Monday, August 17, 2009

Taxpayers Alliance Leave an Open Goal

The Taxpayers Alliance have a post talking about how big government spending harms the economy, what really confuses me is why they've chosen to back this up by featuring a video with none other than Dan Mitchell from the Centre for Freedom and Prosperity. Needless to say, I think that the arguments he makes are pretty simplistic and make a whole lot of assumptions about the nature of markets and the key incentives for improvement in public services.

For now though, I think it's worth pointing out a few of Mr Mitchell's greatest hits, this paper on Iceland for example, that says:
Iceland’s flat tax has a high rate compared to flat taxes in other countries. Other reforms, particularly the low corporate rate and the 10 percent tax on capital income, are more dramatic. From a political perspective, however, the Iceland reform is remarkable. It is the first time a Western nation has decided to no longer impose discriminatory tax rates on more successful taxpayers. Tax reform and economic liberalization have helped Iceland prosper. It remains to be seen whether other industrial nations will learn from Iceland’s success.
Of course, nowadays some might have a different opinion of Iceland's economy, I found this rather poigniant (thank you Charlie):
"Self-made bondage is the strongest form of bondage. Thus wrote Sigfús Daðason, and thus is our situation today. The constitution was mortgaged without the nation being asked, and now we are to acknowledge the collateral and confess to the crime. We are confessing to a crime we did not commit. Let me quote Eva Joly: “This small country of 320,000 inhabitants is now reeling under the weight of billions of Euros of debt, which has absolutely nothing to do with the vast majority of its population and which Iceland cannot afford to pay.”

Yes, we are being enslaved. The Icesave agreement is stage one, the conditions of the International Monetary Fund stage two, and so it will continue until sometime in the future, when we receive an apology for the mistake that is being made … but by then it will be too late. They say we will become the Cuba of the North if we do not ratify this agreement. But shouldn’t we add: We will become the Haiti of the North if we do ratify it. They fulfilled all the IMF’s demands – and are now plagued by a famine. ... That is the reason we are here today – and we oppose this. All of us. We are being made to confess to a crime we did not commit. We are to shoulder the burdens of the global financial system, to become their underdogs.

Another article for the Cato Institute speaks in favour of tax competition and singles out Ireland, Estonia and Slovakia for praise:
All of these reforms have yielded big benefits -- particularly for the nations that have been the most aggressive tax cutters, notably Ireland, Estonia and Slovakia.
Nowadays, we all know that Ireland is having problems, the Slovakian economy looks set to contract by 4.7% this year and estonia looks set to suffer a 15% fall in GDP. It seems like the man has some kind of strange inverse midas touch, it seems as if any economy singled out for praise is now in serious economic trouble.

Why exactly, should we be taking lectures from the TPA on the best tax policy to pursue when they feature (in a section of their website rather ironically named "Economics 101" no less) the recommendations of a man who has been so consistently wrong?

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