On the appalling ignorance of Nick Shaxson

So our Nickie has teamed up with the NEF to do one of their \”Mythbuster\” series. as you might expect this series doesn\’t bust any myths, rather it proclaims them.

Here\’s the opening of the one on why tax competition isn\’t important:

A myth we\’re repeatedly told is that a country must be \”tax competitive\” in order to support a successful economy. It sounds so reasonable. We\’re taught that competition between companies keeps them on their toes and pressures them to produce better products and services, at better prices.

But here\’s the problem: competition between companies in a market bears no economic resemblance whatsoever to \”competition\” between countries on tax. They are utterly different economic beasts.

Theoretical arguments used to support tax \”competition\” between countries were first made in a 1956 paper by the economist Charles Tiebout. He argued that in a globalised world, people would naturally migrate to the countries with the most efficiently run public services for the least amount of tax possible. This would lead to countries \”competing\” with one another by running public services better and with less money, and everything would organically improve. But how many people do you know who will rip their kids out of school and flee to a foreign country as soon as it tweaks its tax code? It doesn\’t take a tax expert to see how silly this theory is.

I refute him thus: Lady Green.

And this is what is so damn fucking stupid about the argument that is being made here. The idiots at the TJN have just spent the last decade complaining that people, money and companies have been buggering off out of high tax jurisdictions and into low tax ones. Their response being that of course we should close down all of the low tax jurisdictions.

So, why would you campaign for a decade to stop people being able to bugger off if you didn\’t think that people do bugger off?

Their own actions for these ten years show that even they don\’t believe this tripe they\’re spouting as a \”mythbuster\”.

The rest of it is the highly selective and biased nonsense you would expect it to be.

And they don\’t even mention the major point in favour of tax competition: that by being able to bugger off a limit is put on the possible exactions of the State. Without that possibility of exit the bastards would rip us off even more.

49 comments on “On the appalling ignorance of Nick Shaxson

  1. In a way, there is validity to the argument. It comes down to the recognition that most people are not easily mobile, nor may they wish to leave their home culture. This is the problem with simplistic Laffer arguments.

    Generally, the higher up the “class” scale a person is, the more internationally mobile they are. We see this in the “new class”, the deracinated elite who currently govern us (like that bint from Texas in another thread) who feel very little geographic allegiance; their lifestyle and peer group are international. They move around frequently and easily.

    The non-elite are much more localised. They thus demonstrate feelings despised by the Elite, such as nationalism, tribalism, fondness for preservation of their culture and environs, etc. These people are not highly mobile. Additonally, if they can usually benefit little from migration anyway in economic terms, at least compared to wealthy new class types.

    So the question really is about whether high taxes on the elite class will cause them to leave, and in practical terms just how fiercely we need to tax Tony Blair to ensure that he fucks off and never, ever, comes back again.

  2. “But how many people do you know who will rip their kids out of school and flee to a foreign country as soon as it tweaks its tax code?”

    The sort of people who earn enough that a change to the tax code makes a substantial difference to their take home earnings “usually” send their kids to private schools anyway.

    Anyway, there are clearly tens of thousands of Brits working in HK, Singapore, and Dubai where tax rates are clearly a very major part of why they are there.

    Sure there’s the fun of being an expat, and it may be where the job needs to be but the fact that earning a largely tax free salary for 5 years means you can bring forward your retirement date by years is obviously a huge incentive.

    And places like HK and Singapore have perfectly decent (private) schools. Or there are boarding schools back in UK.

    Nick Shaxson (and his two kids) lives in Zurich. He must know all this.

  3. “Nick Shaxson (and his two kids) lives in Zurich. He must know all this.”

    I’m sure he only lives there for research purposes and still files and pays full UK taxes in compliance with the moral ethos he is part of.

  4. Surely not being able to put a limit on the exactions of the state would be, to these mythbusters, in parlance commonly used here, a feature rather than a bug, wouldn’t it?

  5. Yet again, Worstall, you are utterly ignorant about the wider implications of your support for inter-jurisdiction tax competition. You sound like a petulant teenager rehashing nonsense from decades ago.

