Source: OECD StatExtract.
No tax cuts for you? Net personal average tax rate of single American, British, Australian and New Zealander on average earnings, no children, since 2000
19 Aug 2015 Leave a comment
in economic history, labour economics, labour supply, politics - Australia, politics - New Zealand, politics - USA Tags: Australia, British economy, taxation and labour supply
Source: OECD StatExtract.
The benefits and costs of the @NZSuperFund since its inception
17 Aug 2015 Leave a comment
in applied price theory, applied welfare economics, economic growth, economic history, entrepreneurship, financial economics, fiscal policy, industrial organisation, labour economics, labour supply, macroeconomics, politics - New Zealand, public economics Tags: ageing society, company tax rate, deadweight cost of taxes, demographic crisis, efficient markets hypothesis, laffer curve, New Zealand superannuation fund, old age pensions, retirement savings, social insurance, sovereign wealth funds, taxation and entrepreneurship, taxation and investment, taxation and labour supply
Most mutual funds still can't beat their benchmark read.bi/1GkTig1 http://t.co/r7ezoDGJbV—
BI Chart of the Day (@chartoftheday) June 03, 2015
The New Zealand Superannuation Fund, the sovereign wealth fund part funding New Zealand’s old-age pension from 2029/2030 onwards, has been a bit of a wild ride. Sometimes the earnings of the Fund were well below and sometimes earning well above the long-term bond rate.
![image_thumb[3]](https://utopiayouarestandinginit.com/wp-content/uploads/2015/08/image_thumb310.png "image_thumb[3]")
Source: New Zealand Superannuation Fund Annual Report 2014.
Since its inception, the Fund earned an average annual return of 9.78%, which was 5.06% above the long-term bond rate, and 1.03% above its reference portfolio.
No information was given in the annual report of the New Zealand Superannuation Fund on the marginal dead weight cost of the taxes raised to fund the New Zealand Superannuation Fund to see whether there is any net benefit to taxpayers from its establishment and continued operation.
The New Zealand Government has contributed $14.88 billion to the fund from prior its inception in 2001 to the suspension of contributions in 2009 by the incoming National Party Government.
Source: New Zealand Treasury.
Over the nine years in which contributions were made, the company tax rate of 28% could have easily been up to 10 percentage points lower.
The New Zealand Treasury estimates that a one percentage point cut in the company tax costs about $220 million in forgone revenue if there are no other changes to the tax system. These are static estimates that do not include any feedback from greater investment and higher growth.
The New Zealand Superannuation Fund must beat the market every single year to make up for the deadweight cost of its funding, a premium for the investment risk added to the Crown’s portfolio and the cost to New Zealand’s growth rate of higher than otherwise taxes on income, entrepreneurship and investment.
Source: Abolish the Corporate Income Tax – The New York Times.
How @equitablegrowth showed inequality helps growth when arguing inequality harms growth
10 Aug 2015 1 Comment
in applied price theory, applied welfare economics, comparative institutional analysis, currency unions, economic growth, economic history, economics of regulation, entrepreneurship, Euro crisis, fiscal policy, global financial crisis (GFC), income redistribution, labour economics, labour supply, macroeconomics, Marxist economics, poverty and inequality, Public Choice, public economics, rentseeking Tags: British disease, entrepreneurial alertness, Eurosclerosis, France, German unification, Germany, growth of government, sick man of Europe, social insurance, Sweden, taxation and entrepreneurship, taxation and investment, taxation and labour supply, welfare state
The Washington Centre for Equitable Growth recently tweeted that inequality harms growth in the USA as compared to Sweden, France, Germany and the UK. It was relying on some dodgy OECD research.
.@OECD sees continued rise in growth-harming inequality, reports @PaulHannon29 on.wsj.com/1EZpq1S http://t.co/xt4heZysXT—
Equitable Growth (@equitablegrowth) May 21, 2015
The Washington Centre for Equitable Growth did not check their inequality ratios they tweeted against trends in economic growth and economic policy since 1970, which I have reproduced in figure 1. Germany is not included in figure 1 because German data on growth is thrown askew by German unification.
Figure 1: Real GDP per British, French and Swede aged 15-64, 2014 US$ (converted to 2014 price level with updated 2011 PPPs), 1.9 per cent detrended, 1970-2013
Source: Computed from OECD Stat Extract and The Conference Board. 2015. The Conference Board Total Economy Database™, May 2015, http://www.conference-board.org/data/economydatabase/
Figure 1 shows that France has been in a long-term decline since the late 1970s despite the blessings of a more equal society than the USA as championed by the Washington Centre for Equitable Growth. In figure 1, a flat line is growth in real GDP per working age person, PPP, at the same rate as the USA for the 20th century, which was 1.9% per year. A falling line in figure 1 indicates growth of less than 1.9% while a rising line indicates growth in real GDP per working age person, PPP, in excess of 1.9%. In figure 1, France hardly ever grew at the trend rate of growth for the USA of 1.9% per year and was frequently well below that rate.
