coming decades not because that would mean a slower rise in living standards, but because it might ... worsen inequality." " >Also, do I really need to remind you that correlation is not the same as causation? Indeed, fortunately we also have economic models suggesting such a relationship should exist so it's not just blind correlation.
    - m12k 6y ago
      The danger of inequality is not something new, and the problem isn't that someone is super-rich, the problem is that median purchasing power is going down, because economic growth is not going into the hands of the lower and middle class, and this is causing demand to fall in the market, leading to an inevitable economic downturn. The dangers of this were discovered a century ago during the Great Depression, and are well understood and not really considered controversial anymore: https://en.wikipedia.org/wiki/Keynesian_economics https://en.wikipedia.org/wiki/Keynesian_economics
- traveler01 6y ago
  These people should look at Portugal. One of the highest taxers in Europe and our economy is crap. The middle class is basically paying for the rich and poor and they don't have money to spend on the economy. We can't support our companies because their products are actually more expensive than outside products (companies pay a lot of taxes too). It's more than known by every good economist that overtaxing isn't good for any economy.
  - secondcoming 6y ago
    There was talk in at least the London tech scene two or three years ago about Lisbon becoming some sort of tech hub. (Personally, I'd love to move there but I'd have to learn Portuguese) But some companies that did try Lisbon out seem to have pulled back. Last I heard it a large reason was because the 'work ethic' of the Portuguese left something to be desired compared to London.
    - ptmvp 6y ago
      This comment is not only based on anedotical evidence, but demonstrably wrong [0] (compare hours worked between Portugal and the UK - these are significantly higher in Portugal) and perpetuating stereotypes with regards to Southern European countries. [0] https://en.m.wikipedia.org/wiki/List_of_average_annual_labor_hours_in_OECD_countries https://en.m.wikipedia.org/wiki/List_of_average_annual_labor...
      - secondcoming 6y ago
        I'm quite sure I did not present it as a fact. It's just the feedback I got from folk who tried it out. YMMV.
  - nunoonun 6y ago
    afaik Portugal is on par with the EU average on income tax and slightly above corporate tax. Of course because of the low average wage it the high bands of taxing start much earlier than the rest of the countries. But lowering taxes does not increase wages, companies will always adapt to pay the least possible and if the wages are lower they will just pay less. And in all the countries the middle class pays for the rich and poor... unfortunately.
- mulmen 6y ago
  Right, nobody actually paid 60%. They used their money to build factories and create jobs instead. Which drove growth. Now they can just keep the money. The actual taxes paid aren't as important as the incentives they create.
DiogenesKynikos 6y ago
> And China, if anyone, has shown how protectionism, and making sure outside companies can only reach your internal market if they play by your rules, and favoring national companies over international ones, is a winning strategy in the 21st century. The winning strategy depends very much on what stage of economic development a country is at. Developing countries often benefit from some level of protectionism (this is the "infant industries argument," which Alexander Hamilton proposed), but developed countries benefit much more from lower trade barriers. In 20 years, it will be China that is pushing for developing countries to lower their trade barriers.
zip1234 6y ago
In the 50s it was a lot easier to evade taxes as well. Less electronic systems that are easier to track and also a lot of loopholes in the system. https://www.latimes.com/business/la-fi-nocera-tax-avoidance-20190129-story.html https://www.latimes.com/business/la-fi-nocera-tax-avoidance-...

by m12k 6y ago

logicchains 6y ago

>The US experienced massive growth in the 50s and 60s while having very high tax rates. The effective rate actually paid by the top 1% was around 42%, which is not much higher than now: https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/ https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/. . The US had also emerged as pretty much the only unbombed industrial country after a global war, giving it a significant advantage. >so thoroughly debunked by now Debunked where? Here's a random paper I found showing a strong correlation between economic freedom and GDP: https://mpra.ub.uni-muenchen.de/49220/ https://mpra.ub.uni-muenchen.de/49220/ . https://www.cato.org/sites/cato.org/files/pubs/efw/efw2019/efw-2019-chapter-1.pdf https://www.cato.org/sites/cato.org/files/pubs/efw/efw2019/e... also has a graph on page 18 showing a strong relationship between economic freedom and income per capita. >What is it with this obsessive focus on supply-side economics, and complete disregard for the demand side? Demand is a factor in short-term market dislocations, but demand cannot create long-term economic growth. Growth requires that some of the value created be saved and invested, in order to increase capital, and no amount of demand will compensate for a long-term fall in investment.

