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May 14, 2013

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Hayek was right

'what if "tax justice" can only be achieved by abolishing capitalism?'

So let the tail wag the dog?

Capitalism best meets a populations need and wants. That's why it has lasted so long, and is not in crisis, whatever certain MiliE, Hollande etc might try to claim.

If 'tax justice' (whatever that is) could only be axchieved by abolishing it, its a non-question. Can't happen.

Ben Nader

Interesting idea, but I think that more tax on individuals (ideally through consumption taxes) is a much better option than throwing out the baby with the bathwater and abolishing capitalism. Corporation taxes are just stupid.

It seems to me that worker-owned firms are possible and do exist in certain places—likelihood is that they aren't more prevalent because they aren't that effective/desirable to workers. But I'm open to evidence either way because I'm not sure.

Neil Wilson

Struggling to see what the excitement is here.

There are only workers and profit to absorb a intermediate tax hike (since bankers are paid pre-tax). A 77:23 ratio seems pretty much in keeping with the wage:profit ratio in an employment constrained fixed-exchange economy.


In which case it suggests that we should switch the taxation burden away from wages and onto corporate taxation - in such a fashion as to encourage investment.

So from a UK perspective abolish National Insurance, high corporate tax rate, scrap capital allowances and make all capital spending revenue deductible.

As any decent tax accountant will tell you, its not the corporate tax rate that matters. It's the size of the cheque you write to the Exchequer.

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It seems to me that worker-owned companies are possible and are available in certain places—likelihood is that they aren't more frequent because they aren't that effective/desirable to employees. But I'm start to proof either way because I'm not sure.In which situation it indicates that we should change the taxes pressure away from income and onto business taxes - in such a style as to motivate financial commitment.

Metatone

"Falling (and negative) real interest rates are in effect a tax on cash, and whilst these have probably prevented capital spending falling more than it has - through mechanisms other than merely reducing companies' opportunity cost of holding cash - it has not unleashed a great boom."

(From your footnote.)

But this ignores the fact that if you tax that held cash directly, you can use the money for fiscal spending. Negative interest rates return money to the BoE (at the end of the chain) which isn't useful for spending, under the current set up.

Yet another Chris

The problem I have with taxing companies go beyond the tax incidence on wages you point out. Both corporation tax and uniform business rates are levied without representation. Companies can't vote. This then leads to companies spending millions on lobbying and tilting the playing field.

As to abolishing capitalism, that went really well in communist countries. This is something I had first hand experience of as an automotive engineer in the 80s when I visited Poland. Their car factories were like something out of the middle ages! As for the economy as a whole, you couldn't buy anything because the shops were empty. Truly, worker (or state, let's face it) ownership just doesn't work. The communists ran a 70-year 'project' and proved it. And if you want more proof, how well is it going in N Korea? I've been to the south and it's amazing - far ahead of the UK for engineering employment. But the north; you're kidding.

Gallbladder

To continue from Yet another Chris, please bear in mind that car manufacturing in 1980's Poland was a lot more workable for state ownership of companies than today's business.

It was relatively low-tech, and material and energy intensive, compared to much of modern economy. Just think of producing computers, modern smartphones, software products, entertainment... that is hugely different from reproducing fifteen-year-old Fiat designs.

Yes, in China there's Huawei and ZTE (owned by the army, etc) but even they are successful not because state ownership allows redistribution within the nation, but because it allows higher concentration of contol of wealth to a few privileged individuals.

(Remember, the Chinese say "socialist market economy" and I say "capitalistic communism", where "capitalistic" is the economic system and "communism" is the administrational and political model.)

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