    Only nutters that hang on to your words like they’re some sort of window unto enlightenment could agree with you.

    Do you actually know anything about how tax competition works, or do you simply spout off the guff that your cronies say?

    Get a grip and some fucking education. You are simply wrong.

  6. I’ll simplify the above. You are a simple two dimensional cartoon who cannot understand the complexity of real life.

    Really, who the fuck are you to dismiss academic research. Fuck off and scratch around in the dirt for your metals. Knowing that does not make you anything else but a simpleton.

    I read this blog to remind myself of the intellectual obstacles, and Jesus, it’s mostly extremist hatred of other people.

    Just hate.

  7. According to his Wikipedia entry, NS is a a British citizen and lives in Zurich. Clearly that’s for reasons other than the Swiss tax system. Isn’t it fortunate for him that he lives in a world in which free movement is possible. Oh, hang on…

  8. @Arnald the thing about “academic research” is that it exists to be debated. Ideally that involves reasoned argument and, crucially, rationality. You haven’t displayed either in your posts and so you cannot expect to be taken seriously.

  9. “Is that an ad hominem ?”

    Oh yes. It is also an “appeal to authority”. Both fallacies used by Mr Murphy regularly so no surprise being used here.

  10. As is pretty clear from another thread, banks do create deposits and do make people pay interest on the money they have created by dishing out unsupported cheques as loans. This is the orthodox explanation BTW as Ralph Musgrave shows with his ample quotes ,something singularly lacking from most contrary postings on here. That being the case all that is necessary is for the Government to take over the creation of money in this way by nationalising the banks and the interest then becomes a tax to replace those constantly being bleated about by Tim.( It is not interesting reading so many defences of tax avoidance on the basis “It’s legal so I’ll do it”.)
    And this would put the bankers out of their ridiculous misery of being given a licence to create money and then making a mess of it ,so badly that porridge looms.

  11. And then, if you want to borrow money, you have to borrow it off the State. And if you want to save money, you have to save it with the State.

    Fabulous plan there, DBC. Fabulous.

  12. I think you’re attacking an argument not made in the piece, and ignoring one they do make.

    They concede that wealthy individuals will move, and that capital will move in response to high taxes (or lower ones elsewhere). So (they argue), countries tend to cut taxes on the wealthy/ capital to stop it bolting (ie they follow the gospel according to Worstall). But govts then tend to tax whatever/whoever won’t or can’t move. Those taxes are just as distorting (they say) as the taxes on capital. And anyway, they say, there is no evidence (they say) that low tax countries are lower growth than high tax countries.

    No idea if this is true. But I reckon there is some truth in the point that as countries are forced to lower taxes on the mobile (say corporation tax) they do not actually lower taxes overall. Eg VAT goes up.

  13. As an aside, I recall reading about tax competition (on efficiency rather than levels) occurring between US states. I forget the source.

    Basically, the duller or less desirable the place was, the more efficiently they used the taxes they raised. People were prepared to have the state waste some of their money as the price of living in California, but not Omaha. (Apologies to Omaha – maybe you are exciting and inefficient.)

  14. “banks do create deposits and do make people pay interest on the money they have created by dishing out unsupported cheques as loans”

    How is it possible for them to go bust then? It’s money for nothing!

  15. Er, DBC…way I & probably most people read that thread, banks don’t create money. You sure you’ve got the correct blog? Muphry’s is thattaway <–

    Shame Tim didn't pick up on this point in the current post:

    " in a globalised world, people would naturally migrate to the countries with the most efficiently run public services for the least amount of tax possible."

    By & large, that's a quality of life question. And "most efficiently run public services" doesn't automatically mean the most comprehensive. It means those provided are are run in a manner that benefits the user to the greatest degree.
    So if the UK became an ultra low tax area, maybe some of us ex-pats would return to put up with the filthy hospitals, jammed roads, lousy local authority services, hopeless education system….
    As it is…NO!

