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Separating Economic Sense and Nonsense

Section: Members Highlights / WTA Blog
30 September 2016 | Separating Economic Sense and Nonsense

The Washington Times
By Richard W. Rahn – – Monday, September 26, 2016

ANALYSIS/OPINION:

Why is it that many politicians and journalists can quickly grasp the idea that if the tax on cigarettes or soft drinks with sugar is increased, the demand for them will decline, but seem unable to understand that increasing a tax on labor, like a mandated increase in the minimum wage, will cause a decline in the demand for labor, leading to higher unemployment?

A number of years ago, I was on a European speaking tour with a couple of other economists. One had received a Nobel Prize in economics. He was exceptionally smart, a math whiz, and a most pleasant fellow. Among his many accomplishments, he developed investment models with others, which were used to forecast. One of the forecasts had turned out to be spectacularly wrong and costly. When chatting with him about the matter, I realized that the problem was the number of years of data they used was too few (more years of the necessary data were not available at the time) to give them the level of certainty they thought they had. In our conversations, I also came to understand that he had done only limited reading in economic history (it was not his field), and was unaware of various financial and monetary bubbles and crashes that have occurred over the last few centuries. Perhaps if he and his colleagues had been as well schooled in economic history as they were in applied mathematics, their risk assessments might have been different.

It is always disheartening to hear politicians propose policies that will not make citizens richer with more opportunities as claimed, but make them less wealthy with fewer options. Politicians who advocate for higher capital gains tax rates, higher taxes on the “wealthy,” higher inheritance tax rates, higher tariffs, more government spending and more regulations, fail to recognize, or admit, that all of this has been tried many times before, with disastrous results. They are either ignorant of economic history or are relying on the ignorance of the press and the people to buy such claptrap. Even more disconcerting are those economists who try to make an argument of why this time the outcomes from bad policies are going to be different — apparently to curry favor with the political and media class.

The high priests of many academic disciplines, with the intent of making it seem more difficult, create many unnecessary new words, when simple, commonly understood words in the English language will suffice in most cases. Economists have not only been guilty of that sin, but in recent decades, have developed the fashion of insisting that almost every academic article be expressed in mathematical terms, or at least have a mathematical appendix, even when totally unnecessary or inappropriate. The result has been that increasing numbers of economics students, both at the undergraduate and graduate level, have spent much of their time studying math rather than economic principles and history. In 2000, the noted economist Thomas Sowell wrote a very fine and well-reviewed introduction to economics, “Basic Economics: A Citizen’s Guide to the Economy,” proving that it was possible to write a clear, accurate and concise economics text without equations, graphs or jargon.

The great intellectual debate among non-socialist economists about the proper role of government during the last 80 years is largely between the followers of John Maynard Keynes and the Austrian school of economists led by F.A. Hayek and Ludwig von Mises, and their frequent Chicago school allies led by Milton Friedman. The great tragedy is many economic students graduate without knowing who Friedman and Hayek were, let alone their contributions to economic thought. Prime Minister Margaret Thatcher and President Ronald Reagan were fans and disciples of Hayek, while many big-government types tend to be Keynesians. Without understanding the substantive debate between these two conflicting visions, it is hard for members of the press and the political class to present coherent thoughts on many public policy issues.

For those wishing to acquire basic economic literacy without the technicalities, I suggest the 2016 edition of short classic bestseller for non-economists, “Common Sense Economics: What Everyone Should Know About Wealth and Prosperity,” by James Gwartney and others. Again, for those who have no background in economics but would like to learn about money and the great bubbles and panics of the past, I recommend the very entertaining bestseller, “The Ascent of Money: A Financial History of the World,” by the distinguished historian Niall Ferguson. This book was adapted for an Emmy Award-winning PBS documentary. Finally, the single best one-volume book on the history of economic thought — both entertaining and dense in useful information, and now in its third edition — is Mark Skousen’s “The Making of Modern Economics: The Lives and Ideas of the Great Thinkers.” The above books provide what one needs to distill the sense from the nonsense about economics coming from the media and political class.

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Economic Reads for the Non-Economist

Section: Members Highlights / WTA Blog
30 September 2016 | Economic Reads for the Non-Economist

Great Economic Reads, especially geared to non-economists:

A short, classic bestseller for non-economists:
“Common Sense Economics: What Everyone Should Know About Wealth and Prosperity” by James Gwartney

The single, best one-volume book on the history of economic thought, according to U.S. economist Richard Rahn:
Mark Skousen’s “The Making of Modern Economics: The Lives and Ideas of the Great Thinkers.”

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Happy 28th Anniversary World Taxpayers Associations!

Section: Members Highlights / WTA Blog
30 September 2016 | Happy 28th Anniversary World Taxpayers Associations!

On the 30th September, it was the 28th Anniversary of the World Taxpayers Associations! The WTA was established, at the National Press Club in Washington DC, on the 28th September 1988 by Bjorn Tarras-Wahlberg, the National Taxpayers Union (USA), and the European Taxpayer Association’s (ETA) president, Rolf von Hohenhau. Nine other countries joined in the launch of what was then called, the Taxpayers Associations International (TAI). Congratulations Bjorn, NTU & ETA on keeping the global fight for economic freedom going all these years!