Sweden tells a slightly different story in figure 1 because of regime change in the early 1990s when Sweden adopted more liberal economic policies where taxes and government spending were reduced:
The rapid growth of the state in the late 1960s and 1970s led to a large decline in Sweden’s relative economic performance. In 1975, Sweden was the 4th richest industrialised country in terms of GDP per head. By 1993, it had fallen to 14th.
@alexvoronov använda smygfinansiering av Generell Välfärd är alltid av ondo. @NimaSanandaji: bit.ly/1Nar2eV http://t.co/wD0YEgncIE—
Old Whig (@aClassicLiberal) August 05, 2015
That regime change reversed a long economic decline since 1970 under the egalitarian policies of the Swedish Social Democratic Party. Under the Swedish Social Democratic Party, Sweden was almost always growing at less than the trend rate of growth of the USA, which was 1.9%. That position reversed only when there was a turn away from big government and high taxes.
Figure 1 tells a similar story for the British economy: a long economic decline in the 1970s when Britain was the sick man of Europe. Under Thatchernomics, Europe had a long economic boom for 20 years or more – see figure 1.
In the 1970s, under the high taxes of the Heath, Callaghan and Wilson administrations, as figure 1 shows, Britain was the sick man of Europe. With the election of the Thatcher Government, Britain soon grew at better than the US trend growth rate for nearly 20 years through few exceptions.
Graph of the Day: The UK has among the lowest total tax rates on businesses in the G7 http://t.co/l6mMhN9yLD—
CPS Think Tank (@CPSThinkTank) August 04, 2015
Swedosclerosis and Eurosclerosis compared
10 Aug 2015 Leave a comment
in applied welfare economics, comparative institutional analysis, economic growth, economic history, economics of regulation, industrial organisation, labour economics, labour supply, macroeconomics, survivor principle Tags: Eurosclerosis, Sweden, taxation and entrepreneurship, taxation and investment, taxation and labour supply, welfare state
This time it is different: unemployment incidence by duration, USA, 1968 – 2014
08 Aug 2015 1 Comment
in budget deficits, great recession, job search and matching, labour economics, labour supply, macroeconomics, politics - USA, unemployment, welfare reform Tags: natural unemployment rate, taxation and labour supply, unemployment duration, unemployment insurance, unemployment rates, welfare state
The Great Recession was the first recession in the USA in a good 40 to 50 years where the composition of employment changed by much. Even the big recession at the beginning of the 1980s did not do much to the composition of unemployment by duration in the USA.
Source: OECD StatExtract.
Those unemployed for more than a year moved from barely double digits even in a bad recession prior to 2008 to coming on one-third of all unemployed. Likewise, those unemployed for less than a month halved from 40% to 20%. Something changed in the US labour market with the Great Recession and the long extensions of unemployment insurance from 26 weeks to 52 weeks and then 99 weeks.
Tax rates on labour income across the OECD area
02 Aug 2015 Leave a comment
in labour economics, labour supply, politics - Australia, politics - New Zealand, politics - USA, public economics Tags: Australia, British economy, Canada, France, Germany, taxation and labour supply
How high is the US #tax burden on labor? Here's an OECD comparison tax.foundation/1KojUv9 by @samcjordan_ @kpomerleau http://t.co/fSAT8ut52z—
Tax Foundation (@taxfoundation) July 24, 2015
Average effective retirement age by gender in the PIGS, 1970 – 2012
27 Jul 2015 Leave a comment
in currency unions, economic history, Euro crisis, fiscal policy, labour economics, labour supply Tags: ageing society, demographics crisis, economics of retirement, female labour force participation, Greece, Italy, male labour force participation, old age pensions, older workers, Portugal, social insurance, Social Security, Spain, taxation and labour supply
Figure 1 shows a relatively distinct pattern for men in the PIGs. Portugal aside, there has been a long decline retirement ages. This is different to the Anglo-Saxon countries where effective retirement ages have been increasing in recent years for men.
Figure 1: average effective retirement age (5-year averages), men, Portugal, Italy, Greece and Spain, 1970 – 2012
Source: OECD Pensions at a Glance.
Figure 2 shows that apart from Greece, that after a long decline in female effective retirement ages, there was something the rebound, especially in Italy and Portugal. In Greece, the rebound was in the 80s, followed by a resumption of decline from the mid 90s.
Figure 2: average effective retirement age (5-year averages), women, Portugal, Italy, Greece and Spain, 1970 – 2012
Source: OECD Pensions at a Glance.