  16. That banks create money is the orthodox position: to say otherwise is unorthodox.
    You cannot get more orthodox (and more eloquent) than the Encyclopaedia Britannica 1981 ed vol12 p357
    “In the course of issuing money the commercial banks actually create it by expanding their deposits ,but they are not at liberty to create all they may wish, whenever they wish, for the total is limited by the volume of bank reserves and by the prevailing ratio between these reserves and bank deposits – a ratio that is set by regulation or custom.” I have the wording of a letter sent from the Treasury 5 Aug 2008 which I am too lazy to copy put in full, (for fear of this mailing disappearing like the previous one) which includes the sentence “By far the largest role in creating money is played by the banking system itself”. I am afraid its all true. If you have any authoritative quotes saying banks don’t create money I would like to see them.

  17. BIS-

    That thread actually pretty much concludes that banks create money. Perhaps the most obvious proof of this is that if all the banks closed, all the money would disappear except a small residuum of notes and coin.

  18. IanB @2

    “The non-elite are much more localised. They thus demonstrate feelings despised by the Elite, such as nationalism, tribalism, fondness for preservation of their culture and environs, etc. These people are not highly mobile. Additonally, if they can usually benefit little from migration anyway in economic terms, at least compared to wealthy new class types.”

    Over 25 million Mexicans and other Central Americans have moved to the United States, legally or not, during the last 30 years, amounting to about 20% of Central America’s population.

    I am fairly confident that they are part of the Non-elite you describe.

    The point is that economic interests (be it a lower tax rate or basic survival) are a powerful driver of mass migration, for all social and economic groups, whatever Shaxson et al may have to say about it.

  19. Ted, I was referring to the non-elite of developed nations. There is obvious good economic reasons for poor people from other nations to move to the developed world.

  20. Shaxton, as is usual, misses his aim, in this case competitive tax regimes, by a country mile. It’s not the individual at which ‘low tax’ is aimed , it’s industries. Red clawed lefties should, therefore, encourage ‘low tax’ as industries will arrive and the opportunity for mass unionisation will arise. Oh, wait, unionisation is worse than high tax, so the industries will fuck off again.

  21. “I was referring to the non-elite of developed nations.”

    I suggest you go to HK, Singapore or Dubai and you’ll see that there are many tens of thousands of UK and European expats who aren’t “elites”.

    Assuming definition of non-elites includes teachers, middle management office staff, personal trainers, hairdressers, restaurant/bar staff, IT support, accountants, car salesmen etc

  22. The problem with the article is that it is riven by internal contradictions.

    It says that people wont move because of taxes. But that capital does. And that two US states engage in a competition to bring in FDI and end up with regressive tax schemes… which suggests that rich people do move and thus, there is tax competition for personal income tax as well as for capital.

    What is true is that the effects of taxation on economic growth are difficult to disentangle. The CRS study cited is bollox – it tries to draw linear cause and effect from an endogenous system.

    We know that some degree of redistribution is economically efficient – imagine the negative effects of no healthcare or education for the very poor. We also know that a 100% tax rate would be bad.

    The bulk of the academic evidence appears to point to – some negative effect of taxation on growth, but with a weak level of explanatory power – thus helping to explain why some high tax countries grow relatively quickly. Pretty much everyone agrees that the structure of taxes is important though. (so lower income taxes, more taxation on inelastic demand commodities)

    Here’s an example:

    http://people.exeter.ac.uk/gdmyles/papers/pdfs/TaxGrow.pdf

    This helps to explain why states compete for FDI.

    In terms of verity:

    Nick Shaxson 2/10
    Tim Worstall 8/10

  23. “tens of thousands”

    Oooh. What’s the population again? Well over 60 millions isn’t it?

    I wouldn’t have thought my general point was that controversial; the lower down the social scale you are, the more rooted, less mobile, and less incentivised to move. That isn’t to say that nobody moves about. It is a matter of degree.

    I can only presume that admitting this is some kind of heresy to Lafferists, or something.

    The fact is, most people stay put even when conditions are by any decent standard intolerable; the old Soviet bloc, hell-holes like Cambodia, most of us are staying here in the UK despite being ruled by total shits. I really don’t think that bar staff doing the Grand Tour on their gap year is really much evidence against that.

