While I do believe in everything I wrote in my last piece, I have not said my final word on the issue of economics, taxati on, and spending, nor are the views comprehensive. One thing worth addressing is the issue of taxation and the economy.
A quick glance at estimates such as the Human Development Index, World Health Organization numbers, and satisfaction with life show that having higher taxes or having the government spend more of your country’s GDP does not correlate to living in an awful sort of totalitarian state or a corrupt inefficient mess. There are noteworthy criticisms of these metrics, such as the WHO’s emphasis on “financial fairness”, which is arguably not a measure of the quality of healthcare, but in broad strokes, the above still stands. Unless there is a huge and conspiratorial gaming of the numbers, high-tax countries are not awful places to live in.
Their numbers and employment and economic growth do not necessarily suffer from these policies. Norway is a country much like Canada in that it relies on resource exports for a lot of its economic growth. They sit at around 3.5 per cent unemployment with around 2 per cent GDP growth. Germany, a manufacturing powerhouse, has a large economy and a large population, with growth at about 3 per cent and unemployment around 5 per cent. Canada’s unemployment rate is near 7 per cent, with economic growth
at 2.5 per cent GDP per year. High tax welfare states have not directly hurt the people, or the economy in these cases.
Just as another exercise we will look at how taxes in Norway work. Taxes are complicated, and I cannot pretend to understand it all or have ti me to get into precise bracket debates, so my apologies in advance if I miss something. No marginal rate of income taxati on exceeds the 50 per cent mark. Corporate taxation is around 28 per cent. In Canada, and I stress not including provincial taxes, the
marginal rates on income do not exceed 30 per cent, and corporate taxes are around 15 per cent. This is not as substantial as it seems, especially compared to two more important factors. First, Norway’s highest value added tax, akin to the GST, is 25 per cent, compared to our 5 per cent. Harmonized with the provinces (HST) these rates do not go above 15 per cent. Their contributi ons on social security vary from 0 to 18 per cent, while ours for those under $40,000 are 1.8 per cent, and do not climb higher.
What can be deduced is that a strong welfare state cannot simply be built on the backs of “the rich,” and that such a state does not hurt growth. Looking at taxes in countries like Norway, one can see that everyone shares a substantial burden. As far as I know, there are no advanced welfare states that properly maintain their financial situations with high taxes on corporations and the rich alone. They are usually combined with higher payroll taxes, along with substantial value-added taxes. These taxes support the programs that help people, which are assumed to be moral goods.
These are also the kinds of taxes that affect middle and poorer income persons, and attempting to raise them would have any government a loss in the next election in North America. So what does this all mean? Job creation, growth, and taxes are not as
straightf orward as parti sans and ideologues assume. There are practical implications and results, as well as morale questions that should be considered.
Both the economist’s Forgotten Man C, and FDR’s Forgotten Man are worthy of consideration.
