Are the very wealthy paying their share?

[Hauldren Collider]

Can't agree with Kuci's thoughts that taxes should be higher, though. I don't particularly mind if people are poor because they make poor choices. So I'd cut redistribution to the point where it basically exists as a safety net for the lowest rung, and make it actual cash payments and not specific benefits like healthcare or food stamps or housing. Then lower taxes so the people who actually do something with their lives can keep what they earn, and businesses have more of a reason to invest here.

[Hauldren Collider]

I'm sorry, that doesn't seem to address the question of the relationship between domestic redistribution of wealth in developed countries and the welfare of people in developing countries.

Ah, yeah. Well there's an opportunity cost. You spend a dollar here, that's a dollar you can't spend there. Other than that, it also depresses economic activity in general which reduces trade.

[giblets]

Who cares about relative wealth? I'd rather make everyone twice as rich than move everyone towards the middle.

Can you stop spouting talking points?

[Hauldren Collider]

Yeah, that was dumb, see the dans

[Dauphin]

It's an interesting subject, but I am worried that solid data is missing. In that environment, people's priors will have far more of an effect on anything I read than the truth will...

I'm not sure what this was supposed to mean, or we are talking cross purposes. I think I've lost the context of "people's priors" (which people?) and why it affects your reading more than the truth (it affects your comprehension of what you read or affects what you choose to read?)

[Dauphin]

Also the lack of solid data is obvious, it's almost an a priori when discussing high secrecy jurisdictions.

[Kuciwalker]

So there really isn't a tradeoff between domestic spending and foreign aid, because developing countries are supposed to pull themselves up by their bootstraps? Or are you saying that at the margin domestic redistribution of wealth is harming economic growth?

I'm saying that in the absence of political support for large, direct international transfer payments (and other visible forms of charity), the most effective politically realistic policy is probably one that minimizes policies that trade economic efficiency for (purported) reductions in intranational inequality. For example, tariffs that aim to protect manufacturing jobs. Or minimum wage laws. Or the corporate income tax (in general, double/triple/etc. taxation of deferred consumption). And we should fund the government through Pigovian taxes (e.g. congestion pricing, carbon pricing) whenever possible, even if we believe the results will be regressive.

All else being equal, we should generally opt for a less generous welfare state and lower marginal tax rates. Even better would be a less generous welfare state, the same marginal tax rates, and much more generous transfers to people in genuine poverty.

(Another benefit of the above is that I believe many of these policies aren't actually regressive, contra popular belief, and that they will also benefit the less wealthy citizens of Western countries.)

[Kuciwalker]

I'm sorry, that doesn't seem to address the question of the relationship between domestic redistribution of wealth in developed countries and the welfare of people in developing countries.

Redistribution of wealth is typically financed through taxes that introduce economic distortions and therefore reduce total wealth.

[Kuciwalker]

Unlike KH (based on previous threads) I support progressive marginal tax rates on consumption, because I believe that the share of consumption that is "conspicuous" (i.e. spent on the positional status good) is progressive. From that you can tell an externality story or a low elasticity of demand story, but they justify the same policy.

[giblets]

Do corporate income taxes in developed countries hurt people in developing countries? If there's a tax on investments that are made in developed countries but not in developing countries, wouldn't that cause some capital flight?

[Dinner]

Do corporate income taxes in developed countries hurt people in developing countries? If there's a tax on investments that are made in developed countries but not in developing countries, wouldn't that cause some capital flight?

Yes, to some extent but there are also other factors at work which help to counter balance it such as the desire to be close to the largest markets so companies can respond quickly to their largest customers' demands, stay on top of recent fast changes in the market, and avoid the risk of currency flucuations, etc... No one policy exists in isolation and there are dozens if not hundreds of other considerations which a company has to take into effect besides simple tax policy.

[Kuciwalker]

Do corporate income taxes in developed countries hurt people in developing countries? If there's a tax on investments that are made in developed countries but not in developing countries, wouldn't that cause some capital flight?

As I understand it, the way the corporate income tax works in the US is that any foreign profits brought back to the US are subject to it. This means that investors in the US ultimately will pay the tax regardless of where they invest.

[Dauphin]

As I understand it, the way the corporate income tax works in the US is that any foreign profits brought back to the US are subject to it. This means that investors in the US ultimately will pay the tax regardless of where they invest.

You assume it comes back to US investors through US companies (or otherwise gets declared as income to US authorities).

[Aeson]

I think blindly having faith in the free market to help those in the worst cases just doesn't cut it. Capital has no real desire to move into these areas it seems, other than to evade higher taxes and minimum wage laws elsewhere (also due to immigration restrictions, they can't just ship in cheap labor, they have to move to it). Even with those motivations, capital still doesn't move into most of these locations, or can do so in a way that's ultimately harmful for the local community. When a corporation is able to lock in rates for land use and labor in highly inflationary local economies, the value they provide the local population decreases over time and can go negative. They are exporting the raw materials, product of labor, and most of the capital from those activities, and leaving the local population with what (at one time) was a slightly higher wage than a subsistence existence.

Probably someday there will be unionization and minimum wage laws that can help fix this, but with capital having such a huge labor pool at those rates (close to half the world population) there isn't much that can be done to really increase the standard of living.

The real potential lies with helping the local population create it's own profitable businesses. Then the capital can be expected to stick around int he local economy for more than the few milliseconds it takes to wire it to an account overseas. Not moving in huge corporations that local businesses (present or future) are likely to have no ability to compete with (if only because they don't have the resources to pay off corrupt government officials as well.)

[Dinner]

Foreign investment is useful for creating an economy where very little existed before but, yes, they'll move on the second it's cheaper some where else so, as Aeson said, the key is to get the foreign investment in some dirt poor place (Papua New Guinea or Africa or what not) use it to kick start development but also make sure much if not most of the new money ends up getting invested in new local start ups which have some loyalty to the local area.