Growing wealth inequality

[patfert1]

I'm not sure why Cavan cutting expenditure to reduce local taxes so as attract investment that might otherwise go to Leitrim, or vice versa, would be good thing for Ireland as a whole. (Or even, quite honestly, for Cavan or Leitrim, as the case may be.)

Your question implies that you think this works out well for the US. Is there evidence that it does?

Interesting as a thought experiment, though, no?

If somewhere like Texas can attract companies from California (Tesla, Oracle, etc) with features like lower personal or corporate state income taxes, less regulations to follow, cheaper living for employees, couldn't Lovely Leitrim attract companies from Dublin in the same way if it was allowed to? It wouldn't have to cut expenditure if there is an overall net gain to the local economy either directly or indirectly. As it stands we have a very unequal distribution of employment and wealth across Ireland. Not sure how it works now, but in the past the only thing encouraging employers to go to Leitrim and the like was IDA grants.

Whether it would work out better for Ireland is indeed the key question. Is it better for the US if companies move from California to Texas, isn't it just a zero-sum game - moving the same corporate income and expenditure from place A to place B? Perhaps if it makes the companies more competitive versus foreign competition (either internally within the organization or externally against competitors), makes it easier attract staff, and most importantly achieves a more equal distribution of wealth across the country, then perhaps there could be a net gain economically and/or socially for the country.

Naturally this is the sort of debate that keeps economists in their professorships.

 

[patfert1]

I tried to find some research and I didn't succeed but this article (no idea about the source) has a few interesting comments.

How Corporate Headquarters Relocations Affect Cities

When corporate headquarters move, it not only benefits the company's growth, but the city's as well. How does corporate relocation affect cities? Read this post to find out.

www.beck-technology.com

When a large company moves into a city, the city can expect population growth, increased average wages, job growth, public and private investment growth, increased charitable giving, and more tax money all help a city thrive.

For example, after Amazon moved to Seattle in 2007, poverty dropped, and wages increased. Delta Airlines provides $43.5 billion a year in economic impact in Atlanta.

 

[Nermal]

The latter promotes competition among countries in which, effectively, they all lose out — no country gets more than nominal tax revenue from the shifted profits — and the big winners are multinational corporations and their shareholders. And we might reasonably ask whether this is a good outcome and, if so, why?

But that hasn't been the outcome, even after decades of this policy. Other countries haven't competed with us, not seriously at least, and we've benefitted enormously in the meantime. Long may it continue.

 

[TomEdison]

No. You're confusing the policy of offering tax breaks to attract investment, which we have pursued for decades and which has been very successful, and the policy of offering tax breaks to have profits shifted to Ireland, which is (a) rather more recent, (b) very controversial and (c) doesn't appear to confer much benefit on us (apart from the happy accident of the Apple tax case, of course).

I accept that there can be a bit of a blurry line between these two policies, especially as some taxpayers (cough Apple cough) may benefit from both simultaneously. But that blurriness is part of the problem; I think there's a real risk that if we push the shonky profit-shifting stuff too far we provoke an international response which will also limit the effectiveness of our efforts to use tax policy to attract investment.

 

[TomEdison]

I tried to find some research and I didn't succeed but this article (no idea about the source) has a few interesting comments . . .

But if Drumshanbo experiences population growth, increased average wages, etc rather than Cootehill, there's no net advantage. But (if this has been acheived by Leitrim cutting taxes) there's a net tax loss. Which is great if you think that low taxes are inherently a bad thing, but not so great if you think that public services and/or lower public debt night be a good thing.

Put it another way; if two different coutnries or regions competed to attract investment by trying to drive wages down, you wouldn't think that was good thing, would you? Or if they competed by slashing environmental regulations, or pullution controls, or health and safety standards? A race to the bottom is usually damaging for its contestants, and I don't see that a race to the bottom on tax rates is an exception to the general rule.

 

[Brendan Burgess]

Another downside of the huge artificial tax take in Ireland is that we are living well beyond our natural means. And when these tax lottery wins stop and we have to start living within our means, there will be huge cutbacks. And the people who will suffer most will be the people who became dependent on the state's profligacy.

 

[Nermal]

No. You're confusing the policy of offering tax breaks to attract investment, which we have pursued for decades and which has been very successful, and the policy of offering tax breaks to have profits shifted to Ireland, which is (a) rather more recent, (b) very controversial and (c) doesn't appear to confer much benefit on us (apart from the happy accident of the Apple tax case, of course).

I'm not. The 'Double Irish' was around since the 1980s. Profit-shifting and not the 12.5% is why many multinationals established a presence here. Of course it conferred enormous benefits on us. Employment generates taxation and they brought plenty of it. They weren't just brass plates.

 

[Nermal]

Another downside of the huge artificial tax take in Ireland is that we are living well beyond our natural means. And when these tax lottery wins stop and we have to start living within our means, there will be huge cutbacks. And the people who will suffer most will be the people who became dependent on the state's profligacy.

That we have done a bad job with those revenues is not a good argument against collecting them in the first place.

 

[faketales]

I'm not sure why Cavan cutting expenditure to reduce local taxes so as attract investment that might otherwise go to Leitrim, or vice versa, would be good thing for Ireland as a whole. (Or even, quite honestly, for Cavan or Leitrim, as the case may be.)

I believe this already happens with the likes of commercial rates. Meath has some very low rates.

 

[patfert1]

But if Drumshanbo experiences population growth, increased average wages, etc rather than Cootehill, there's no net advantage

Replace Cootehill with Dublin. Isn't there an argument that would be better for Ireland, at least socially? Income trickles down to the local economy.

