I’ve already written about how the Paris-based Organization for Economic Cooperation and Development (OECD), which is heavily subsidized by American taxpayers, is advocating for bigger government.
I’m especially irked that the OECD has gotten in bed with nutjobs from the Occupy movement and also joined forces with the union bosses to push for statist policies.
So I guess I shouldn’t be surprised that the bureaucrats are now acting as cheerleaders for Thomas Piketty and class-warfare tax policy.
This is evident in a new report on “Top Incomes and Taxation in OECD Countries.” The bias is evident on the very first page, with the report asserting that “the very richest in society are accumulating an ever-increasing proportion of national incomes.” Yet this language inaccurately implies the economic pie is fixed in size and it is rather revealing that it uses “accumulating” rather than “earning.”
But that’s trivial compared to the assertion, also on the opening page, that the goal is to “identify concrete policy options to ensure a fairer distribution of resources.” In other words, the focus is on re-slicing the pie, not making it bigger.
But the problem is not merely bad rhetoric. The report concludes with a long list of potential tax hikes, all of which supposedly are justified because “historically high levels and the sustained rise in the share of top income recipients in total income are often taken as signs that top earners’ “capacity to pay” tax has increased. Furthermore, this coincides with a period where public finances are tight and governments are seeking new sources of revenue.”
I guess we shouldn’t be surprised that a bureaucracy representing governments has a list of policies designed to increase government power. But that doesn’t change the fact that class-warfare policies are destructive.
The OECD lists a smorgasbord of tax hikes, beginning with higher top tax rates.
A most direct way to ensure that top income earners pay a higher share of taxes is to raise marginal tax rates on income as well as other taxes which affect them. While there may be some concerns that such measures may not be as effective as intended with regard to raising tax revenues, some recent analysis suggests that there is still some scope to increase top tax rates to maximise tax revenues.
I supposed I should be happy that the bureaucrats are at least acknowledging that higher tax rates may not be “effective” because of Laffer Curve reasons, but it’s nonetheless disturbing that they think the goal should be revenue maximization.
That implies imposing a lot of economic damage to collect very small amounts of revenue. As Professor Martin Feldstein observed:
Why look for the rate that maximizes revenue? As the tax rate rises, the “deadweight loss” (real loss to the economy rises) so as the rate gets close to maximizing revenue the loss to the economy exceeds the gain in revenue…. I dislike budget deficits as much as anyone else. But would I really want to give up say $1 billion of GDP in order to reduce the deficit by $100 million? No. National income is a goal in itself. That is what drives consumption and our standard of living.
Looking specifically at an Obama proposal to boost payroll tax rates, Lawrence Lindsey admitted that the government would get more money, but at very high cost.
We should also keep in mind that the economic well-being of the country is not measured by how much taxes the government can collect, or even the size of the deficit. Rather, it is measured by the country’s productive capacity. …It is shocking to think that we have a presidential candidate who would make the private sector $5 poorer in order to make the government $1 richer.
And here’s what I wrote about some research from the European Central Bank.
…this study implies that the government would reduce private-sector taxable income by about $20 for every $1 of new tax revenue. Does that seem like good public policy? Ask yourself what sort of politicians are willing to destroy so much private sector output to get their greedy paws on a bit more revenue.
Here’s the remaining list of suggested tax hikes, followed by my parenthetical observations.
• Abolishing or scaling back a wide range of those tax deductions, credits and exemptions which benefit high income recipients disproportionately; (I want to get rid of loopholes, assuming we use the right definition, but only if the money is used to finance lower tax rates).
• Taxing as ordinary income all remuneration, including fringe benefits, carried interest arrangements and stock options; (I want to tax fringe benefits, but only as part of good tax reform and good health reform, not to give politicians more money).
• Considering shifting the tax mix towards a greater reliance on recurrent taxes on immovable property; (I already don’t like Fairfax County raping me for property taxes, so I sure don’t want the federal government doing the same thing).
