by Tyler Cowen
on May 2, 2010 at 2:04 pm
1. Greeks don't always pay their taxes.
2. Interview with the new Business Week editor.
3. Via Chris F. Masse, GetPivot.com, YouTube on it here, pretty neat, start with the video.
4. Mankiw on a VAT.
5. At the Fed, what kind of jokes do they laugh at?
6. The Chilean torture colony (incredible story).
7. Markets in everything, escaped gorilla edition.
Wow, the Chilean story reminds me of Jean-Christophe Grangé’s novel Miserere.
Interesting how the lefties can carefully document the terrors of right wing dictatorships…But the atrocities of people like Fidel Castro completely escape them.
I’d be interested in hearing thoughts from other readers as to whether travelers to Greece bear any ethical obligation in helping to curtail the tax evasion problems mentioned in the article. I was there about 18 months ago, and I’m trying to think of what I might do differently were I to go back now. Maybe paying with credit cards instead of cash? Any other ideas?
One of the proposals on VAT taxes is from some Cornell economist that has a simple system and actually rewards savings, and can be adjusted to be progressive.
The way it works is you declare all income, declare all savings, subtract savings from income, and the remainder is consumption which is taxed with the VAT rate which varies by level of consumption.
So, a high earner who saves alot pays the same VAT tax as an earner who spends everything and doesn’t save. A person who borrows alot to spend alot is taxed more, so a person who borrows alot to conspicously consume pays more than those who do not for a given income.
VAT taxes can vary by consumption levels. So, if you consume $300k out of an income of $500k ($200k savings), you get taxed at VAT rate x; if you consume at $30k, you get taxed at VAT rate y.
It would encourage savings, encourage disclosure of savings and investment.
Personally, I would prefer the traditional VAT which, in effect, taxes imports and gives a remission for exports. And, if you are a country that is a net importer, having some of the incidence of tax fall on the Chinese exporter is not so bad. And, the US manufacturer would be competing on the same playing field as a Chinese firm: chinese imports are taxed with the VAT and US manufacturing for domestic consumption has a VAT.
Today, imports are not effectively taxed and domestic manufacturers are through the coporate income tax, unless they are a MNC, in which case they know how to avoid taxes pretty well too.
The one time I was in Greece–summer 1998–I recall asking one of our tour
guides why so many houses seems to be unfinished, in particular had
open second floors (no, or only rudimentary, walls; no roofs). She
said it was because new housing was only subject to property tax when
it was completed. And as long as you left the upper floor unenclosed,
the house was uncompleted, and therefore untaxed. I do not know
whether that was true, but it sure seemed to explain a lot of what we saw.
I suspect he was referring to the VAT Mankiw post, Donald.
Sorry if I was obscure; I was suggesting that the USA avoid installing a VAT bureaucracy and just tax gasoline, jetfuel and so on.
mankiw: “why, if these two tax systems are really the same, are conservatives attracted to the flat tax and repelled by the VAT?”
This conservative is repelled by the VAT because it is hidden. The taxpayer never sees how much he is paying for all those government “services”. With a flat tax, the government burden is clear to all. Which is why elected officials are scared silly of the flat tax, but willing to embrace a combined income/VAT tax system which might exact an equal but hidden burden on every taxpayer.
The Chilean story reminds me of ‘Feet of Clay’ by Anthony Storr. In particular, the sections on Jim Jones and David Koresh. Excellent book.
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