Put it another way; if two different coutnries or regions competed to attract investment by trying to drive wages down, you wouldn't think that was good thing, would you? Or if they competed by slashing environmental regulations, or pullution controls, or health and safety standards? A race to the bottom is usually damaging for its contestants, and I don't see that a race to the bottom on tax rates is an exception to the general rule.

Looking at the poor state of environmental controls in US, you are right about that. But if a way could be found using taxation to make it more attractive for companies to establish in rural areas, refer to social benefits above.

I'm not suggesting it should or could happen. It'sjust interesting to consider how to more fairly balance wealth equality in ireland.

 

[jman0war]

I'm not convinced it's actually a problem, rather it's just a leftist social engineering project.
Forced redistribution to people that haven't earned it isn't going to make a better society.
It rewards envy, locks-in victimhood mentality, punishes people that strive & win more wealth.
It's like a soft Marxist concept, but Marxist nonetheless.
No doubt the DSA in USA and the left leaning media will make it a campaigning issue.

 

[patfert1]

it's just a leftist social engineering project.
Forced redistribution to people that haven't earned it isn't going to make a better society.

To me, that sounds like many aspects of the Ireland we live in. I have a tenant who gets a property to live in at half-market rent, and most of that is covered by HAP. For just one example. Well, that's wealth redistribution, I suppose.

 

[TomEdison]

Looking at the poor state of environmental controls in US, you are right about that. But if a way could be found using taxation to make it more attractive for companies to establish in rural areas, refer to social benefits above.

Using tx to encourage development in rural areas is one thing. Promoting a race to the bottom on tax and services among local governments as they compete to attract investment is quite another.

In the Irish context, taxes for investors who establish businesses in Ireland are already pretty low — that's a large part of the reason why we have been so successful at attracting inward invesment. There isn't much scope for lowering them still further to encourage them to establish in Cootehill reather than Dublin.

If you thought it was good idea, there would probablhy be more effective ways to do this — e.g. use tax revenues (collected nationally) to subsidise the construction of investment-friendly infrastucture in the areas that you are seeking to 'level up".

I'm not convinced it's actually a problem, rather it's just a leftist social engineering project.
Forced redistribution to people that haven't earned it isn't going to make a better society.

All the evidence from the last century or more is that it is. That's the whole reason we have the modern welfare state, public health services, etc. They are all mechanisms for redistributing wealth so as to create a more inclusive society, which is associated with higher well-being, better health, lower crime and less poverty.

 

[Purple]

I'm not convinced it's actually a problem, rather it's just a leftist social engineering project.

It's a problem if our actions annoy countries that are far more powerful than us to a sufficient extent that they act to damage us.

Forced redistribution to people that haven't earned it isn't going to make a better society.

Wealth generated from capital appreciation is unearned. Most wealth is generated from capital appreciation.

It rewards envy, locks-in victimhood mentality, punishes people that strive & win more wealth.

All taxation is forced redistribution. During the period between the end of the Second World War and the 1980's we saw a massive increase in living standards, real wages, life expectancy and home ownership in the developed world. That was also the period where we had the highest levels of inheritance tax and income taxes on very high incomes. That's not a coincidence.

 

[jman0war]

It's a problem if our actions annoy countries that are far more powerful than us to a sufficient extent that they act to damage us.

Are you claiming the US is annoyed by our wealth distribution ratios?

During the period between the end of the Second World War and the 1980's we saw a massive increase in living standards, real wages, life expectancy and home ownership in the developed world. That was also the period where we had the highest levels of inheritance tax and income taxes on very high incomes. That's not a coincidence.

It's not tax policy that did that. It was the fact that the USA came out of WWII with manufacturing industry fully intact, activated and running on all cylinders. Thus she, and her allies were able to capitalise on that unique position.

 

[Leo]

Are you claiming the US is annoyed by our wealth distribution ratios?

FYI - How to reply to or quote a post

 

[jman0war]

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That's what I thought, it doesn't work. Maybe it's InCognito thing

 

[Purple]

Are you claiming the US is annoyed by our wealth distribution ratios?

No.

It's not tax policy that did that. It was the fact that the USA came out of WWII with manufacturing industry fully intact, activated and running on all cylinders. Thus she, and her allies were able to capitalise on that unique position.

That's completely incorrect.

At the end of the Second World War the USA produced 50% of global manufactured goods and accounted for around 40% of global GDP. That allowed it to construct a global financial system which it was at the centre of. 80% of global stock market values are now in the US and 85% of global FX transactions involve the US Dollar. None of that accounts for how wealth is distributed within a given country.

In the 1600's China accounted for around 35% of global GDP.
In the 1700's Mughal India was by far the largest economy in the world with around 25% of global GDP.
Neither of those countries had a large property owning middle class or a broad distribution of wealth.

 

[jman0war]

Despite your headline tax rate on high earners, a simple search in AI reveals the context and that this was modified by deductions, the effective tax rate being 42-46%.
Pretty inline with what we have here isn't it.


The top marginal income tax rate in the US remained above 90% for high earners in the immediate decades following World War II, having peaked at 94% in 1944–1945 on income over $200,000 (equivalent to roughly $3.5 million today). This rate stayed at 91–92% through the 1950s under Presidents Truman and Eisenhower before dropping to 70% in 1964.

Effective tax rates paid by the wealthiest were significantly lower than the statutory marginal rates due to deductions, exemptions, and the structure of the tax code. While the marginal rate hovered near 90%, the effective federal tax rate for the top 1% of earners was approximately 42% to 46% during the 1950s, with some estimates suggesting the actual burden on the very highest incomes was closer to 16–25% after all adjustments.

• Few taxpayers actually paid the top marginal rate; in 1962, only 447 filers out of 71 million paid taxes at the 91% level

 

[JimmyB99]

80% of global stock market values are now in the US

Source please!