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Taxes & Growth - Norway Oil

 
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PostPosted: Sun Sep 07, 2014 6:01 am    Post subject: Taxes & Growth - Norway Oil Reply with quote

PeakTrader:

Cutting taxes $100 to $300 on workers earning $30,000 to $75,000 a year wouldn’t have much of an effect.

A $5,000 tax cut instead may be enough to jolt the economy into a self-sustaining consumption-employment cycle.

Large tax cuts worked under Kennedy, Reagan, and Bush, ceteris paribus (and Clinton benefited from the “peace dividend,” $10 oil, and the Baby-Boomers reaching their peak productive years).

Of course, in the Great Depression, taxes were too low to cut taxes. So, government spending was needed.

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The Kennedy tax cuts contributed to the longest expansion in U.S. history, up to that time.

The Reagan tax cuts contributed to the V-shaped recovery and taxes were later raised to slow the expansion to a sustainable rate.

When Bush raised taxes, in 1990, we had a moderate recession in the 1982-07 economic boom.

Clinton raised taxes when the expansion was underway, but didn’t cut taxes in 2000.

Fortunately, Bush cut taxes in 2001 and we had a mild recession, along with building upon the 1995-00 boom, when the economy produced above potential output and beyond full employment.

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Jonathan, your statement is misleading.

For example, the 1981 tax cut was twice as big as all the subsequent tax hikes in the 1980s.

http://www.ritholtz.com/blog/2010/09/reagan-tax-increases/

I never stated government spending, including defense spending, doesn’t add to economic growth.

The Reagan economic boom generally reflected a boom in private goods, that continued to 2007.

Also, I may add, to my statement above, the Bush tax cut in early 2008 gave the Fed time to catch-up easing the money supply. The U.S. was on the path to a mild recession, until Lehman failed in September 2008.

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Cutting taxes in a recession and raising taxes in an expansion generates more tax revenue.

Tax revenue isn’t dependent on just tax rates, it’s also dependent on employment.

And, per capita real GDP growth was stronger in 1982-90 than in 1995-00.

Of course, the 1995-00 boom was on top of previous booms, and the 2001-07 expansion looks weak, in part, because it was on top of huge economic gains, in 1982-00 (also, trade deficits reached $750 billion a year, in the mid-2000s, which subtract from GDP).

****

Bruce, your second link says: “The combination of such taxes meant (Wisconsin) residents faced the fifth-highest tax burden in the U.S. and also paid $3,387 — or 8.3% of their incomes — in Wisconsin state and local taxes.”

Adding federal taxes, regulations, fees, and fines, it’s no wonder so many Americans are struggling.

Moreover, there’s likely a market failure in low-wage income. For example, in the fast food industry, productivity rose 25%, while the real minimum wage fell 25%.

Furthermore, there are tens of millions of low-skilled immigrants, from dirt poor countries, and their children. Many went to poor public schools and their parents aren’t interested in helping them attain a good education. So, they end-up in underpaid or low-paid jobs, thanks in part to overpaid or highly-paid bureaucrats, which adds to inequality. Of course, much of the older domestic population has also moved into higher income classes, while newer low-skilled immigrants are in the lower classes.

The explosion of means-testing and government benefits likely created disincentives to work.

U.S. firms have more market power. However, the goal of firms should be to maximize profits.

Profit is the result, and reward, of efficiencies.

Efficiencies in prior economic revolutions allow an economy to expand into new economic revolutions.

There are fundamental problems with the U.S. economy.

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End of oil boom threatens Norway’s welfare model
May 8, 2014

“Norway is the world’s seventh biggest oil exporter, and it supplies a fifth of the European Union’s gas…It also boasts the world’s highest GDP per hour worked…per capita GDP around $100,000…while unemployment is low, there is large underemployment, made possible by benefits.

In 2012, a new word entered the Norwegian lexicon – to “nave”, or live off benefits from welfare agency NAV…job security seems to be taken for granted, almost like it’s a human right to have a job.

How Norway handles this “curse of oil” – huge wealth that bring unhealthy dependency in its train – may hold lessons across the North Sea in Scotland, which votes on independence from the United Kingdom later this year.

Norway had the foresight to put aside a massive $860 billion rainy-day cash pile, or $170,000 per man, woman and child. It also has huge budget surpluses, a top-notch AAA credit rating and low unemployment.

But costs have soared, non-oil exporters are struggling, the government is spending $20 billion more oil money this year than in 2007 and the generous welfare model, which depends on a steady flow of oil tax revenue may not be preparing Norwegians for tougher times.

The Scottish National Party’s argument in favor of independence has centered on the promise that Scotland can replicate the success of Norway’s oil economy, creating a sovereign wealth fund for future generations, while public coffers would be only half as dependent on oil and gas.

Unfortunately for Scotland, the glory days of British hydrocarbon production are already in the past, with North Sea output down around two thirds since its peak.”

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Here’s what someone from Britain said:

“The Nordic Countries “success story” economies are a joke. I’ve been living here the last couple of years after being dragged here by my wife, and trying to run your business here is tough. It just isn’t a business friendly place at all. Taxes in Denmark are 60-odd% as soon as you have the cheek to earn more than £35,000 a year! My guess is that 50-70% of the population are in government jobs, and they rely heavily on exports of oil, timber and fish in order to generate the foreign earnings to pay for it all.”

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The Rage:

Sounds like a failed businessman. Somebody who needs to accept their failure and admit they can’t do that particular vocation.

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PeakTrader:

Maybe, he should’ve moved production overseas. From article above:

“Kongsberg Automotive has only 5 percent of its workers left in Norway, having moved jobs to places like Mexico, China and the United States, and keeping only high-tech, automated functions at home. It says it is struggling with high labor costs and even problems such as excessive sick leave.

“It’s a bit discouraging that the sick leave in Norway is twice the level of other plants,” Havdal said. “That is to me an indication that something is not as it should be.””

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Ed, I worked for a few days on my vacation in California and needed a business license.

I paid about $100 for the license and earned less than $1,000.

I got a letter from the city saying I owe $1,871.85 in business taxes!

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