PyroFalkon #39;s Sims 4 Socialism Challenge Day 36
Let #39;s play The Sims 4! Jon "PyroFalkon" Michael, the writer of the IGN Entertainment strategy guide wiki for The Sims 4, has created a set of house rules to ...
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PyroFalkon's Sims 4 Socialism Challenge Day 36 - Video
Bolivian President Evo Morales recently won re-election by a smashing margin. His eight-year rule has weakened the notion of property rights in Bolivia. He has also indulged in frequent nationalizations and demonized capitalism.
And yet, the Morales years have also produced Bolivias best growth rates in several decades, far better than those achieved when orthodox economic policies were pursued in the 1985-2003 period.
All of this must puzzle many elites around the globe. Thus, Morales recent policy of making Bolivian clocks run backwards seems reflected by the apparent successful defiance of theory in his economics.
In reality, though, there is a fairly simple explanation, and it is an important lesson for other poor countries no less than for global elites.
His economic policies have a certain logic to them. Through nationalization and tearing up contracts, he has enabled the Bolivian state to quadruple its revenues from minerals and energy extraction.
Fortuitously for him and his nation, this occurred at a time when prices were high. So the big bucks arrived in his state coffers. Otherwise, mining and energy companies would have made those windfall profits.
This good timing on his part has enabled Morales to increase the Bolivian welfare state without drastically unbalancing the budget. Indeed, aided by the windfall in resource revenues, his budgetary policies have been a model of restraint.
Bolivias performance in that regard is far better than that of most other Latin American countries, or indeed than that of the rich nations of Europe, the United States or Japan. Purely judged on his budgetary policies, we might well envisage for Morales a post-Presidential career as the successor to the United States Jack Lew or the UKs George Osborne!
The results of Bolivias economic policies have been excellent. An average growth rate of over 5% since Morales took office in 2006, with the 2008-09 recession survived with barely a hiccup.
With the budget so close to balance, Bolivias international debts are also modest, although a 2008 default on outstanding international bonds for a time made it difficult for the country to borrow. However in late 2012, the hyper-liquid state of global bond markets enabled Bolivia to borrow again, raising $500 million of ten-year money at a rate of only 4.875%.
Read more here:
Where Socialism Appears to Work: A Close-Up Look at Evo Morales
Since all economic theories even Marxism and socialism recognize that capital formation is a key to long-run growth, higher wages, and improved living standards, it obviously doesnt make sense to penalize saving and investment.
Yet thats exactly what happens because of double taxation in the United States, as can be seen by this rather sobering flowchart.
So how can we fix the problem? The best answer, particularly in the long run, is to shrink the burden of government spending so that theres no pressure for punitive tax policies.
Good reform is also possible in the medium run. Policy makers could implement a big bang version of tax reform, replacing the corrupt internal revenue code with a simple and fair flat tax. That automatically would eliminate the tax bias against saving and investment since one of the key principles of the flat tax is that income gets taxed only one time.
That being said, theres no chance of sweeping tax reform for the next few years (and maybe ever), so lets look at some pro-growth incremental reforms that would reduce or eliminate the extra tax penalties on income that is saved and invested.
On the investment side of the ledger, any policies that lower or end the capital gains tax and the double tax on dividends would be desirable.
But lets focus today on the saving side. And lets start by explaining how a fair and neutral system would operate. Heres what I wrote back in 2012 and I think its reasonably succinct and accurate.
all saving and investment should be treated the way we currently treat individual retirement accounts. If you have a traditional IRA (or front-ended IRA), you get a deduction for any money you put in a retirement account, but then you pay tax on the money including any earnings when the money is withdrawn. If you have a Roth IRA (or back-ended IRA), you pay tax on your income in the year that it is earned, but if you put the money in a retirement account, there is no additional tax on withdrawals or the subsequent earnings. From an economic perspective, front-ended IRAs and back-ended IRAs generate the same result. Income that is saved and invested is treated the same as income that is immediately consumed. From a present-value perspective, front-ended IRAs and back-ended IRAs produce the same outcome. All that changes is the point at which the government imposes the single layer of tax.
The key takeaways are in the first and last sentences. All savings should be protected from double taxation, not just what you set aside for retirement. And that means government can tax you one time, either when you first earn the income or when you consume the income.
Our friends to the north can teach us some lessons on this issue.
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Canada Shows How to Eliminate the Tax Bias against Saving
PyroFalkon #39;s Sims 4 Socialism Challenge Day 31
Let #39;s play The Sims 4! Jon "PyroFalkon" Michael, the writer of the IGN Entertainment strategy guide wiki for The Sims 4, has created a set of house rules to ...
By: PyroFalkon #39;s Let #39;s Play Extravaganza
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PyroFalkon's Sims 4 Socialism Challenge Day 31 - Video
PyroFalkon #39;s Sims 4 Socialism Challenge Day 35
Let #39;s play The Sims 4! Jon "PyroFalkon" Michael, the writer of the IGN Entertainment strategy guide wiki for The Sims 4, has created a set of house rules to ...
By: PyroFalkon #39;s Let #39;s Play Extravaganza
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PyroFalkon's Sims 4 Socialism Challenge Day 35 - Video