The Instigator
jimtimmy
Pro (for)
Winning
31 Points
The Contender
larztheloser
Con (against)
Losing
22 Points

High Tax Rates Hurt the Economy

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Voting Style: Open Point System: 7 Point
Started: 7/27/2011 Category: Economics
Updated: 3 years ago Status: Voting Period
Viewed: 1,475 times Debate No: 17672
Debate Rounds (4)
Comments (0)
Votes (9)

 

jimtimmy

Pro

I argue that High Tax Rates Hurt the Economy.

First Round is for acceptance only



Feel Free to ask any questions in the comment section
Debate Round No. 1
jimtimmy

Pro

I thank my opponent for accepting this debate. I argue that high tax rates do hurt the economy. I will employ both theoretical and empirical support for this assertion.



Why High Taxes Hurt The Economy?



Higher tax rates hurt the economy because they discourage productive behavior. If labor taxes were to be higher, then labor would be less desirable relative to leisure. This is because the higher taxes on labor would reduce the reward for labor. This would reduce the incentive for people to choose work over leisure.


The same is true of capital taxation. If the government were to tax capital higher, the potential reward for successful investment would be reduced. This would then reduce the level of investment. Reduced investment leads to less capital reinvestment, less new jobs, less new equipment, and lower productivity.

These higher tax rates would also reduce the potential reward from entrepuenership. This would mean that higher taxes would lead to less new businesses and less entrepeunerial ventures in the economy.

Furthermore, taxes also deeply distort economic behavior. When tax rates are higher, the value of tax deductions are much higher. When the tax rate is 80%, there is more reason to try to avoid taxes through deductions than at a tax rate of 40%. This leads to many misused economic resources.

Right now, our tax code has a full deduction for employer provided Health Plans. Due to this, 59% of Americans are on Employer Provided Health Plans. This has led to extreme distortions in our Health Care System, as it kept patients from buying individualized Health Care Plans.

High tax rates also encourage tax dodging. Billions of dollars go to tax lawyers to help people avoid taxes. These are wasted resources that could go to more productive uses. If tax rates were lower, there would be less incentive to use resources to avoid taxes, meaning that more resources would go towards more productive ventures.

Finally, high tax rates in one country, particularly high progressive tax rates, typically lead to a many companies and high skill workers emigrating to lower tax countries. This leads to job loss in high tax countries (as some corporations move to lower tax countries, brining jobs with them) and productivity loss, as some of the most productive and innovative members emigrate to lower tax countries.




Empirical Evidence on High Tax Rates and Economic Growth




Empirical Evidence generally supports the notion that higher tax rates reduce labor supply, and, therefore, economic output. Nobel Prize Winning Economist Edward Prescott looked at the difference in labor supply between the G-7 Countries and found that different tax rates are responsible for almost allof the difference in labor supply between countries:


"Americans now work 50 percent more than do the Germans, French, and Italians.'
This was not the case in the early 1970s, when the Western Europeans

worked more than Americans. This article examines the role of taxes in accounting

for the differences in labor supply across time and across countries;

in particular, the effective marginal tax rate on labor income. The population of

countries considered is the G-7 countries, which are major advanced industrial

countries. The surprising finding is that this marginal tax rate accounts for the

predominance of differences at points in time and the large change in relative

labor supply over time."



These results go a long way in showing that high tax rates do, in fact, reduce labor supply over time.


Another common result in empirical studies is that the Corporate Tax is particularly harmful to growth. This is a common result found in numerous studies from the OECD, World Bank, Joint Comittee on Taxation, Oxford, and a number of reputable independant economists.


These studies typically find that high corporate tax rates reduce investment and entrepeunership. On top of this, high corporate taxes typically send corporations to lower tax nations.


High tax rates also tend to correlated with lower growth rates. One empirical study on this was published in the Cato Journal, which, after controlling for numerous factors, found that high marginal tax rates have significant negative impact on growth in US states:



"This article explores the impact of tax policy on economic growth

in the states within the framework of an endogenous growth model.

Regression analysis is used to estimate the impact of taxes on economic

growth in the states from 1964 to 2004. The analysis reveals a

significant negative impact of higher marginal tax rates on economic

growth. The analysis underscores the importance of controlling for

regressivity, convergence, and regional influences in isolating the

effect of taxes on economic growth in the states."




