Why Tax Breaks Aren’t Bad

23 March, 2010

The economist Robert H Frank in his book ‘The Return of the Economic Naturalist’ completely dismisses the case in favour of tax breaks for the rich (a policy aggressively pursued by the then Bush administration). As far as boosting employment is concerned, he claims, it doesn’t matter what tax rate business owners are paying.

If the addition of another worker to the company is profitable, the entrepreneur will hire him regardless of what tax rate he is paying. This is the decision criterion of the rational utility-maximising capitalist, he says. Although Frank’s logic is extremely elegant, it is ultimately flawed.

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Why Tobin Taxes Wouldn’t Have Prevented The Financial Crisis

24 November, 2009

The Economist discusses the populist rhetoric from Gordon Brown on the topic of the Tobin Tax, a fee levied by government on any financial transaction. US Treasury Secretary Tim Geithner admits that any such policy would be useless unless adopted world-wide, because trading would simply migrate to unregulated jurisdictions.

Public support for such measures is worrying though, as the Tobin Tax is ineffective in preventing risk-taking in financial markets or harmful asset price bubbles. It would be extremely effective at making markets inefficient though..

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How To Lose Friends and Alienate Tax-Payers

23 November, 2009

The public sector strikers might as well be protesting against the recession, as though such a beast could be tamed by opprobrium. They seem to be confusing the dire economic circumstances facing the state and public finances, with some discretionary government policy that can be reconsidered.

Quite simply, the government has to cut back on public sector pay, and quite significantly so. According to the Department of Finance, the Irish government has suffered a €26 billion deficit in expenditure over revenue thus far in 2009. Next year, it could be worse.

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The ‘Sticky Tax’ Phenomenon

22 May, 2009

Philip Lane of the IIIS discussed the future of Irish fiscal policy. This included the nature of the revenue deficit, the constraints around fiscal policy in the current environment, the political realities of tax policy, and what he considers the optimal path of public sector pay cuts and tax hikes.

Firstly, we’ll discuss the consequences of the composition of the budgetary deficit. In recent years, tax revenue became heavily reliant on assets. These sources have now dried up, and won’t ever recover to the same levels. Thus, it becomes a question of what, not whether, tax hikes will be permanent.

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Carbon Warfare

16 May, 2009

Paul Krugman debates the limit of policy options that should be used to make China reduce its carbon consumption. He argues the necessity for China to change for the sake of the planet, and appears to be suggesting that imposing carbon taxes on imports might be acceptable if political progress cannot be made.

However, China has been making significant progress in developing clean technology according to the New York Times. Indeed, it has become the world leader in advanced coal-fired power generation, says the International Energy Agency. Meanwhile, combatting climate change will require international co-operation and compromise from both sides. Krugman’s moral superiority is not the answer.

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Recipe for Recovery?

10 May, 2009

The Economist critiques Gordon Brown’s tax changes in the UK. By pandering to the masses and allowing dictation of policy by politics, they will damage the long-term recovery prospects for the economy and drive out the economy’s highest earners. The entire country will suffer for this myopia, even if voters are not angered in the short-term.

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Transfer Taxing

6 May, 2009

The Irish Times reports that President Obama is set to implement sweeping tax changes to treatment of repatriated profits from overseas. The measure might seem politically expedient, but is questionably beneficial for the American economy. Meanwhile, Ireland seems exposed.

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