m12k 6y ago
> The US had also emerged as pretty much the only unbombed industrial country after a global war, giving it a significant advantage Ding-ding-ding - you hit the nail on the head! The US' competitive advantage and special position in the world, including all those fortune 500 companies, doesn't come from its special adherence to laissez-faire capitalism, it comes from other historic advantages. The supply-side trickle-down cult didn't start until the 70's and incidentally real median purchasing power in the US has been in decline ever since. > Debunked where? Here's a random paper I found Here's a very non-random book I found: https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce... Also, do I really need to remind you that correlation is not the same as causation?
- logicchains 6y ago
  >Here's a very non-random book I found: https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce... According to Wikipedia, that book makes the argument that economic equality will grow over time. It doesn't show that countries with more economic freedom grow slower. To copy from the "Criticisms" section of that wiki page: " According to Financial Times columnist Martin Wolf, he merely assumes that inequality matters, but never explains why. He only demonstrates that it exists and how it worsens.[36] Or as his colleague Clive Crook put it: "Aside from its other flaws, Capital in the 21st Century invites readers to believe not just that inequality is important, but that nothing else matters. This book wants you to worry about low growth in the coming decades not because that would mean a slower rise in living standards, but because it might ... worsen inequality." " >Also, do I really need to remind you that correlation is not the same as causation? Indeed, fortunately we also have economic models suggesting such a relationship should exist so it's not just blind correlation.
  - m12k 6y ago
    The danger of inequality is not something new, and the problem isn't that someone is super-rich, the problem is that median purchasing power is going down, because economic growth is not going into the hands of the lower and middle class, and this is causing demand to fall in the market, leading to an inevitable economic downturn. The dangers of this were discovered a century ago during the Great Depression, and are well understood and not really considered controversial anymore: https://en.wikipedia.org/wiki/Keynesian_economics https://en.wikipedia.org/wiki/Keynesian_economics
traveler01 6y ago
These people should look at Portugal. One of the highest taxers in Europe and our economy is crap. The middle class is basically paying for the rich and poor and they don't have money to spend on the economy. We can't support our companies because their products are actually more expensive than outside products (companies pay a lot of taxes too). It's more than known by every good economist that overtaxing isn't good for any economy.
- secondcoming 6y ago
  There was talk in at least the London tech scene two or three years ago about Lisbon becoming some sort of tech hub. (Personally, I'd love to move there but I'd have to learn Portuguese) But some companies that did try Lisbon out seem to have pulled back. Last I heard it a large reason was because the 'work ethic' of the Portuguese left something to be desired compared to London.
  - ptmvp 6y ago
    This comment is not only based on anedotical evidence, but demonstrably wrong [0] (compare hours worked between Portugal and the UK - these are significantly higher in Portugal) and perpetuating stereotypes with regards to Southern European countries. [0] https://en.m.wikipedia.org/wiki/List_of_average_annual_labor_hours_in_OECD_countries https://en.m.wikipedia.org/wiki/List_of_average_annual_labor...
    - secondcoming 6y ago
      I'm quite sure I did not present it as a fact. It's just the feedback I got from folk who tried it out. YMMV.
- nunoonun 6y ago
  afaik Portugal is on par with the EU average on income tax and slightly above corporate tax. Of course because of the low average wage it the high bands of taxing start much earlier than the rest of the countries. But lowering taxes does not increase wages, companies will always adapt to pay the least possible and if the wages are lower they will just pay less. And in all the countries the middle class pays for the rich and poor... unfortunately.
mulmen 6y ago
Right, nobody actually paid 60%. They used their money to build factories and create jobs instead. Which drove growth. Now they can just keep the money. The actual taxes paid aren't as important as the incentives they create.

DiogenesKynikos 6y ago

> And China, if anyone, has shown how protectionism, and making sure outside companies can only reach your internal market if they play by your rules, and favoring national companies over international ones, is a winning strategy in the 21st century. The winning strategy depends very much on what stage of economic development a country is at. Developing countries often benefit from some level of protectionism (this is the "infant industries argument," which Alexander Hamilton proposed), but developed countries benefit much more from lower trade barriers. In 20 years, it will be China that is pushing for developing countries to lower their trade barriers.

zip1234 6y ago

In the 50s it was a lot easier to evade taxes as well. Less electronic systems that are easier to track and also a lot of loopholes in the system. https://www.latimes.com/business/la-fi-nocera-tax-avoidance-20190129-story.html https://www.latimes.com/business/la-fi-nocera-tax-avoidance-...