This study is not an exception to the rule. There are numerous studies finding that taxes have a negative impact on economic growth (look at links to see numerous other studies).




Conclusion




Based on both these theoretical and empirical facts, I conclude that taxes have strong negative effect on the economy.




Sources



http://en.wikipedia.org...

(for Prescott study on Taxation and Labor Supply) http://www.minneapolisfed.org...

(for CATO study on Income Taxes and Growth) http://www.cato.org...


(for numerous other studies that show high taxes hurting growth) http://pirate.shu.edu...














larztheloser

Con

I'd like to thank my opponent for opening his substantive contentions. First I will address his, then introduce my own. In terms of the setting of this debate, I think it should be applied to every country, not just the USA, because every country faces the trade off of high and low taxation.

Pro 1. Reduced reward means less productivity
This argument presupposes that earning less money reduces reward. Money itself, however, has no intrinsic value. The only value of money is in the denomination. Therefore, it is not money that gives people utility, but the standard of living associated with that money. Government expenditure, the quality of the environment, the crime rate, interest rates (which affect investment) and numerous other factors can alter my standard of living. As I will shortly prove, these other means are more effective at improving standard of living than private expenditure, and they are all improved through taxation. Exactly the same counter-argument is true for capital taxes.

My opponent cites Edward Prescott's study as evidence for this. Virtually every other economist agrees that the major source of US growth recently has not been low taxes but high debt [4]. The periods examined by Prescott are very selective. The biggest growth the US ever had was during the 1950s-60s, when tax rates for the top tax bracket were about 91%, the biggest slump was during the 1920s when the rate was only about 25% [5]. If he had looked at these periods relative to other countries, he would have seen quite a different picture. The first period he chose,
1970–74, was when the US was mounting debt before the crash of the early 80s. The second was the early years of the Clinton administration, years marred by "the massive deficit and the problem of government spending" [6]. Europe had much less debt during these periods and that's why this study is misleading. That tax rates corresponded to productivity during these periods was the product of bad decision making, not effective economics.

He then cites the "numerous studies" that show a link between tax rates and investment. "Investment" in economics has a very precise meaning. It generally means money given by the private sector (including households) to companies from their savings. It does not include government spending. When I give $10 to a company and the government gives $10 to a company, the effect on the economy is the same but the effect on investment is very different. When tax rates increase, investment might go down, but government spending goes up, so there is a neutral effect on the economy.

Finally he makes precisely the same claim, again citing his "numerous studies," this time for tax rates and growth. The problem is that almost all of the studies found only a small, modest correlation, and that was almost entirely due to the same dataset that Prescott studied. The other datasets often did not fit with their conclusions at all, and even contradicted them. They also only measure the cost of taking the money into the hands of the government, not the benefit of the reallocation of wealth. Engen and Skinner, for example, admitted in their conclusion "beneficial government expenditures may yield a net improvement in the ... economy," before going on to prove government spending has empirically raised growth in some cases - their conclusion was the taxation itself had no effect on the economy, but rather what mattered was how it was spent.

Pro 2. Incentive for tax evasion
Activities that fall under the radar of taxation are called the "shadow economy." Uruguay has a lowish personal income tax rate of 0–25% [1], and their shadow economy is 51% of their GNP [2]. The USA's rate is higher, at 0-35% plus up to 10.55% state taxes [1], yet their shadow economy is only 8% of their GNP [2]. Lower taxes, therefore, does not mean less tax evasion. What really causes tax evasion is how much people trust their government, as has been shown empirically on numerous occasions [3]. What better way to lose the faith of your citizens than to be underfunded and unable to carry out the big projects they demand? To build trust you need a strong police force, you need a strong education system, you need strong social security, not to mention a strong healthcare service. The money for all these things needs to come from somewhere.

Pro 3. Emigration
Look at the status quo. In the Bahamas there is no tax [1], yet not everyone emigrates to the Bahamas. People are obviously motivated to stay in certain countries by more than just the tax rate. The same thing is true of companies. The tax rate is irrelevant if the country isn't going to be profitable, and if it's profitable the company has another incentive to expand there.