• Reviewing other forms of wealth taxes such as inheritance taxes; (On a per-dollar-collected basis, a wealth tax might be the most destructive levy).
• Examining ways to harmonise capital and labour income taxation; (This means increased double taxation of income that is saved and invested).
• Increasing transparency and international cooperation on tax rules to minimise “treaty shopping” (when high-income individuals and companies structure their finances to take account of favourable tax provisions in different countries) and tax optimisation; (Is anyone shocked that the OECD is endorsing its own campaign to impose higher tax burdens on multinational companies?).
• Broadening the tax base of the income tax, so as to reduce avoidance opportunities and thereby the elasticity of taxable income; (Perhaps I’m missing something, but how is this different from the aforementioned point about credits, deductions, and exemptions?).
• Developing policies to improve transparency and tax compliance, including continued support of the international efforts, led by the OECD, to ensure the automatic exchange of information between tax authorities. (In other words, undermine tax competition to enable and facilitate higher tax burdens).
By the way, there’s one group that doesn’t have to worry very much about all these proposed tax hikes. OECD bureaucrats get tax-free salaries, which may explain why they seem oblivious to the real-world impact of their proposed policies.
Interestingly, the report inadvertently acknowledges that lower tax rates are good for capital formation and tax compliance.
The decline in top rates of income tax leads to a reduction in the tax burden carried by high earners and thus increases their post-tax income. Higher disposable income makes it easier for individuals to save and accumulate capital which eventually increases incomes further. Reducing top rates of income tax reduces the incentive to engage in tax planning to avoid or evade tax, so leads to more income being declared for income tax purposes.
Though this accidental bit of insight certainly didn’t have any impact on the OECD’s policy recommendations.
P.S. I periodically cite data from the IMF, BIS, and OECD to show that rising burdens of government spending are sewing the seeds of fiscal crisis in most industrialized nations.
We now have updated numbers from the OECD. The good news, so to speak, that America’s need for “budgetary consolidation” appears to have dropped from about 9.5 percent of GDP to 9 percent of GDP. But we’re still one of nations with the biggest long-run challenge, which is why I’m a broken record on the need for real entitlement reform.
The numbers for Greece and Portugal have gotten much worse in the past couple of years. I’m tempted to say that this is evidence that all the tax increases in those two nations have backfired. But I suspect it’s more a function of the OECD statistics people being wildly off base a couple of years ago.
P.P.S. If you were asked about the policies needed to promote more growth in Malaysia and Indonesia, you would probably suggest copying the high-growth economies in the region such as Hong Kong and Singapore.
But if you were an OECD bureaucrat, you would instead put out a report about “Rising tax revenues: A key to economic development in emerging Asian countries.”
And you would make this absurd assertion.
Increased domestic resource mobilisation is widely accepted as crucial for countries to successfully meet the challenges of development and achieve higher living standards for their people. Additional tax revenues enable governments to simultaneously strengthen infrastructure development, enhance the quality of education and promote social cohesion.
But don’t be surprised. The OECD made the exact same recommendation for higher taxes to finance bigger government when looking at Latin American economies. So at least they’re consistent.
Too bad the OECD bureaucrats are so in love with higher taxes that they never suggest the policies that enabled Western Europe to become rich.
P.P.P.S. The OECD report focuses on “taxing the rich,” but always remember that politicians use that as a strategic gimmick in order to justify higher taxes on the rest of us.
