- js reader version
- view hidden posts
- tags and related articles
by Rudolf Hickel
Tuesday, Dec. 20, 2016 at 7:13 AM
A low business tax can be counter-productive if a deadbeat infrastructure arises through lower state revenues. Lowering business tax rates leads first to enormous budget holes. Employees will bear this burden at the end.
LOW TAXES IS AN ACT OF DESPERATION
The economist Rudolf Hickel warns: The low tax plans of Theresa May and Donald Trump are dangerous. Down with taxes! Will Theresa May lure Indian firms to Great Britain?
[This interview published on 12/14/16 is translated from the German on the Internet, www.taz.de. The 74-year old economist is the author of many books and directed the Institute of Labor and Economy at the University of Bremen up to 2009. He is a co-founder of the Alternative Economic Policy study group.]
taz: Mr. Hickel, the future US president Donald Trump, Hungary's Premier Victor Orban, and Great Britain's Prime Minister Theresa May – all want to drastically lower business taxes in their countries. What is your opinion?
Rudolf Hickel: A primitive myth, the Swiftian tax table, stands behind the plans of the governments. When business taxes fall, businesses have more incentives for investments. The gross domestic product – the basis for assessment – and the tax revenues grow. So a lower t0061 rate should lead to higher tax revenues at the end.
Does this mechanism really function?
No, and that is proven by history. The height of the tax rate is not the sole decisive criterion for investments by businesses. The infrastructure, the supply of trained workers, and net possibilities are the really important reasons for a location decision. A low business tax can even be counter-productive if a deadbeat infrastructure arises through lower state revenues.
What does it look like in practice?
Look at Germany. The Schroeder government lowered the business taxes – like the corporation tax. The expected growth impulses and the additional tax revenues that should compensate the losses through the lower tax rates were canceled. Ronald Reagan tested that in the US. The result was higher state debts through tax reductions, neoliberal insanity.
Why then do countries like Luxemburg and Ireland profit from their tax incentives for businesses?
Businesses did not become sustainable and active in these countries and bring investments and employment. "Tax optimization" of big businesses occurred, for example withdrawing profits from other countries tax-free with the help of patent payments. The international companies in Great Britain are concerned that the country leaves the EU domestic market, not about excessive business taxes. No business from Germany would migrate to Great Britain only because the business tax is six percentage points lower – especially not with the current uncertainty and downswing of the pound.
How do you judge Theresa May's announcement?
The obsequiousness with low tax rates is an act of desperation. It is an admission that the Brexit has dreadful consequences – that cannot be stopped.
What dangers threaten through possible tax reductions in the US and Great Britain?
I see two great dangers with this policy. The first is within one country. Lowering business tax rates leads first to enormous budget holes. Employees will bear this burden at the end: through the social cuts sparked off by the budget imbalances and by increased mass taxes like the sales tax to offset this deficit.
What is the second danger?
This is the increasing competition between states to raise their location advantages and to lower taxes. This is the beggar-thy-neighbor policy – make your neighbor into a beggar. Tax dumping is carried out at the cost of other states to gain supposed economic advantages. This is similar to the Euro-crisis. Germany exports wage cost advantages and pushes out domestic businesses. A tax race also harms other countries and forces them to join in this competition. The results are the destruction of trade relations, state debt crises, and intensified austerity policies.
Where do you see parallels between Orban, Trump, and May?
Their tax concepts are an expression of re-nationalization, populism, and right-wing screening. They collect points among voters with the same sayings: USA First, Britain First. A screening policy follows in trade. Nationalist protectionism and the swing to the right are two sides of the same coin.
Let's stay with Trump for a moment. Aside from tax policy, what other nationalist measures do you expect in US economic policy?
