High Tax Rates Hurt the Economy

Pro 1. Reduced reward means less productivity (Response) My opponent claims that the "individual utility model is completely unrealistic and demonstrably untrue". He does not justify this with any source. He then says: "People actually do care about the education system, for instance, even if they do not directly benefit from it. If other people do well, we do well too - and we know it. This is why the individual utility model needs to be supplemented with the collective utility model. "Does my opponent really believe that people are going to work 40 hours a week for an education system that is used by millions of people? Even if the education system personally benefits a certain person, this would not change the fact that this person would get to use this system regardless of whether or not they worked. So, yes, people do care about the education system, but people are not going to work 40 hours a week for an education system that would be the about same whether or not they worked. My opponent has an unrealistic view of Human Nature. People are not going just to work just to fund services, even if those services benefit people, because people realize that these service's existence is not contingent on individual's work efforts. My opponent also claims: "But if what he says is true, surely countries with lower tax revenues (as a % of GDP) should have lower outputs per working hour, as well as lower competitiveness. In fact, the opposite relationship is true, as has been confirmed by numerous studies [1]. " In fact, my opponent only links to one study. It is from CUPE, a left wing labor group. This study claims to have found a positive relationship between GDP per hour and tax revenue. Even if this was true, there is an explanation for this. Taxes have the effect of reducing hours worked. The hours that are not worked due to high taxes are hours that are on the margin, which are less productive hours. This tax related reduction in hours worked lowers GDP per person, but slightly raises GDP per hour (which my opponent cites). An example of is the comparison of the US and France, France has a slightly higher GDP per hour than the US, but the US has a much higher GDP per person. This is because people in America work less hours, largely because of lower taxes. My opponent also seems to believe that all government services are things like roads, electricity, etc. This ignores the fact that most tax revenue goes toward transfer type programs (SS, Medicare, Medicaid, Welfare, etc. ). These may be valuable programs, but they do cause a significant free rider problem. These transfer type programs make up about 60% of the Federal Government's budget. My opponent disagrees with my claim that US debt is not larger than the debt of other countries by claiming that the IMF, which shows the US having higher debt, is more reliable than the CIA, which shows the US having lower debt. I actually believe they are both reliable. The reason that they have different results is that they use different measures of debt. Regardless, even the IMF data set only shows a recent explosion of debt in America, as well as some European countries. This does nothing to prove my opponent's assertion that American growth in recent decades is based on debt. My opponent criticizes the Rogoff and Reinhart Study. He claims that they used a small data set. In fact, Rogoff and Reihnart explain their methods in the paper: "Our results incorporate data on 44 countries spanning about 200 years. Taken together, the data incorporate over 3,700 annual observations covering a wide range of political systems, institutions, exchange rate and monetary arrangements, and historic circumstances. "This is a large data set. Regardless, my opponent claimed, earlier, that the IMF is the most trustworthy source:"The IMF is sponsored by nobody, and has numerous checks and balances to ensure this [3]. Therefore the IMF figures are more reliable. " It just so happens that the IMF also released a study finding that high debt hurts growth: "The empirical results suggest an inverse relationship between initial debt and subsequent growth, controlling for other determinants of growth: on average, a 10 percentage point increase in the initial debt-to-GDP ratio is associated with a slowdown in annual real per capita GDP growth of around 0.2 percentage points per year"This is from the IMF, which my opponent claimed is a far better source than the CIA. My opponent also claimed that the Chetty study does not show that higher taxes reduce labor supply. This is untrue. The Chetty study found: "Our results suggest that macro elasticities may be substantially larger than the estimates obtained using standard microeconometric methods. ". High elasticities mean that labor supply reacts highly to tax rates. As Chetty himself explains, his study found that labor supply reduces somewhat sharply over time in response to higher tax rates. My opponent also claims that studies don't take into account the long term benefits of government services. This is not true. Many of the studies looked at long periods of time when comparing growth rates. Also, many private sector investments would have long term benefits but are crowded out by government programs and taxes. Many government programs do long term harm. This is because they stay in existence far too long, eventually just being a waste of resources. (I dropped Tax Evasion due to space limitations)Pro 3. Emigration (Response)I am a bit discouraged to see my opponent commit the exact same straw man he did in his first argument. My opponent obviously did not read my last post when I said "I never said that taxes are the only thing that mattered. " Taxes are just one factor in a firm's decision to move, but they are a factor nonetheless. If income matters for a person, wouldn't the amount of income they get to keep matter too? This may matter less to firms and high skilled workers if those taxes fund good education and good roads, but, if these taxes go to welfare programs, they really will reduce the amount of high skilled workers and firms. Con 1. Govt makes better decisions (Response) Consensus is different from consumer demand. Government is elected officials. They do what they think is best (or at least they claim to). However, the private market provides provides what individual consumers demand. This is why the government could never run the technology industry, as it is far too complex for any central planners to track the constant changes in this market. Con 2. Equity (Response)In stable countries, economic growth benefits all classes. During the Reagan years, inequality went up, but all income quintiles still gained a lot of income. I believe economic growth is a better way to reduce poverty and crime. Con 3. Govt more efficient (Response)This is not real competition. Government programs that are politically popular, but inefficient and financially unstable, are impossible to change for politicians. This is an example of consensus not being a good way to run the economy. Con 4. Govt investments more likely to bolster external sources of standard of living (Response)There is no response to this claim. As a side note, claiming to win a point is different from winning a point. ConclusionI believe I have adequately made the case that higher taxes harm the economy and responded to all of my opponents claim adequately. Good Luck to my opponent and VOTE PRO! !! Sources:(Output per Person by Country) . http://en.wikipedia.org...(PPP)_per_capita(Federal Government Budget) . http://en.wikipedia.org...(IMF Study on Debt and Growth) . http://www.imf.org...(Re-Link to Chetty Study) . http://obs.rc.fas.harvard.edu...(Income Growth Under Reagan) . http://www.cato.org...;