[…] For all intents and purposes, we’re all destined to become Greece according to long-run projections from the International Monetary Fund, Bank for International Settlements, and Organization for Economic Cooperation and Development. […]
[…] For all intents and purposes, we’re all destined to become Greece according to long-run projections from the International Monetary Fund, Bank for International Settlements, and Organization for Economic Cooperation and Development. […]
[…] In China. In Africa. Everywhere. […]
[…] now you can understand why international bureaucracies like the IMF, BIS, and OECD estimate that the fiscal challenge in the United States may be even bigger than the problems in […]
[…] now you can understand why international bureaucracies like the IMF, BIS, and OECD estimate that the fiscal challenge in the United States may be even bigger than the problems in […]
[…] now you can understand why international bureaucracies like the IMF, BIS, and OECD estimate that the fiscal challenge in the United States may be even bigger than the problems in […]
[…] now you can understand why international bureaucracies like the IMF, BIS, and OECD estimate that the fiscal challenge in the United States may be even bigger than the problems in […]
[…] now you can understand why international bureaucracies like the IMF, BIS, and OECD estimate that the fiscal challenge in the United States may be even bigger than the problems in […]
[…] argument. Bureaucracies such as the International Monetary Fund, the United Nations, and the Organization for Economic Cooperation and Development also have claimed that there will be more prosperity if governments get more control over the […]
[…] as the International Monetary Fund, the United Nations, and the Organization for Economic Cooperation and Development also have claimed that there will be more prosperity if governments get more […]
[…] this argument. Bureaucracies such as the International Monetary Fund, the United Nations, and the Organization for Economic Cooperation and Development also have claimed that there will be more prosperity if governments get more control over the […]
[…] now you can understand why international bureaucracies like the IMF, BIS, and OECD estimate that the fiscal challenge in the United States may be even bigger than the problems in […]
[…] For all intents and purposes, we’re all destined to become Greece according to long-run projections from the International Monetary Fund, Bank for International Settlements, and Organization for Economic Cooperation and Development. […]
[…] there isn’t a single tax cut or pro-growth proposal. It’s a taxapalooza, what you expect from a France-based bureaucracy, not from an American […]
[…] compete (OECD vs IMF) to advocate class […]
[…] the Congressional Budget Office or from international bureaucracies such as the IMF, BIS, and OECD, show that America will become a European-style welfare state over the next couple of decades in […]
[…] not a make-believe argument. Left-leaning bureaucracies such as the International Monetary Fund and Organization for Economic Cooperation and Development have been pushing this idea in recent years. They use phrases such as “resource […]
[…] For all intents and purposes, we’re all destined to become Greece according to long-run projections from the International Monetary Fund, Bank for International Settlements, and Organization for Economic Cooperation and Development. […]
[…] I give speeches about modern welfare states, I’ll often cite grim data from the IMF, BIS, and OECD about the very depressing fiscal consequences of ever-expanding […]
[…] supplanted. Bureaucracies such as the International Monetary Fund, the United Nations, and the Organization for Economic Cooperation and Development are now pushing a statist agenda based on the bizarre theory that higher taxes and more spending […]
[…] supplanted. Bureaucracies such as the International Monetary Fund, the United Nations, and the Organization for Economic Cooperation and Development are now pushing a statist agenda based on the bizarre theory that higher taxes and more spending […]
[…] been supplanted. Bureaucracies such as the International Monetary Fund, the United Nations, and the Organization for Economic Cooperation and Development are now pushing a statist agenda based on the bizarre theory that higher taxes and more spending […]
[…] for the United Kingdom is very grim. The data generated by the International Monetary Fund and the Organization for Economic Cooperation and Development isn’t quite as dour, but those bureaucracies also show very significant long-run fiscal […]
[…] Wow, it’s depressing that the long-run outlook for the United States is worse than it is for some of Europe’s most infamous welfare states. Though I guess we shouldn’t be totally surprised since I’ve already shared similarly grim estimates from the IMF, BIS, and OECD. […]