  24. Even the less mobile and well off benefit if governments are pressured to run prudent finances. So tax completion does not just benefit the wealthy, I would submit. A world of low capital movement is likely to be bad news for everyone. Consider the rapid rise in living standards prior to WW1.

    Arnauld’s outburst is pure ad hominem. I also sense an underlying tone of violence. Maybe I am seeing phantoms but you do wonder about those who celebrate the violence-backed power of the state to impose tax without limit.

  25. I can recall seeing the first ‘Mythbuster’ and inwardly cringing – by a facile comparison of debt levels across the centuries with not even a rudimentary attempt to consider historical or societal context, it came up with the rather curious argument that we don’t need to worry about the debt as ‘Britain has been broke for three centuries’. I naively hoped this would be the nadir – only to stumble into this piece.

    Wow – no mention of low taxes creating efficiency- utterly ignorant of, seemingly anything other than a Socialist worker version of world history between 1945 and 1979. I actually enjoyed Ellie Mae O’Hagan’s discomfiture of Murphy when she was invited in his stead to the BBC, where he showed his true colours and effectively ended his chances of becoming the Chief Economic Advisor to the incoming Miliband government – but sadly her politics are those of a 19 year old student, and her economics knowledge, (together with Shaxson) near zero.

    Just to note one classic fallacy from the piece:

    ‘Astonishing difference in taxes as a share of the economy, from Japan at 29% and Denmark of 55% – seem to have had no impact on rate of growth ‘

    - this, or something like this is the ‘level of evidence’ that is used to ‘bust the myth’.

    Let me put this through the likes of Arnald’s rather dense crania:

    ‘The examples of The Hong Kong SAR with a base rate of 20% and Korea DPR , where tax rates are believed to be near 90% of income, show the importance of healthy, low overall tax rates to ensuring higher rates of economic growth’

    A statement the likes of Arnald would rightly deride, as its as partial and selective in its use of examples as the Shaxson/ O’Hagan example.

    His recourse to ever more febrile ad hominem attacks shows the desperation of his position – the article quoted is one of the worst pieces of ‘research’ I have ever seen. I’m hoping it marks a nadir, only to vaguely recollect we’re due something from Murphy himself, which I’m fearing might make the Shaxson piece look like the ‘Road to Serfdom’ in comparison….

  26. V_P @30

    There are some basic problems with the piece of ‘research’.

    The graph of the growth in GDP/head versus average Government revenue/GDP is a scientific horror show. Any freshman in any economics or statics program knows that you do not compare or regress a second-degree (growth) versus a first-degree (revenue) variable. If anything Shaxson should either compare growth in GDP/head versus change in Government revenue/GDP, or absolute GDP/head versus absolute Government revenue/GDP.

    The bigger issue however is the sample of countries, which comprises only of Western nations in long-term relative decline. It is probably no coincidence that Shaxson omits Taiwan (where Government revenue/GDP is 13%), Singapore (14%), Chile (18%), Korea (25%), or even Israel (36%, but of which it spends in excess of 10% on defense). All of these nations (OK maybe not Chile, yet) have absolute levels of GDP/head comparable with the sample on the graph, but dramatically higher growth rates

  27. “Oooh. What’s the population again? Well over 60 millions isn’t it?”

    Working age adult population is substantially smaller than 60 million. And it’s these people who largely pay most of a country’s taxes.

    So can we agree that Shaxson is wrong to imply practically nobody moves for tax reasons to agree that many do move, it’s just a question of how many.

    And actual numbers aren’t what is significant. One £5m pa banker leaving the UK for HK is a far more significant loss to the UK’s exchequer than 100s of minimum wagers leaving.

    PLEASE MEND THIS SITE !!!!

  28. One £5m pa banker leaving the UK for HK is a far more significant loss to the UK’s exchequer than 100s of minimum wagers leaving.

    It is. You’ve got rid of one state-supported parasite, rather than losing hundreds of economically beneficial productive workers.