Hourly minimum wages before and after taxes, USA, UK, Canada, Australia, New Zealand and Japan
26 Jul 2015 Leave a comment
in labour economics, minimum wage, politics - Australia, politics - New Zealand, politics - USA, population economics, public economics Tags: Australia, British economy, Canada, Japan, social insurance, Social Security taxes, taxation and labour supply
Figure 1: Hourly minimum wage before and after taxes, 2013, US dollars at purchasing power parities, single-person household
Source: OECD Focus on Minimum Wages after the crisis (2015).
Annual hours worked per working age American, German and French, 1950–2013
12 May 2015 Leave a comment
in applied price theory, economic growth, economic history, great depression, labour economics, labour supply, macroeconomics, politics - USA, Public Choice, public economics, taxation Tags: Edward Prescott, Euroclerosis, France, Germany, labour supply, Robert Lucas, taxation and labour supply
Figure 1 shows that Americans work the same hours per year pretty much the entire post-war period. By contrast, there is been a long decline in hours worked in Germany and France. The large drop in 1992 was German unification.
Figure 1: annual hours worked per working age American, German and French, 1950 – 2013
Source: OECD StatExtract and The Conference Board Total Economy Database™,January 2014, http://www.conference-board.org/data/economydatabase/
The long decline seemed to tally with the disproportionately sharp rise in the average tax rate on labour income, including social security contributions in France and Germany. When tax rates on labour income, including social security contributions stabilised in about 1980, hours worked stabilised in all countries.
Figure 2: average tax rate on labour income,USA, Germany and France, 1950 – 2013
Source: Source: Cara McDaniel.
Some pander to the great vacation theory of European labour supply. This is the hypothesis of a large increase in the preference for leisure in the European Union member states. That is, mass voluntary unemployment and mass voluntary reductions and labour supply by choice by Europeans. They just decided to work less.
This is not the first outing for the great vacation theory of labour supply. In the late 1970s, Modigliani dismissed the new classical explanation of Lucas and Rapping (1969) of the U.S. great depression in which the 1930s unemployment was voluntary unemployment – the great depression was just a great vacation – with the following remarks:
Sargent (1976) has attempted to remedy this fatal flaw by hypothesizing that the persistent and large fluctuations in unemployment reflect merely corresponding swings in the natural rate itself.
In other words, what happened to the U.S. in the 1930’s was a severe attack of contagious laziness!
I can only say that, despite Sargent’s ingenuity, neither I nor, I expect most others at least of the non-Monetarist persuasion, are quite ready yet. to turn over the field of economic fluctuations to the social psychologist!
As Prescott has pointed out, the USA in the Great Depression and France since the 1970s both had 30% drops in hours worked per adult. That is why Prescott refers to France’s economy as depressed. The reason for the depressed state of the French (and German) economies is taxes, according to Prescott:
Virtually all of the large differences between U.S. labour supply and those of Germany and France are due to differences in tax systems.
Europeans face higher tax rates than Americans, and European tax rates have risen significantly over the past several decades.
Countries with high tax rates devote less time to market work, but more time to home activities, such as cooking and cleaning. The European services sector is much smaller than in the USA.
Time use studies find that lower hours of market work in Europe is entirely offset by higher hours of home production, implying that Europeans do not enjoy more leisure than Americans despite the widespread impression that they do. Europeans did not work less. They worked more on activities that were not taxed.
The role of new taxes in the Great Recession
24 Apr 2015 Leave a comment
in economic growth, fiscal policy, great recession, labour economics, labour supply, macroeconomics, politics - USA Tags: great recession, obama, Obamacare, taxation and entrepreneurship, taxation and investment, taxation and labour supply
.
Stephen Williamson on Marginal Taxation
03 Aug 2014 Leave a comment
in applied welfare economics, fiscal policy, income redistribution, politics - New Zealand, politics - USA, Public Choice Tags: envy, Stephen Williamson, taxation and entrepreneurship, taxation and human capital, taxation and investment, taxation and labour supply, top 1%
He says a lot. I’ll try to address piece by piece.
Next, some people have shown interest in this paper by Diamond and Saez. A key result that seemed to get these people excited is the calculation of a top optimal marginal tax rate (including all taxes) of 73%, relative to the current rate of 42.5%. There are two key assumptions that Diamond and Saez make to come up with the 73% optimal rate. First, we should not care about the welfare (at the margin) of the rich people. This argument is based solely on the notion that marginal utility of income is low for the top income-earners. Second, Diamond and Saez use a “behavioral elasticity” of tax revenue with respect to the tax rate of 0.25. To see how this matters, if you use their formula and an elasticity of one, you get an optimal top tax rate…
View original post 1,215 more words
Utopia, you are standing in it! 
Recent Comments