See the write up of it at the time in the Dollars & Sense publication here.

“High Taxes = Low Economic Growth
Low Taxes = High Economic Growth”
~ Bjorn Tarras-Wahlberg

“There are only two things that are certain in life: Taxes and Death, but unfortunately they come in the wrong order.” ~Benjamin Franklin

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Lithuanian Free Market Institute’s Tax Calculator

Section: Members Highlights / WTA Blog
12 August 2016 | Lithuanian Free Market Institute’s Tax Calculator

The Lithuanian Free Market Institute (LFMI) has developed a great tool called the Tax Calculator, and they want to share it with you!

This is a wonderful idea for a taxpayer group to bring awareness to people on how much tax they actually pay.

LFMI’s tax calculator http://mokumokescius.

How it works: Creating the calculator, one indicates the individual net wage income, get the amount of income and social security contributions (and a breakdown of these), and then travel through the personal expenditures to see what taxes are paid every time money is spent on different categories of goods or services.

At the end, one gets the total personal tax amount paid and the personal Tax Freedom Day, and finally gets the personal bill from government showing where the government spends the taxes paid (the tax amount is broken down by government expenditure areas). One can also go through those government spending areas to see how much they constitute in terms of government revenues and spending proportions.

LFMI can help other groups to replicate the tax calculator. They provide the roadmap and the application package with uncompressed working files of illustrations, codes, website style guidelines at no additional cost. They also give the texts and translations.

Other adaptations: LFMI has adapted the tax calculator for Poland http://sprawdzpodatki.pl. Institute of Economic and Social Studies (INESS) in Slovakia has created an app based on the concept and design. The Economic Institute Molinari is now working on a French version, the Bendukidze Free Market Center is developing it for Ukraine, and they are guiding a group in Bosnia and Herzegovina, the Centre for Policy and Governance.

If you are interested in adapting this Tax Calculator to your country, please contact their Development & Programs Director, Aneta Vainė: aneta@freema.org. They are eager to help!

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French workers pay the most in taxes in Europe!

Section: Members Highlights / WTA Blog
27 July 2016 | French workers pay the most in taxes in Europe!

The French are paying the most taxes out of all of Europe’s workers, an annual report shows, but are they getting value for money?

The French will be forgiven for celebrating the Friday feeling more than usual this week, given that they will be free from the clutches of the French tax man.

Well in theory at least.

An annual study by the liberal think tank the Molinari Institute has concluded that French workers are the most taxed in Europe – above even the Belgians who held have previously held the unfortunate title.

The study by the Brussels–based think tank works out the “tax liberation day” in each country or in other words the day after all their earnings go to them after the tax man has been paid off.

It calculates how much tax, social charges and VAT a person must pay to the state compared to what they earn on average. It then works out the equivalent of how many days a year it will take them to pay it.

And unfortunately for workers in France they have to wait the longest for their independence day, which this year is Friday July 29th – the exact same day as last year, where as the Belgians can celebrate two days earlier on Wednesday July 27th.

Based on figures from EY (formerly Ernst and Young) French workers hand over some 57.5 percent of their salaries to the state in various kinds of taxes compared to 56.9 percent in Belgium.

France’s rise to the top of the table has more to do with the impact of Belgian tax cuts (last year tax liberation day was August 6th), the Institute said, but it appears France’s own tax cuts have failed to take effect if the study is anything to go by.

Cécile Philippe, president of the Molinari Economic Institute and co-author said: “The fiscal and social pressure on the average French employee remains at record levels.

“This pressure, which cannot be explained by more attractive benefits, penalizes most of the world.”

As the map from Le Figaro newspaper (below) shows the workers in other countries like the UK have been pocketing their earnings for a long while.

The annual tax freedom day for Britons this year was back on May the 9th – long before the Brexit referendum and Euro 2016.

In Ireland it was April 30th, before the sun had even come out for spring. In Germany workers were still paying off the country’s tax mannshaft up until July 11th.

The study reckoned that although the French earn higher wages on average than their German counterparts, those across the Rhine actually have 17 percent less spending power.

In Sweden, where the tax man also has a gluttonous reputation workers stopping paying into his pockets on June 22nd – the same day Zlatan and co were knocked out of Euro2016.

The Institute also chose to look at whether the French were getting value for their money in terms of the social and welfare services all their taxes were being spent on.

But their conclusion was not positive noting that France’s public services are not the best performing.

“It seems that the high level of collective spending in France is not matched by better well-being that would justify the higher taxation,” the report said.

The institute pointed out that France was placed 9th in Europe in the UN’s latest Human Development Index, and 11th in the OECD’s Better Life index, which look at overall quality of life.

James Rogers, associate researcher at the Institut économique Molinari said: “The Belgian and French workers spend more than half of the amounts distributed by their employers and taxes. It is worthwhile to ask why they do not get back the best schools, the best health care or the most generous pensions. ”

The French president François Hollande has vowed to cut taxes before the 2017 presidential election.

The expected move is seen purely as a tactic to win votes with the president’s popularity ratings as low as they’ve ever been.

http://www.thelocal.fr/20160726/french-workers-paying-the-most-taxes-in-europe

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