  29. Arnald – “Get a grip and some fucking education. You are simply wrong.”

    So tell us again how the British trained the Khmer Rouge Arnie.

    You are in no position to lecture anyone on their ignorance. Except, I suppose, from a position of expertise. Nor is this irrelevant – even if TW was wrong, and I cannot see he is, his error would be trivial. Your error was vastly larger in terms of the political and moral implications.

    You have shown you have no respect for the truth or the facts. You are unable to admit when you are wrong. You are unable to take correction from those that know vastly more than you do. And you are morally indifferent to the implications of your errors.

    In other words, f**k off Arnald, you are a twat.

  30. Inter-jurisdiction tax competition can only lead to a race to the bottom. When all countries offer zero tax then what happens?

    By having a few jurisdictions offering zero rates, to attract parasites, then other jurisdictions will have to raise public revenue by taxing more.

    Tax competition should not even be on the table. If you want to reduce countries to rubble just to make a few people richer, then sure, support it. Tax levels everywhere could be lower if there were no tax competition.

    So Shit You Must Be A Parody

    You write so much revisionist drivel, it’s unreal. how you can tell anyone what truth is, is beyond the pale.

    The SAS trained the Khmer Rouge. Thatcher followed the US lead that they were the true Cambodians. As I said. Get a grip and stop believing your bigoted delusions.

    Van Patten

    This blog, as I have said over and over, is a series of ad hominems. So therefore Worstall is desperate, yeah. At least you’re not a raving lunatic like Butt Munch For Buggery.

    It was good to see Worstall torn apart on Murphy’s blog. Ignorant and bigoted.

  31. Arnauld, a race towards lower taxes does not mean no taxes, since obviously one of the reasons for living in a state is that it has basic, but good, public services that people are happy to pay for, such as through sales taxes and other hard-to-evade levies, such as on property.

    The relatively low rates of tax in Singapore/Hong Kong are cases in point; ditto certain other countries.

    To state that if there were no tax competition, tax rates around the world would be lower hardly squares with experience; in fact, the determination by many governments to form what amounts to a harmonised tax system around the world invariably means harmonisation in an upward, not downward, directi0n (if there are historical exceptions to that please cite them).

    When governments try and stop people taking their own wealth out of a jurisdiction, that tends not to be the behaviour of a state that keeps its spending under control.

    And of course Arnauld’s overall idea depends on the economy being a fixed, not expanding, thing. The whole premise of his argument is wrong, in my opinion.

    Perhaps you think they are “bigoted delusions”. May you have the joys of the warm blaze of your own moral self-righteousness.

    Run home back to your Mummy.

  32. The name is Arnald.

    You’re just stating opinions, not fact.

    It’s So Many False Statements who’s the bigoted delusional.

  33. Arnald, you haven’t provided a single fact; no independent sources or links for your assertions. Not one.

    It happens to be a fact, by the way, that prior to WW1, when much of the developed world was o the old Gold Standard, and capital markets were relatively free, that economic growth was pretty robust. This item links to some stunning statistics:
    http://www.econbrowser.com/archives/2012/09/the_gold_standa_1.html

    Dial down the belligerent attitude and set out some hard facts to prove your case that a global tax cartel will not lead to higher taxes overall.

    Because “tax cartel” describes what is on the the cards from those who want to remove “tax competition” as they see it. There is no more reason to suppose that such a lack of tax diversity won’t produce bad outcomes any more than such things do in business, which is why Shaxson talks such nonsense.

    For anyone interested, I recommend this 91-page paper with a mass of references and footnotes:

    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=878438

    If you have specific points to make in rebuttal, fine. Otherwise, you can do the other thing.

  34. Ha ha and you cite Richard Teather!!

    No wonder you’re all brainwashed. Jesus. You can shut up about being belligerent, there is no more extremist view than Teather and his ilk.

    Hang them all, as timbles would say.

  35. Oh and for the record, no one calls for a cartel. Just a well informed democratic mandate, not one that is poisoned by those with the wealth and so power to force the electorate to choose between their way or no way.

    Next you’ll be fellating Digby fucking Jones.