Now on to my points:

Con 1. Govt makes better decisions
Unlike private households and the vast majority of businesses, governments are advised by a panel of experts as to what sectors of the economy merit investment. They are in the unique position of being able to have access to as much information as possible about the state of their own country, as well as a duty to provide the greatest return to everybody, not just their "shareholders" or family, possibly at the expense of others. It makes sense that this group should be allowed to direct investment to areas which will provide long-term prosperity. Good investment by government contributes more to growth than bad investment by individuals. Individuals are much more likely to get it wrong because all they look for is a monetary return.

Con 2. Equity
Government spending increases equity because much of it goes to the poor, as opposed to investment which largely goes to the wealthy. The largest impact of tax cuts is on the wealthy, particulary as my opponent appears to argue against progressive tax in particular. This is bad because it's actually a distortion - the poor often work at the expense of the wealthy. Capitalism automatically feeds wealth to leaders, even though leaders often don't work hard to get to the top. Inequality, social injustice, and poverty are the results. This was exactly what happened in Brazil [7]. In China the government recently admitted taxes were one of the reasons why so many Chinese live in poverty, and adjusted its tax rates as a result [8]. It happened twice in the USA - once in the 1890s and once between the 1970s and late 2000s (under the influence of the supply-side model). In both cases, real wages fell sharply.

Con 3. Govt more efficient
While all governments have their fair share of bureaucrats, so do the big firms. The difference is that they don't need to advertise, pay corporate salaries, keep profits rolling, plus they achieve the greatest possible economies of scale. For all these reasons governments are likely to not only do the right job, but do it better than corporates. That is, if corporates do it at all (*cough* Bolivia's water supply *cough*).

Con 4. Govt investments more likely to bolster external sources of standard of living
The title says it all. The government is more likely to keep the streets safe, build free parks, look after nature reserves, and so on, than private firms, because these activities do not generate income. These improve the quality of people's lives in other ways and can have massive positive benefits to productivity.


The moot falls.


Sources
1. http://en.wikipedia.org...
2. http://aysps.gsu.edu..., pg 21
3. http://www.bsos.umd.edu...
4. http://www.thenewfederalist.eu...
5. http://www.businessinsider.com...
6. http://en.wikipedia.org...
7. http://www.infosurhoy.com...
8. http://www.biznewschina.com...
Debate Round No. 2
jimtimmy

Pro

I thank my opponent for responding.



Defending My Own Arguments



My opponent argues that the only reason people earn money is to improve their own standard of living. We agree on this. My opponent also points out that things like Environment and Crime Rates affect standard of living. This is true. However, this does not deal with the fact that higher taxes disincentivize productive behavior.

People try to maximize their personal utility. So, let us say, hypothetically, that taxes were used to fund valuable services that improved standard of living. This is all good and well, but there would be no incentive to work and invest so these services could be funded. Very few people are going to work full time to fund community wide services, but almost everyone would be happy to use these services. This creates a free rider problem, where there are more people willing to use societies services than people willing to fund them.

With lower taxes, people will be forced to work to maximize their own utility, reducing this free rider problem.




My opponent attacks the Edward Prescott study I cited in previous argument by saying:


"My opponent cites Edward Prescott's study as evidence for this. Virtually every other economist agrees that the major source of US growth recently has not been low taxes but high debt [4]. The periods examined by Prescott are very selective. The biggest growth the US ever had was during the 1950s-60s, when tax rates for the top tax bracket were about 91%, the biggest slump was during the 1920s when the rate was only about 25% [5]. If he had looked at these periods relative to other countries, he would have seen quite a different picture. The first period he chose,
1970–74, was when the US was mounting debt before the crash of the early 80s. The second was the early years of the Clinton administration, years marred by "the massive deficit and the problem of government spending" [6]. Europe had much less debt during these periods and that's why this study is misleading. That tax rates corresponded to productivity during these periods was the product of bad decision making, not effective economics."



My opponent's claim that "virtually every other economist agrees that the major source of US growth recently has not been low taxes but high debt" is both mystifying and unsupported.It is simply untrue that every other economist believes this. Moreover, this is disproven by two facts: the US does not have higher debt than other countries and high levels Debt actually reduce growth.

It is not made clear what type of debt my opponent is talking about. Regardless, there is no measure of debt that puts the US at consistently higher rates of debt than European countries. It may be true that the US has higher levels of total debt than individual European countries. However, this is totally irrelevant. What matters is debt as a percentage of GDP, because a country with a large population and bigger economy would naturally have more debt than smaller economies (e.g. US has more total debt than France, but France has much smaller economy and population than US, so, as a percentage of GDP, France has higher Debt. This would mean that Debt is actually larger in France).

