Yes, sorry, I messed them up.
Alex Barnes
Karma: 322
Tax Havens and the case for Tax Justice
Thank you!
Mankiw’s review article on Optimal Taxation Theory is really great. This is exactly why EA needs more economists.
I find this intriguing:
it is directly concerned with what type of tax system maximises utility
Does “utility” as used by economists diverge in important ways from “utilitarianism” as used by moral philosophers? If the social planner optimizes for minimal negative utility, I assume that could change the optimal tax structure.
In the Mankiw article, the first justification of Capital Income Ought To Be Untaxed seems clear:
because capital equipment is an intermediate input to the production of future output… it should not be taxed
However, I’m not sure if capital income and capital equipment are interchangeable concepts. Perhaps they are.
The second justification seems a bit murkier:Second, because a capital tax is effectively a tax on future consumption but not on current consumption, it violates the Atkinson and Stiglitz (1976) prescription for uniform taxation. In fact, a capital tax imposes an ever-increasing tax on consumption further in the future, so its violation of the principle of uniform commodity taxation is extreme.
I’m not clear how that logic would be different if applied to labour. Probably I need to read more about this to fully understand it. I assume the idea is I can reinvest capital income into more capital, but I can’t reinvest labour income into more labour. The article mentions “human capital”, so maybe I can reinvest my labour income into “human capital” such as education.
Finally, the third justification:This distortion is so large as to make any capital income taxation suboptimal compared with labor income taxation, even from the perspective of an individual with no savings.
Has the premise:
In the Ramsey model, at least some households are modeled as having an infinite planning horizon (for example, they may be dynasties whose generations are altruistically connected as in Barro, 1974).
I’m not sure how realistic it is for households to have an infinite planning horizon. Moreover, it seems undesirable and dangerous to optimize for what could potentially be a totalitarian dynasty. Perhaps I’m misunderstanding the argument here.
The Mankiw article made me curious:
How easy is it to distinguish labour income from capital income? For example, a salaried plumber receives labour income, but a plumber who is paid as an independent contractor presumably receives capital income.
Is a laptop purchased by a business considered capital, but the same device purchased by a family considered consumption?
If tax havens’ low tax is beneficial, could the secrecy they provide to illicit financial flows be considered a harmful externality?
The article raises democratic legitimacy as an important constraint:
When Margaret Thatcher, during her time as the Prime Minister of the United Kingdom, successfully pushed through a lump-sum tax levied at the local level (a “community charge”) beginning in 1989, the tax was deeply unpopular.
Optimal Taxation Theory contains some really interesting ideas. Tax policy, in general, seems like a neglected area of EA.
Thanks Sami!
I think there is a part missing in the middle, because I couldn’t find an argument why TJN is a good place to donate
Sorry, I should have been a bit clearer on this—TJN is central to the tax justice community. The policies mentioned would have considerably less traction without TJN:
Automatic Exchange of Information
Universal Beneficial Ownership
Country by Country Reporting
Organizations focused on developing countries wouldn’t have been created (or created as soon) without TJN:
TJN Africa
Tax Inspectors without Borders
I attempted to answer “what would they do with additional funding?” in the future plans section. Concepts like Optimal Tax Theory (thank you again Larks!) are key to advancing the discussion, “tax incentives are important for investment and growth” versus “tax incentives distort markets impairing investment and growth”.
Hauke suggested building an expected value model of think tank funding. For example, how much would it cost to have a 10% chance of recouping 20% of the $5B/year in lost tax revenue? I haven’t had a chance to do that yet, but if you (or anyone else) has interest in helping to build that, please message me.Did you make the table that ranks the interventions. (AEOI, UBO, CbCR)? If yes, can you provide details on the methodology?
I did, but the methodology was not very rigorous. After I finish with illicit financial flows, I’ll revisit it properly.
Excellent idea!
The problem seems to be our recent successes with Ebola, SARS, MERS and H1N1 lulled us into a false sense of security. The main risk of under-reacting to a future pandemic is probably a couple of generations out.
How do you build a “No More Pandemics” movement today that will still be seen as relevant after most of us are gone?
Annual events and permanent monuments such as Remembrance Day, the Vietnam War Memorial and Holocaust Memorials can remind future generations of the horrors of the past. But would a “No More Pandemics” day or monuments to the lives lost be enough to convince future generations to question their own false sense of security?
Gradual changes in institutional norms and traditions in other domains can provide transferrable lessons. For example, economists and politicians handled the 2008 Financial Crisis far better than the 1930s Great Depression. Perhaps if they hadn’t disregarded the lessons from the depression they could have prevented the financial crisis altogether. I’ve been reading Arguing with Zombies by Paul Krugman and the long-term challenges with “No More Pandemics” (great branding, btw) sound similar.
Scott Alexander nicely summarizes this tension between tradition and rationality in his review of Joseph Henrich’s The Secret of Our Success :
Rationalists always wonder: how come people aren’t more rational? How come you can prove a thousand times, using Facts and Logic, that something is stupid, and yet people will still keep doing it?
Henrich hints at an answer: for basically all of history, using reason would get you killed.
Thank you! That sounds very encouraging. The exact details will be very important.
Great report! Is there an up-to-date, comprehensive list of all EA groups somewhere?
Is it true that some tech folks started up a low-impact-angst group for all the Zaharas out there? (Asking question, not telling!)
Good point! We wouldn’t want to encourage people to lower their impact and become angsty to get into an EA Club—that’s what Clubhouse is for...
Awesome article Naryan!
Some additional Complexity / Systems Thinking Resources:
Great idea! Thank you!!
What if I lack communication skills and want to chat with and learn from a wonderful group of EAs who have communication skills, can I still join? Asking for a friend ;-)
Great article—really useful lessons and takeaways. Thank you!
Very impressive! Is there a way to get involved without using Facebook?
Wow! Thank you for this fascinating write-up!!
I’ve met folks at Complexity Weekend and RadicalxChange working on DAOs, NFTs, blockchain and crypto-related activities. Definitely something for EAs to explore...
Rejection sucks and you often feel stupid for even applying in the first place. Sometimes it helps to lean into this feeling and Dare To Be Stupid.
I see a lot of EAs using scope insensitivity as a reason to assume listening to their feelings is not worthwhile. Your feelings are probably better seen as helpful messengers—I’d love to see a Slack Group or channel for discussing feelings and how to integrate them with research, action and feedback!
Thank you for offering a virtual option! So excited for EAG London 2021 : Virtual Edition!!
[Question] Forbes India—Effective Altruism
I love it! Thank you for posting and let me know how I can help HIP—I’d love to chat with you about “cluster networking” for building robust, scalable and high impact social networks.
Related: you might want to consider the benefits of becoming a “decentralizing hub” (for one, it scales better). If this is of interest, you can connect with lots of folks working on decentralized models at Complexity Weekend.I’m really looking forward to all the great things High Impact Professionals will co-create and inspire
Given your interests in both Entrepreneurship and Public Policy, you might find the books by Mariana Mazzucato, in particular, The Entrepreneurial State, enlightening: https://marianamazzucato.com/entrepreneurial-state/