When would fiscal necessity override government contractual obligations?

[ticketyboo]

It wasn't though, was it?

I'm sitting here watching with the sound off, looks dull and scrappy.
Ms Peaks doing her yoga exercises is far more appealing, apart from the bloody New Age "whale sounds" shyte she insists on playing.

Question, a chara? Someone on another thread insinuated that you were in fact a female. Can you dissuade us of this notion, or are you in one of these "new fangled" marriages.

[patslatt]

Question, a chara? Someone on another thread insinuated that you were in fact a female. Can you dissuade us of this notion, or are you in one of these "new fangled" marriages.

Immature trolls,first year in college,trying to prove they are clever.

[Spanner Island]

When demand is weak and the economy is shredded prices soar?

Simple answer to that...

The vast majority of rocketing prices can be linked to the 'state', various vested interests and/or various protected sectors which need to be blown open to real competition and made fully transparent.

There are 2 parallel universes currently in existence in Ireland...

The first is the real world, full of those who are fully exposed to the current crisis. In this universe people are and have been cutting prices, rationalising, economising, improving efficiencies and productivity etc... In this universe people have either adapted fast or they've gone bust and lost their jobs and businesses.

Then there's the second universe - made up primarily of the 'state', 'establishment', vested interests and protected sectors (legal, medical etc)... In this universe things move at far slower speeds. Self regulation, endless negotiation, bureaucracy, cronyism etc. rule. And for many in this universe there persists the delusion that the first universe will continue to fund the second despite the fact that the first is being systematically destroyed and diminishing in size and numbers. And still, unsustainable salaries and welfare and benefits persist as if they're some God given right...

Madness.

[feargach]

-Diminishing returns on taxation occur as higher taxes depress economic activity,

Only in the absence of aggregate demand. Taxes on the rich were over 90% between 1940 and 1960 in the USA, but those were years of immense economic boom.

It's simply false to say that taxes always depress the economy. They just don't.

[patslatt]

Only in the absence of aggregate demand. Taxes on the rich were over 90% between 1940 and 1960 in the USA, but those were years of immense economic boom.

It's simply false to say that taxes always depress the economy. They just don't.

Those high US taxes were accompanied by huge loopholes for business in lavish expense accounts,company cars and maybe most important,the absence of a capital gains tax.Business can't be taxed beyond a certain limit because investments ultimately must generate returns and if taxation prevents that,investment will drop and take the economy down with it.

In the UK,the relatively low tax years of Thatcher and Blair resulted in a much better economic performance than in the high tax years of the 1970s.

[feargach]

Those high US taxes were accompanied by huge loopholes for business in lavish expense accounts,company cars and maybe most important,the absence of a capital gains tax.

That doesn't amount to very much. The fact is that the tax burden back then, even if we swallow your dubious loopholes claim, was still vastly higher then than it has been at any point in the last 20 years.

Business can't be taxed beyond a certain limit

Whoa, nelly! First, what is that limit and where did you pull it from? Is there any specific basis in fact for this claim? Or is it something that was worked out on paper by an ivory-tower economist who thought he could handwave away all the complexities of life by reducing the economy to a series of cartoonish axioms?

In the UK,the relatively low tax years of Thatcher and Blair resulted in a much better economic performance than in the high tax years of the 1970s.

So, you found a very specific, rather short time period and geographic zone to cherry-pick your data from. Well allow me to pick a more representative time and a bigger, more informative sample than a decrepit ex-empire living through an oil-fuelled services epoch.

Western Europe in the two decades after world war 2. Far higher taxes. Fewer loopholes as in the USA. Much, much higher investment than the Chirac-Sarkozy-Merkel era.

Confronted with the facts, your notions just don't hold a candle. Better peddle them somewhere that posters are less willing to question dodgy assertions.

[patslatt]

Europe enjoyed high economic growth in the postwar era until the early 1970s despite high taxation but there was one massive loophole-NO CAPITAL GAINS TAX,a fantastic incentive. Businesses could expand tax free through continuous reinvestment of profits as many did during the long postwar boom in which there was massive rebuilding of capital stock and application of wartime technology leaps. This allowed those cashing in their chips or selling part of their holdings to reap huge tax free capital gains,often in multiples of millions. Germany only introduced a capital gains tax around 1975 and some argue that this undermined the dynamic growth of the German economy,especially that of the backbone Middelstadt or mid-size family controlled companies. As Paul Samuelson,Nobel prize winning economist,famously said, "Capitalism breathes through loopholes in the tax laws". The Irish 15% corporate tax rate is another a good illustration.

My claim that business can't be taxed beyond a certain limit can be proved by the common sense Laffer curve,originally drawn on a napkin. As taxes rise,profits fall and at 100% taxation, there are no profits to tax as business ceases to operate. Obviously government wouldn't tax 100% but many push taxation close to that in oil and gas,in which most costs are sunk exploration costs,water under the bridge.But many governments also push tax on other businesses to dangerously high levels in rates,licencing fees,payroll taxes,income and capital gains tax and VAT. High taxes increase risks for business and while they can be passed through in price increases in stable markets,in recessionery times they cause high levels of business failure and unemployment.

[kerdasi amaq]

I'd suppose that bankers and financiers are exempt.

No pain for them.

[patslatt]

I'd suppose that bankers and financiers are exempt.

No pain for them.

The success of top bankers and financiers is akin to the success of soccer superstars in that the profitability of the business depends on the individual talent of large numbers of key players on the team. If the talent walks,the business loses heavily,a risk that forces the business to pay extremely high wages. Few business are as dependant on large numbers of superstar players:investment banking finance,law,big budget movie and TV productions,medical consultants,architecture. Many technical business can easily substitute one technical person for another and pay surprisingly low wages,for example,physics,construction engineering.

There is a serious problem with excessive executive pay given the separation of ownership and control in public companies as some managements appoint their allies to board of director positions in charge of pay. The obvious solution would be to tax long term capital gains at a lower level than short term gains to encourage stable ownership with a keen interest in directorships.But high short term gains tax would discourage trading of shares,resulting in serious liquidity problems in trading as trading dried up. This could cause spreads between bid and ask,the "market makers' spread",to rise to impractical levels,maybe 40% eg bid 100 ask 140.