Second, high debt typically reduces growth. The most influential economic paper on this comes from Carmen M. Reinhart and Kenneth S. Rogoff, who find that debt and growth are unrelated until debt reaches 90% of GDP, where debt starts hurting growth substantially.


My opponent seems to imply that Prescott cherrypicked his dates. However, the same result has been replicated by numerous other economists using different dates and datasets. One of these was renowned Harvard Economist Raj Chetty who used Danish Firm Level Datato find that labor supply does go down when taxes goup.


Another important paper came from Lee Ohanian, Andrea Raffo, and Richard Rogerson who used a larger dataset and found:


"We document large differences in trend changes in hours worked across OECD
countries between 1956 and 2004. We assess the extent to which these changes are
consistent with the intratemporal first order condition from the neoclassical
growth model, augmented with taxes on labor income and consumption expenditures.
We find that the model can account for most of the trend changes in hours worked
measured in the data. Differences in taxes explain much of the variation in
hours worked both over time and across countries."


My opponent also claims that the studies to not take into account the fact that governments spend the money they take in. This is simply untrue. The studies look at how the economy performs when taxes are higher, this means that they do take into account the fact that the government spend the money that it takes in from higher taxes.

For example, if a country raised taxes and spent it on programs that did help the economy, these studies would take this into account. This is because times of high taxes are also times of higher government spending, which is reflected entirely in these studies.




My opponent also commits the straw man fallacy in critizing my claim that higher taxes cause high skilled emmigration. I never said that taxes are the only thing that mattered. I said that taxes are an important factor for high skilled workers and companies. This is why this point, made by my opponent, is irrelevant:



"Look at the status quo. In the Bahamas there is no tax [1], yet not everyone emigrates to the Bahamas. People are obviously motivated to stay in certain countries by more than just the tax rate."



My assertion is supported by this study, which studied US states, that finds that:


"The results indicate that 1% differences in state corporate tax rates are associated with 7-9% differences between the investment shares of foreign tax credit investors and the investment shares of all others, suggesting that state taxes significantly influence the pattern of foreign direct investment in the US."


This would suggest that taxes do strongly affect location decisions of firms.




Responding to Opponents Claims




My opponent claims that government makes better decisions than private individuals. This is untrue simply because the government is not responding to consumer demands. There are no experts that are able to track the demands of millions of people, nobody has enough information to plan entire sectors of the economy. Only the price mechanism can do that.




My opponent claims taxes increase equity. I agree, however more equity does not always mean higher standards of living if average income is much lower. France, with higher taxes than the US has more equity, but lower average income. The standard of living for middle class is higher in the US (in terms of median income).




Government is not more efficient. This is an odd claim. Governments are notorious for innefficiency. This is because, unlike private firms, government is not subject to competition as private firms are. Failing government programs don't go away when they fail, they just continue to waste resources. When inneficient private firms fail, they go out of business.



My opponent says that government investments are more likely to improve standard of living. This may be true of some basic services, but, unlike the private sector, the government does not respond to consumer demand. This means that, unlike the private sector, the government is not run based on what consumers want.




Sources:




(debt by country) http://en.wikipedia.org...


(Debt and Growth) http://www.economics.harvard.edu...


(Labor Supply Papers) http://obs.rc.fas.harvard.edu... and http://www.kansascityfed.org...;


(Taxes and Location of Investment) http://www.nber.org...


(Median Income by Country) http://www.oecd-ilibrary.org...;





















































larztheloser

Con

I'd like to thank my opponent for his insightful counter-arguments.

Pro 1. Reduced reward means less productivity
The assumptions of the individual utility model are ridicliously unrealistic and demonstrably untrue. People actually do care about the education system, for instance, even if they do not directly benefit from it. If other people do well, we do well too - and we know it. This is why the individual utility model needs to be supplemented with the collective utility model. But if what he says is true, surely countries with lower tax revenues (as a % of GDP) should have lower outputs per working hour, as well as lower competitiveness. In fact, the opposite relationship is true, as has been confirmed by numerous studies [1].