  36. So I note no actual attempt to rebut with facts, just ad hominem and swearing. So give reasons for what is wrong with what Teather writes.

    Is this really the best you can do? Your hysteria is really quite amazing. Are you ill?

    Cartel is an apt term to describe attempts to prevent people choosing a lower tax jurisdiction. Countries, even democratic ones don’t have unfettered rights to fleece people without limit. That is what is meant by limited govt.

    When a person becomes as rude as you it means you have lost any rational debate. My loathing of the collectivist mindset is partly driven by interacting with thugs such as you.

  37. Mr Pearce, you must read this blog through gritted teeth then. There aren’t many ‘civilised’ bloggers that uses the language Worstall enjoys.

    Tax ‘competition’ is driven by non-democratic agencies. It only benefits them. The people within those jurisdictions are then forced to choose cuts in services or higher personal taxes.

    I’m sorry you can’t open your mind and read the reams of information out there, and choose an extremist like Teather, or the IEA, promoting failed economic policy ideas, but that’s your choice.

    As for thugs, does it not register the hatred the likes of Richard Murphy inspires amongst the regular posters here.

    Even Murphy’s blog doesn’t reciprocate in the slightest. And really, how is rejecting the idea of tax competition as a means to economic growth become ‘collectivist’?

    If it worked, the UK, with its network of secrecy jurisdictions with 0% corp tax, no IHT or CGT, should be thriving. The only ones thriving are the ones that lobby for it.

    They are the ones that deserve the ire. If tax rates were truly determined by an informed democratic decision, then they would be at a level that delivers the services they believe governments should deliver, and they would not choose to favour the corps that ‘fleece’ the real economy.

    At its most basic level, you support the facilitation of criminality, without question. Just because you are misguided that those that are rich enough to distort democracy are more important than democratic freedom.

    That’s thuggish.

  38. La Chupacabra (#31)

    Absolutely spot on. The Left has never liked the countries or people from the Far East as their illustrate the key contribution of cultural mores in assisting in economic development. Hong Kong (and to a lesser degree) Singapore were the subject of consistent character assassination from the Left Wing Press throughout the 1960s and 1970s, when Socialism at least had the excuse that it hadn’t been tried for long enough to make it a success!

  39. Arnald (Various)

    I am intrigued by your comment:

    ‘Tax competition should not even be on the table. If you want to reduce countries to rubble just to make a few people richer, then sure, support it. Tax levels everywhere could be lower if there were no tax competition.’

    The problem here is what are you classifying as tax competition – For example, is Japan – cited by Shaxson in the article or South Korea (both defined as ‘Secrecy jurisdictions’ by the TJN) a ‘tax competitor’? Is Germany, Denmark? – I can understand your ire directed at tiny microstates whose sole purpose appears to be for wealthy people to create elaborate ‘avoidance’ schemes (some might call it tax planning but there you are) but the problem with your argument seems to be its advocacy of a near uniform global rate of tax.

    To enforce this would require some kind of Global governing body to be a remotely effective measure , and that does not seem either a likely prospect in either the present or the future, and to be blunt nor does it seem to be an especially desirable one, especially if it’s the likes of Richard Murphy that are going to be offering such a body advice!

  40. I think you are being hysterical, Van. No one is desiring the forcing of anything on anyone. It’s just a question of where and why the ‘wealth creators’ pay the tax due according to the benefits they get from the where and why.

    There’s nothing sinister about it. Most people in the UK are PAYE, why shouldn’t everything be?

  41. Arnald (#48)

    Hysteria aside, you seem to have rather sidestepped the question. You argue that the issue is one of ‘wealth creators’ being forced to pay the tax that is due according to the benefits they get from the where and the why. I’m assuming that is a reference to Murphy’s advocacy of ‘country by country reporting’ -but the questions remain

    is everywhere to adopt a PAYE system? By whom would this be enforced? What happens if a country that is too big to bully (ie China) decides it wants to lower taxes below a certain rate ? What authority does TJN possess to claim global expertise in this area and why should their opinion be any more valid than an organisation like the IEA?

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