The peril of low taxes!


Usual Grauniad complaint that if taxes are low then there\’s no such thing as society (cont. pg 94).

Among the Arab oil producers, for example, taxation accounted for only 5% of gross domestic product in 2002, rising to 17% in the non-oil countries – which is still very low compared with Germany (39%), Italy (41%) and Britain (37%).

Not quite, for we normally include such things as oil and gas royalties as taxes (which they are of course, upon Ricardian Rents).

However, there\’s a much larger fault in this analysis. I\’ve not got the exact number at my fingertips but the UK govt only takes in the low 20s % ish level of GDP for the actual goods it buys/provides.

All the rest of that tax share of GDP is on redistribution of incomes. And I\’m deeply unconvinced that anyone thinks we\’ve got too little government in the UK (even if there are many who think there\’s too little redistribution).

2 thoughts on “The peril of low taxes!”

  1. Taxation is an often-overlooked factor in the internal politics of the Middle East: it helps to explain why undemocratic regimes stay in power for so long. Governments that have substantial non-tax income can buy themselves out of trouble by showering largesse on the population, often keeping prices low through subsidies (as happens in Iran).

    Um, and they can buy people willing to keep the proles in line.

    Taxes are never popular, and the higher the taxes are the more likely it is that people will demand a say in how the money is spent. … As a rule of thumb, high taxes can act as a spur towards democracy and accountable government.

    Because taxes are high! We don’t deliberately pay high taxes in order to get democracy and accountable government. He’s putting the cart before the horse somewhat.

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