He mentions the free rider problem. The first problem is that many government services aren't technically public goods. Electricity, water, wastewater and so on are not non-excludible. The second problem is that even truely public goods, such as free-to-air television or roads, are not harmed by free riders. There is no (significant) marginal cost associated with a free rider and therefore there is no problem. Increasing the number of roads has never been shown in any study to increase unemployment - indeed, it creates employment as people build the road, and entrepreneurs use their road to expand their operations.

My claim of debt funding the growth bubble in the United States is not unsupported, as I gave a source. If you believe CIA figures, the US is well behind France in terms of debt as a percentage of GDP - if you believe the IMF, the conclusion is the opposite [2]. The same is generally true of all Europe when compared to the United States. The difference is that the CIA is sponsored by the American government, who have an interest in fostering positive outlooks for their economy, as this encourages spending which leads to growth. The IMF is sponsored by nobody, and has numerous checks and balances to ensure this [3]. Therefore the IMF figures are more reliable.

Now we turn to some academia. First, the Reinhart and Rogoff study, which is not influential but infamous. It made no allowance for an impact over time, was based on a tiny dataset (during which time tax rates were also high), did not prove or even provide evidence for causality, and worked on gross debt rather than public debt [4]. Second, Raj Chetty's top-down study. What this proved is that with fewer tax brackets (which produce "kinks"), people look more actively for jobs that puts them closer to the top end of a tax bracket, incurring switching costs and affecting the elasticity of labour supply. It does not have anything to do with increasing taxes if you read it properly, unless those fewer tax brackets put a worker in a higher tax bracket. This would therefore be an argument for making taxes more progressive, not less. Third, I couldn't open the link to your third study. It appears to be broken. Please provide a working link.

My opponent claims that the studies look at how the economies performs when taxes are high or low, and therefore account for how the spending happens. This is a non sequiter. Spending on a potentially productive sector may not have a performance impact now, but it may ensure long-term prosperity (by which time taxes may have decreased and the whole thing is ascribed to lower taxes). Spending on producing more hamburgers now may boost performance, but it may ensure long-term costs (such as healthcare expenses - by which time taxes may have increased and the costs are ascribed to higher taxes). None of my opponent's studies take this into account.

Pro 2. Incentive for tax evasion
Looks like my opponent has dropped this point.

Pro 3. Emigration
My opponent now claims that taxes are very important. Can I assume this means he will be packing his bags for the Bahamas or Afghanistan? Seriously voters, how relevant is the tax rate when making your decision to move somewhere? Wouldn't you rather look to the crime rate, the quality of the healthcare and education systems, the level of pollution, whether you have a job there, and so on? Wouldn't firms rather look to the market size, cost of infrastructure, local cultural factors, local household income, and so on? It's about the profitability, as I say. Taxes are only a small consideration when assessing the profit potential of a market.


Con 1. Govt makes better decisions
Apparently the government does not respond to people's demands. Corporations certainly don't because profit can come without concensus (which is the measure of the demand of the people as a whole). Government cannot form without consensus, therefore they need to respond to what people want - or else people will vote in somebody who does give them what they want. In this way government does meet public demands.

Con 2. Equity
Average income is a poor measure of standard of living and absolutely does not account for the middle class. In a country where one person earns a million dollars and ten people earn ten cents, the average income is about $91,000. In a country where 11 people have the some money divided equally between them, the average income is the same. However, in the former scenario there is a much higher standard of living than in the latter. Median income is also bad because it ignores everyone but the middle man - in a country of 5 people, it doesn't matter how poor persons 1 and 2 are so long as person 3 is reasonably well-off. Social injustice and poverty resulting from this inequality increases the crime rate, litters the streets with homeless and reduces standard of living. Getting them off the street and away from crime increases it.

Con 3. Govt more efficient
Governments do have competition - other people who want political power capitalise on present government's mistakes. Politicians and corporations alike fall from grace.

Con 4. Govt investments more likely to bolster external sources of standard of living
My opponent tells you this is predicated on Con 1. This is false, but it doesn't matter because I won that point.


Good luck for the final round!


Sources
1 - http://cupe.ca...
2 - http://en.wikipedia.org...
3 - http://www.imf.org...
4 - http://www.epi.org...
Debate Round No. 3
jimtimmy

Pro

I thank my opponent for responding so quickly.



