{"id":30289,"date":"2015-08-23T16:00:52","date_gmt":"2015-08-23T15:00:52","guid":{"rendered":"http:\/\/www.taxresearch.org.uk\/Blog\/?p=30289"},"modified":"2015-08-23T16:01:32","modified_gmt":"2015-08-23T15:01:32","slug":"tax-doesnt-harm-growth","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2015\/08\/23\/tax-doesnt-harm-growth\/","title":{"rendered":"Tax doesn’t harm growth"},"content":{"rendered":"

I have borrowed the following italicised text from the Tax Justice Network blog<\/a>, because it's well worth sharing, as is the rest of the blog that follows the bit I have used:<\/p>\n

There are a lot of \u2018competitiveness\u2019-related rankings of countries and states out there, from the World Economic Forum\u2019s\u00a0Global Competitiveness Report<\/a>, to the World Bank\u2019s Ease of Doing Business rankings<\/a>. (We\u2019ll address some of these in due course.) It\u2019s interesting to\u00a0note, for starters, that the highly taxed, highly regulated Scandinavian economies seem to do just as well as their low-tax, lightly regulated peers.\u00a0Recently we\u00a0made up a\u00a0little graph to illustrate this, looking at the WEF\u2019s ranking:<\/em><\/p>\n

\"Source:<\/a><\/p>\n

There\u2019s no obvious trend here, is there? The high-tax countries seem to be\u00a0just as \u2018competitive\u2019 as the low-tax ones, it seems, even\u00a0on the WEF\u2019s measures, (which are somewhat skewed toward the low-tax, light\u00a0regulation model.) The non-trend you see in this graph\u00a0is just as Martin Wolf<\/a>, Paul Krugman<\/a> and various others<\/a> would have predicted.<\/em><\/p>\n

Now \u2018competitiveness\u2019 in these rankings is usually taken to be a pointer for\u00a0future economic growth potential and as Krugman commented a few days ago in a post entitled \u2018Competitiveness and Class Warfare\u2019<\/a>:<\/em><\/p>\n

\n

\u201cEconomic growth is pretty insensitive to policy: France and the US are at the extremes of advanced-country regimes, yet there\u2019s not much difference in their long-term performance.\u201d<\/em><\/p>\n<\/blockquote>\n

Wolf\u00a0made this point<\/a>\u00a0from a tax perspective\u00a0not so long\u00a0ago,\u00a0with supporting graphics. As he put it:<\/em><\/p>\n

\n

\u201cThe spread in the average tax ratio is quite large, at 26 per cent of GDP, from Japan to Denmark. It is even quite surprising that such a spread seems to have no effect on economic performance.\u00a0. . . a tax burden within the range of 30 per cent to 55 per cent of GDP) tells one nothing about a country\u2019s economic performance. It is far more a reflection of different social preferences about the role of the state. What matters far more are culture, quality of institutions, including law, levels of education, quality of businesses, openness to trade, strength of competition and so forth.\u00a0My conclusion is that the focus on the tax burden is misguided. Alternatively, the economic arguments are a cover for (perfectly understandable) self-interest.\u201d<\/em><\/p>\n<\/blockquote>\n

(There\u2019s more on the theory backing\u00a0these findings\u00a0here<\/a>.)<\/em><\/p>\n

None of which is surprising of course: tax is really all about making sure resources are allocated to best effect to meet the social needs of the society charging them (on which there is much to come in The Joy of Tax). In that case it is hardly surprising that high tax rates are no impediment to growth, and that there is even (as the TJN blog goes on to explore) some indication that low tax rates may hinder that objective in states at broadly the same state of development.<\/p>\n

To put it another way: no one need fear tax increases. So why do you here the idea promoted so hard and so often in the media? Could that be, as Martin Wolf suggested, pure self interest on the part of a few?<\/p>\n","protected":false},"excerpt":{"rendered":"

I have borrowed the following italicised text from the Tax Justice Network blog, because it’s well worth sharing, as is the rest of the blog
 Read the full article…<\/em><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[35,97],"tags":[],"class_list":["post-30289","post","type-post","status-publish","format-standard","hentry","category-economics","category-tax-justice"],"_links":{"self":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/30289","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/comments?post=30289"}],"version-history":[{"count":0,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/30289\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/media?parent=30289"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/categories?post=30289"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/tags?post=30289"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}