[…] Wow, it’s depressing that the long-run outlook for the United States is worse than it is for some of Europe’s most infamous welfare states. Though I guess we shouldn’t be totally surprised since I’ve already shared similarly grim estimates from the IMF, BIS, and OECD. […]
[…] OECD published a report suggesting numerous schemes to increase national tax […]
[…] To back up my claim, I then cited grim numbers from the Congressional Budget Office, and also linked to very sobering data about America’s long-run fiscal position from the Bank for International Settlements, the International Monetary Fund, and the Organization for Economic Cooperation and Development. […]
[…] OECD, for instance, has written that “Increased domestic resource mobilisation is widely accepted as crucial for countries to […]
[…] OECD, for instance, has written that “Increased domestic resource mobilisation is widely accepted as crucial for countries to […]
[…] OECD, for instance, has written that “Increased domestic resource mobilisation is widely accepted as crucial for countries to […]
[…] now you can understand why international bureaucracies like the IMF, BIS, and OECD estimate that the fiscal challenge in the United States may be even bigger than the problems in […]
[…] now you can understand why international bureaucracies like the IMF, BIS, and OECD estimate that the fiscal challenge in the United States may be even bigger than the problems in […]
[…] now you can understand why international bureaucracies like the IMF, BIS, and OECD estimate that the fiscal challenge in the United States may be even bigger than the problems in […]
[…] previously shared projections from the IMF, BIS, and OECD, all of which show the vast majority of developed nations will face serious fiscal crises in the […]
[…] OECD published a report suggesting numerous schemes to increase national tax […]
[…] OECD published a report suggesting numerous schemes to increase national tax […]
[…] bureaucracies such as the IMF, BIS, and OECD show America in worse long-run shape than Europe, but the U.S. is actually in a better position […]
[…] more concerned about dealing with the long-run fiscal challenge (as seen in these IMF, BIS, and OECD numbers). So Rubio’s position doesn’t strike me as a problem. Indeed, I think he’s pushed the […]
[…] more concerned about dealing with the long-run fiscal challenge (as seen in these IMF, BIS, and OECD numbers). So Rubio’s position doesn’t strike me as a problem. Indeed, I think he’s pushed […]
[…] more concerned about dealing with the long-run fiscal challenge (as seen in these IMF, BIS, and OECD numbers). So Rubio’s position doesn’t strike me as a problem. Indeed, I think […]
[…] OECD published a report suggesting numerous schemes to increase national tax […]
[…] OECD published a report suggesting numerous schemes to increase national tax […]
[…] To bolster my case (particularly for folks who might be skeptical of a libertarian message), I frequently cite pessimistic long-run fiscal data from international bureaucracies such as the IMF, BIS, and OECD. […]
[…] while I don’t like OECD schemes to enable higher tax burdens, the BEPS project won’t equally affect all […]
[…] would have more important things to worry about, such as the fact that the IMF, BIS, and OECD all show the country on track for Greek-style fiscal […]
[…] Why are many developed nations facing long-run fiscal crisis according to long-run estimates from the IMF,BIS, andOECD […]
[…] Why are many developed nations facing long-run fiscal crisis according to long-run estimates from the IMF, BIS, and OECD? […]
[…] I mentioned that there will be more debt-crisis dominoes at some point in the future. I hope I’m wrong, but it’s hard to be optimistic when you look at long-run fiscal estimates from the IMF, BIS, and OECD. […]
[…] I mentioned that there will be more debt-crisis dominoes at some point in the future. I hope I’m wrong, but it’s hard to be optimistic when you look at long-run fiscal estimates from the IMF, BIS, and OECD. […]
[…] about this OECD study. I suggested that “the bureaucracy’s ‘research’ now is more akin to talking points from the Obama White House” and highlighted some utterly preposterous conclusions of the […]
[…] And that’s a non-trivial argument, based on very sobering data from the Bank for International Settlements, the International Monetary Fund, and the Organization for Economic Cooperation and Development. […]
[…] How else would you describe a bureaucracy that consorts and cooperates with leftist groups like Occupy Wall Street and the AFL-CIO and routinely published propaganda in favor of Obama’s agenda on issues such as global warming, government-run healthcare, so-called stimulus, and class-warfare taxation. […]