Pro 1. Reduced reward means less productivity (Response)


My opponent claims that the "individual utility model is completely unrealistic and demonstrably untrue". He does not justify this with any source. He then says:


"People actually do care about the education system, for instance, even if they do not directly benefit from it. If other people do well, we do well too - and we know it. This is why the individual utility model needs to be supplemented with the collective utility model."



Does my opponent really believe that people are going to work 40 hours a week for an education system that is used by millions of people?

Even if the education system personally benefits a certain person, this would not change the fact that this person would get to use this system regardless of whether or not they worked. So, yes, people do care about the education system, but people are not going to work 40 hours a week for an education system that would be the about same whether or not they worked.

My opponent has an unrealistic view of Human Nature. People are not going just to work just to fund services, even if those services benefit people, because people realize that these service's existence is not contingent on individual's work efforts.

My opponent also claims:



"But if what he says is true, surely countries with lower tax revenues (as a % of GDP) should have lower outputs per working hour, as well as lower competitiveness. In fact, the opposite relationship is true, as has been confirmed by numerous studies [1]."


In fact, my opponent only links to one study. It is from CUPE, a left wing labor group.

This study claims to have found a positive relationship between GDP per hour and tax revenue. Even if this was true, there is an explanation for this. Taxes have the effect of reducing hours worked. The hours that are not worked due to high taxes are hours that are on the margin, which are less productive hours. This tax related reduction in hours worked lowers GDP per person, but slightly raises GDP per hour (which my opponent cites). An example of is the comparison of the US and France, France has a slightly higher GDP per hour than the US, but the US has a much higher GDP per person. This is because people in America work less hours, largely because of lower taxes.

My opponent also seems to believe that all government services are things like roads, electricity, etc. This ignores the fact that most tax revenue goes toward transfer type programs (SS, Medicare, Medicaid, Welfare, etc.). These may be valuable programs, but they do cause a significant free rider problem. These transfer type programs make up about 60% of the Federal Government's budget.

My opponent disagrees with my claim that US debt is not larger than the debt of other countries by claiming that the IMF, which shows the US having higher debt, is more reliable than the CIA, which shows the US having lower debt. I actually believe they are both reliable. The reason that they have different results is that they use different measures of debt. Regardless, even the IMF data set only shows a recent explosion of debt in America, as well as some European countries. This does nothing to prove my opponent's assertion that American growth in recent decades is based on debt.


My opponent criticizes the Rogoff and Reinhart Study. He claims that they used a small data set. In fact, Rogoff and Reihnart explain their methods in the paper:


"Our results incorporate data on 44 countries

spanning about 200 years. Taken together, the

data incorporate over 3,700 annual observations

covering a wide range of political systems, institutions,

exchange rate and monetary arrangements,

and historic circumstances."


This is a large data set. Regardless, my opponent claimed, earlier, that the IMF is the most trustworthy source:


"The IMF is sponsored by nobody, and has numerous checks and balances to ensure this [3]. Therefore the IMF figures are more reliable."


It just so happens that the IMF also released a study finding that high debt hurts growth:


"The empirical results suggest

an inverse relationship between initial debt and subsequent growth, controlling for other

determinants of growth: on average, a 10 percentage point increase in the initial debt-to-GDP

ratio is associated with a slowdown in annual real per capita GDP growth of around

0.2 percentage points per year"



This is from the IMF, which my opponent claimed is a far better source than the CIA.

My opponent also claimed that the Chetty study does not show that higher taxes reduce labor supply. This is untrue. The Chetty study found: "Our results suggest that macro elasticities may be substantially larger than the estimates obtained using standard microeconometric methods.". High elasticities mean that labor supply reacts highly to tax rates. As Chetty himself explains, his study found that labor supply reduces somewhat sharply over time in response to higher tax rates.


My opponent also claims that studies don't take into account the long term benefits of government services. This is not true. Many of the studies looked at long periods of time when comparing growth rates. Also, many private sector investments would have long term benefits but are crowded out by government programs and taxes. Many government programs do long term harm. This is because they stay in existence far too long, eventually just being a waste of resources. (I dropped Tax Evasion due to space limitations)



Pro 3. Emigration (Response)


I am a bit discouraged to see my opponent commit the exact same straw man he did in his first argument. My opponent obviously did not read my last post when I said "I never said that taxes are the only thing that mattered."
Taxes are just one factor in a firm's decision to move, but they are a factor nonetheless. If income matters for a person, wouldn't the amount of income they get to keep matter too?