In the election campaign, Trump promised to bring back jobs to people in the Rust Belt. He will promote screening American industry outwards. If he really does that consistently, he has two other instruments besides fiscal policy. One is an aggressive "Buy US" – strategy. This means hardly any or no foreign businesses will be commissioned in the public sector. As the second instrument, he could reject free trade agreements and impose high dumping tariffs on foreign imported goods. Dumping tariffs are a harsh instrument that can have very fast effects on world trade.
In Germany, there are only a few Trump fans. However, some say: "At least the TTIP (Transatlantic Trade and Investment Partnership between the EU and the US) will not pass now." Do you see it that way?
I cannot be glad about this. Critics of the TTIP do not want re-nationalization through screening. They want trade relations on the basis of the highest social, ecological and economic standards for all countries. We want above all to inactivate the power of corporations. Nationalist protectionism is the other extreme to the total neoliberal free trade.
Report this post as:
GUIDE TO REBEL CITY LOS ANGELES AVAILABLE
lausd whistle blower
Help KCET and UCLA identify 60s-70s Chicano images
UCLA Luskin: Casting Youth Justice in a Different Light
Change Links April 2018
Nuclear Shutdown News March 2018
Join The Protest Rally in Glendale on April 10, 2018!
Join The Protest Rally in Glendale on April 10, 2018!
Spring 2018 National Immigrant Solidarity Network News Alert!
Anti-Eviction Mapping Project Shows Shocking Eviction Trends in L.A.
Steve Mnuchin video at UCLA released
Actress and Philanthropist Tanna Frederick Hosts Project Save Our Surf Beach Clean Ups
After Being Told He's 'Full of Sh*t' at School Event, Mnuchin Demands UCLA Suppress Video
Resolution of the Rent Strike in Boyle Heights
What Big Brother Knows About You and What You Can Do About It
Step Up As LAPD Chief Charlie Beck Steps Down
Our House Grief Support Center Hosts 9th Annual Run For Hope, April 29
Don’t let this LA County Probation Department overhaul proposal sit on the shelf
Echo Park Residents Sue LA Over Controversial Development
Former Signal Hill police officer pleads guilty in road-rage incident in Irvine
Calif. Police Accused of 'Collusion' With Neo-Nazis After Release of Court Documents
Center for the Study of Political Graphics exhibit on Police Abuse posters
City Agrees to Settle Lawsuit Claiming Pasadena Police Officer Had His Sister Falsely Arre
Professor's Study Highlights Health Risks of Urban Oil Drilling
Claims paid involving Pasadena Police Department 2014 to present
Pasadenans - get your license plate reader records from police
LA Times Homicide Report
More Local News...
TheMilitary of Yemen IN In The 1990's
The Shortwave Report 04/27/18 Listen Globally!
Federal Bank Examiner FDIC recalls year long 1999 robbery in 2017
Doxa du lobby
Tech workers organize
Architect Stephen Francis Jones
UN Forum Wrestles with Economic Policies 10 Years After Financial Crisis Islands Call for
What does the Quran Say About Islamic Dress??
Biodiversité ou la nature privatisée
The Market is a Universal Totalitarian Religion
Book Available about Hispanics and US Civil War by National Park Service
The Shortwave Report 04/20/18 Listen Globally!
The Republican 'Prolife' Party Is the Party of War, Execution, and Bear Cub Murder
Paraphysique de la dictature étatique
Book Review: "The New Bonapartists"
The West Must Take the First Steps to Russia
Théorie générale de la révolution ou hommage à feu Mikhaïl Bakounine
The Shortwave Report 04/13/18 Listen Globally!
“Lost in a Dream” Singing Competition Winner to Be Chosen on April 15 for ,000 Prize!
The World Dependent on Central Banks
Ohio Governor Race: Dennis Kucinich & Richard Cordray Run Against Mike DeWine
March 2018 Honduras Coup Again Update
Apologie du zadisme insurrectionnel
ICE contract with license plate reader company
Black Portraiture(S) IV: The Color of Silence...Cuba No...Cambridge Yes
More Breaking News...