[…] most recently, the OECD published a report suggesting numerous schemes to increase national tax […]
[…] Incidentally, I’m not exaggerating in the interview when I warn that the United States may turn into Greece if we don’t seize the opportunity to make reforms and slow the growth of government. If you don’t believe me, check out these sobering estimates of long-run fiscal chaos from the IMF, BIS, and OECD. […]
[…] relentless in urging more revenue. It’s why the leftists at the Paris-based OECD endlessly urge higher taxes in America (even to the point of arguing that tax-financed redistribution is somehow good for growth). And […]
[…] on America’s long-run fiscal crisis from international bureaucracies such as the IMF, BIS, and OECD. And I’ve explained that demographics are a big part of the […]
[…] long-run fiscal crisis from international bureaucracies such as the IMF, BIS, and OECD. And I’ve explained that demographics are a big part of the […]
[…] in urging more revenue. It’s why the leftists at the Paris-based OECD endlessly urge higher taxes in America (even to the point of arguing that tax-financed redistribution is somehow good for growth). And […]
[…] in urging more revenue. It’s why the leftists at the Paris-based OECD endlessly urge higher taxes in America (even to the point of arguing that tax-financed redistribution is somehow good for growth). And […]
What politicians don’t seem to realize is that future government revenues are diminished in the attempt to maximize current revenue.
While taxes are only most obvious brake on growth, this administration’s anti-business agenda has not only slowed recovery from the 2008-2009 (-2014?) recession, it has dramatically reduced the tax base over what it might have been. Every year this continues compounds the problem.
And, while we’re on the subject of the Laffer Curve and high marginal tax rates, let’s not forget that by far the highest marginal taxes are paid by single women with children, trying to earn their way out of poverty. Loss of means-tested benefits is far more detrimental to incentives and economic growth than a few percentage points on the official highest tax rate.
Reblogged this on Gds44's Blog.
Of course, no mention of how even small differences in growth rate compound to enormous differences in one or more generations. Not to worry though, we are on a crusade to handle our descendants a planet that is 1C cooler, … so plus/minus 50% less compounding prosperity, … Ahhh that’s just details…
So what’s in the conclusions for policy makers section of the OECD report? Let me guess, ..,”coercive collectivism can not only redistribute wealth, but also create it at its maximum compounding rate”, right?
As I have said a few times, one of the main attributes of successful jurisdictions in the 21st century will be the calculation that the benefit of exiting or ignoring OECD outweighs the risks and consequences of vindictive retaliation from the cartel. But few societies will have the courage to do that. Those will be the few that succeed. For the rest, as in classic evolution, most branches dead end into extinction ( decline in the case of economics).
As far as the relationship between extra tax revenue and output potential loss, whatever the multiplier, the relationship is not linear. Not by far. There are very strong inflection points. When your society’s aggregate motivation to produce drops below a group of most competitive nations in the world, then all hell breaks loose. To take an example from the business world, a company whose costs suddenly increase unilaterally by 10-20% does not simply suffer minor adjustments. It gets obliterated by the competition. Thus, the question for America is: What is the aggregate production motivation advantage that Americans have compared to the rest of the world? And more importantly compared to the next group of most competitive nations worldwide? It is not 50% or even 20%. It is likely down to just a few percentage points. Can Americans afford to lose it? NO. But yes they will, “yes they can”.
Finally, the next to the last OECD point about “…broadening the tax base” is likely segue for VAT and similar additional but “flat” taxes.It is essentially the admission that — because of Laffer Curve effects and decreased compounding growth — increased revenue by taxing the wealthy alone has limited effect, especially in the longer term, and thus the non-rich will also have to pay more with VAT and other taxes. In other words, the state and other constructs of coercive collectivism must inevitably turn around and consume the very useful idiots that gave them power. But of course the OECD must make such statements in code language, such as “broadening the tax base”.