This may matter less to firms and high skilled workers if those taxes fund good education and good roads, but, if these taxes go to welfare programs, they really will reduce the amount of high skilled workers and firms.




Con 1. Govt makes better decisions (Response)



Consensus is different from consumer demand. Government is elected officials. They do what they think is best (or at least they claim to). However, the private market provides provides what individual consumers demand. This is why the government could never run the technology industry, as it is far too complex for any central planners to track the constant changes in this market.



Con 2. Equity (Response)


In stable countries, economic growth benefits all classes. During the Reagan years, inequality went up, but all income quintiles still gained a lot of income. I believe economic growth is a better way to reduce poverty and crime.



Con 3. Govt more efficient (Response)

This is not real competition. Government programs that are politically popular, but inefficient and financially unstable, are impossible to change for politicians. This is an example of consensus not being a good way to run the economy.



Con 4. Govt investments more likely to bolster external sources of standard of living (Response)

There is no response to this claim. As a side note, claiming to win a point is different from winning a point.




Conclusion

I believe I have adequately made the case that higher taxes harm the economy and responded to all of my opponents claim adequately.


Good Luck to my opponent and VOTE PRO!!!




Sources:


(Output per Person by Country) http://en.wikipedia.org...(PPP)_per_capita

(Federal Government Budget) http://en.wikipedia.org...

(IMF Study on Debt and Growth) http://www.imf.org...

(Re-Link to Chetty Study) http://obs.rc.fas.harvard.edu...

(Income Growth Under Reagan) http://www.cato.org...;
larztheloser

Con

I thank my opponent for closing his case.

Pro 1. Reduced reward means less productivity
First, pro will do well to note that my source for the first paragraph includes that quote nearly word for word.

Second, the education system would not be the same whether or not people worked 40 hours. As I've said time and time again, the money for education needs to come from somewhere. People are not generally as silly as my opponent, and relise that their work efforts translate into benefits. Even if others, down on their luck, do not have work and become free riders, it is not at the expense of anybody else - but if people stop working, it is at the expense of everybody else. It is not unrealistic of me to say that people are often happy to fund the construction of roads, and they don't care about free riders. They still make a gain to their standard of living, and the free riders don't cause a loss. My opponent also never responds to my analysis that most of your tax dollars are spent on excludable goods - including transfer-types, the thing he said I "ignored".

Third, I do only link to one study, but he will note that this study cites about a half dozen which reached the same conclusion. My opponent did this same thing to save space on sources in round 1. While CUPE has ties to the left wing, my opponent's sources (largely funded by CATO and Fraser) have ties to the right wing. This does not make the findings untrue.

My opponent next assumes marginal hours are the least productive, and that taxes reduce the hours you work. No source, no analysis, nothing. I deny both premises of his refutation. At best, taxes don't reduce hours but wages. You'd think then taxes increase the number of hours worked for extra income, but people recognise that they don't need as much income to meet the needs the government now provides. For this reason my article's argument stands.

Next he says that an explosion of debt does not prove the growth is based on debt. This is true, just as super-low taxes does not mean growth is based on super-low taxes. If he disputes my conclusion, he must discard every piece of evidence he has given you so far.

Sixth he disputes that the Rogoff and Reinhart study had a small data set. What he in fact shows is that they had a large sample size. There is a difference between sample size and size of data set, as the data set is that data you use to reach your conclusion. Their "over 90%" conclusion is based on six consecutive years where it was over 90%. The reason for the data is because the US was just going out of world war 2, as my opponent would have seen had he read my source. He also does not respond to any of my other criticisms. The IMF study was published by the IMF, but does not represent its views (as it states on the front page). This is probably because it is a working paper, and therefore as yet unpublished. It would be wise to wait for that paper to be peer-reviewed before passing our judgement.

Seventh, "reacting highly to tax rates" does not mean "labor supply does go down when taxes go up" in the context of Prof. Chetty's study. Sure the markets may be more reactive, but his investigation focused on the effects of changing tax bracket treshholds, not tax rates.

Finally, that government programmes crowd out investment is only true if the government needs to borrow to finance those programmes [1] because it affects interest rates. Just because the government builds one road doesn't stop a firm from building another. The government only needs to borrow if it doesn't get enough money from tax. The answer, therefore, is higher taxation.

Pro 2. Incentive for tax evasion
*cue wind noise and tumbleweed*

Pro 3. Emigration
It's not a straw man to say that increasing taxes will not be enough to produce widespread emigration. I'm not denying it isn't a factor, but I argue that the factor isn't enough to warrent scaremongering about everyone heading off the moment taxes are raised. As to what the money is spent on, that is a matter for another debate. Needless to say, the fact some taxes are unwisely spent is not an argument against high taxes, because taxes can be unwisely spent when taxes are low, too.

Con 1. Govt makes better decisions
I apologise, I seem to have had a mistaken idea of what you meant by demand. You seem to mean demand for goods or services, I mean demand by businesses for investment. I want to be very clear on something - I'm not saying the government should run industries. I'm saying the government has a better idea of what to invest in and what not to. It has the analysts, the economists and the advisors that most ordinary investors wouldn't have in their dreams. The market provides what people want, but what people want isn't always what's best for the economy in the long run in terms of where investment should be placed. The state is better placed to make that kind of judgement than the masses.

Con 2. Equity
Your beliefs are not enough to win you the point. No evidence (other than the thing about Regan, which actually did nothing to show the link between increased inequality and reduced crime), no analysis, therefore your counter-argument fails (and isn't even a counter-argument, but a dogmatic didactic assertion). I gave you clear examples as to why your belief is false - Brazil and China. There are others, but I've heard no response to these first two, and it's too late now. That's why I win this point.

Con 3. Govt more efficient
"Government programs that are politically popular, but inefficient and financially unstable, are impossible to change for politicians. This is an example of consensus not being a good way to run the economy." I disagree with how you use "run" here. By implementing a single bad programme the government does not hijack control over the whole economy. If politicians really are dogmatic and unresponsive as you assert in Con 1, they're not going to change their beliefs for votes as you assert here. And even if they did, the project is going to be far less inefficient and financially unstable than in the hands of private firms, as I proved back in the first substantive round. Of course some politicians get crazy ideas sometimes - but then again, so do business leaders.

Con 4. Govt investments more likely to bolster external sources of standard of living
Nope, actually my response was an expanded version of "cf con 1" because my response is the same. I'm not going to bother writing the same thing out twice.

I'd like to thank my opponent for having this very entertaining and engaging debate with me. I urge voters to

Vote CON
for the eCONomy

Sources
1 - http://en.wikipedia.org...(economics)
Debate Round No. 4
No comments have been posted on this debate.
9 votes have been placed for this debate. Showing 1 through 9 records.
Vote Placed by 16kadams 2 years ago
16kadams
jimtimmylarztheloserTied
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Reasons for voting decision: Counter viper
Vote Placed by royalpaladin 2 years ago
royalpaladin
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Reasons for voting decision: Viper has countered Kage, so I am removing my vote. This means that LordKnukle is votebombing.
Vote Placed by Viper-King 2 years ago
Viper-King
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Reasons for voting decision: counter LK
Vote Placed by Lordknukle 2 years ago
Lordknukle
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Reasons for voting decision: Counter Royal.
Vote Placed by MasterKage 2 years ago
MasterKage
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Reasons for voting decision: Counter vote bombing
Vote Placed by Teafood 2 years ago
Teafood
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Reasons for voting decision: High tax rates don’t harm the economy, most studies show that tax rates up to 70 aren’t detrimental and actually help the economy by stimulating more demand reoriented growth and growth that is focused on the middle class instead of the elite 1. Other then that pro dropped and admitted to losing several points
Vote Placed by imabench 2 years ago
imabench
jimtimmylarztheloserTied
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Reasons for voting decision: counter vote bomb
Vote Placed by Willoweed 2 years ago
Willoweed
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Reasons for voting decision: I felt that con had more arguments and better ones. He refuted many points by pro; also pro used some misleading and inaccurate sources/points as pointe doubt by con. Also con pointed out how even some of pros sources actually agree with con
Vote Placed by Double_R 3 years ago
Double_R
jimtimmylarztheloserTied
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Reasons for voting decision: I felt that Con argued his position more effectively but his entire case essentially misses the point. He argues that higher tax rates equal higher standard of living. This does not negate that higher taxes hurt the economy which is what this debate was supposed to be about. Con wins S.G. for Pros round 2 spacing blunder and for spelling mistakes.