It is that time of year in Finland again - tax transparency time.
For those that don't know, tax information is not only open information here, but they print the "top" earners in local newspapers, where the earnings are estimated based on how much tax was paid. The top two earners this year are like normal, tech people. One is the founder of a successful mobile gaming company. The other is someone who underpays foreigners who have no other employment options, to deliver food.
World changers.
But what is interesting, is that there are 1500 people who don't appear in the records even though they earned more than a million euros in 2023. This is because there are ways for the wealthy to not pay tax on certain incomes, or transfer the income to various holding companies so it doesn't appear as personal income, with the added benefit of paying far less tax or none at all.
All legally of course.
But, even at the bare minimum where they only earned the lowest million each, that is 1.5B in earnings that don't show up there, which is over a half a percent of the entire Finnish GDP. But of course, they didn't earn the low mark, the earned well over that on average, which means that 1500 people earned full percentage points of the GDP. And, these are the amounts that don't appear in the income. And of course, there are people who are under a million that don't appear in that 1500, but are close enough too.
While a bit perverse, I actually don't have much of a problem with tax transparency, because in my opinion, everyone including companies should be paying the same tax rate. In the past perhaps it made sense to incentivize businesses with a lower tax rate, because they were growing and employing an increasing number of people. However, that is not the case today, where they are essentially looking for as many ways as possible to reduce their headcount. And with the technology today, this is more possible than ever, and increasingly so.
The entire system is now out of sync.
Put in very simple terms, there used to be a deal in society that created some kind of balance. People would have children. The government would school those children. The companies would employ people and pay them so they can have more children. The people would pay taxes so the government can school children.
Yes, it is a bit more complicated than this, but over time, this social arrangement has eroded away because more of the earnings can essentially be hidden, or through creative accounting methods or outright fraud, can be shipped into areas where lower taxes or no taxes are paid. This means that governments that only have access to the money in the country, will have less, and they will need increasingly more and the only way to get it, is to tax the people. But the people are also earning less relative to the cost of living, so they will also suffer increasingly more. But during this time, the corporations and the owners of them will earn increasingly more.
This forms the growing wealth gap.
There is no reigning it in either, because the system is set up for wealth attracting wealth. The more one has, the more one will have. And, even when there is economic downturn and opportunity to invest and capitalize, those with wealth are the ones who are able to do so at a far, far greater percentage than those who are struggling to eat.
The social contract of old has well and truly been broken, which means that the tax system in place to support it, is increasingly invalid. Making the "tax is theft" argument increasingly valid. That social contract where the tax made the economic world go round, means that we are no longer getting what we have paid for. The contract has been broken, and it wasn't broken by the average person who has their taxes taken automatically from their salary, before being able to hide it in Panama. It has been broken by the other two parties involved in the deal, the corporations that were meant to return wealth into the system by hiring people and acting locally; and the governments that were meant to set up the policies to ensure that the system was functioning appropriately.
Yet, we are tied to the contract.
Not only that, the repercussions for "non-delivery" are asymmetric, where if we as a citizen break the deal, ew are punished, but there is no such punishment for corporation or government. Even when the laws are clearly broken like in the global case of the Panama Papers, only one person went to jail.
The loopholes have loopholes.
What is interesting, is that while private people fight for increased security because our lives are becoming more transparent and more monitored by the governments and the corporations - the governments and the corporations are getting more opaque, being able to increasingly hide their activities. Again, another asymmetry that doesn't bode well for upholding the social contracts for a functioning society. And as you might have notice, society isn't functioning very well.
Perhaps it is time to renegotiate the contract.
Taraz
[ Gen1: Hive ]
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Well clearly the "People would have children" part of the contract has fallen apart in Finland, Europe and almost the entire civilised world.
In the past, an economy needed physical activity to grow, which meant more people. Now, not so much.
However, I don't think the reason for many is actually a lack of money to support kids, but rather, a desire to hold onto childhood themselves. Having children is inconvenient, and since we don't need them to look after us in old age, or take over the farm or business, the incentive really isn't there.
Wise insights as to why people are not having children, but the idea that an economy can grow without them is wrong.
Firstly economic growth is driven by increasing consumption. Fewer consumers (especially in wealthy countries) means less consumption.
No amount of AI and robotics can compensate for that.
No amount of third world population growth (which is itself slowing rapidly) can compensate for the endless decline in the number of consumers in advanced economies.
Moreover as people age they naturally spend less, both because they already have what they need and also because the natural aging processes mean they are less consumerist.
Fewer and fewer consumers every year means that long term economic growth is impossible. It means the stock prices, which are based on PE ratios, will fall.
Less wealth means remaining consumers spend less which drives down demand further.
Its a vicious and extremely destructive cycle of civilisational suicide that has happened to successful civilisations many times before in history and is playing out very rapidly on a global scale right now.
No, I get this and should have clarified. The corporations don't care about the long term, they are in to maximize now. They aren't in it for a balanced economy, they are in it for quarterly and annual shareholder wealth.
And with all we know, all the knowledge and history at our fingertips - here we are again.
I don't know about Finland, but in the US with housing costs so high and so many people literally living paycheck to paycheck and medical debt bankrupting people, there are so many people that want kids but simply can't afford them.
Friends of ours were charged $90,000 for the birth of their child after there were some complications and the baby ended up in the ICU. There had been a mix up with heath insurance papers and they got it sorted out, but many people simply have to pay.
The US healthcare system is insane. I don't understand how it is a superpower, or why anyone other than the wealthy that benefit from it, would defend it.
Abbott is a US pharma:
Pfizer another US:
But hey - the land of the free!
I generally agree with a flat tax rate, but how do you think about it in terms of economic growth? If someone earning $40,000 a year is working full time, is paying 50% of their wage on housing, and the rest on living expenses - then paying 30% tax might prevent them for also taking on education costs to study for qualifications for a new job. Would you be open for someone in that situation paying less than the flat rate so they could eventually earn more and add more valuable economic activity later?
You are looking at it from the perspective of current situation. The average fortune 500 company pays around 11% tax, with some paying zero. This is on their already lower taxes compared to the people they employ. Close the loopholes. Make it so taxes are paid in the places the income is earned, not in some tax haven or country with lower tax incentives. Taxes on passive earnings shouldn't be lower than taxes on active work performed, should it? Inject the increased revenue into lowering ridiculous education costs, reducing the cost of quality foods, and increasing taxes on obvious luxury goods. Provide support where necessary.
Ah, you're right... I was thinking about it from the perspective of the tax limiting an individuals means for wealth mobility, instead of thinking about the tax from companies removing the friction. That works for me.
I think one of the saddest parts of this is probably the fact that they don't even need that percentage of money that they are saving by hiding it from taxes. In the grand scheme of things it isn't the difference between them being able to make a mortgage payment or living on the street. Maybe a mortgage payment for their fifth house somewhere...
What do you mean, everyone needs more!
I think for them, it is like a football game. They want to win crush their opponent. Unfortunately, their opponent is us, and we don't have pads or helmets.
That's the trap isn't it? Everyone always feels like they need more. I'd like to think I would reach a point where enough is enough, but I am human. You are likely right about it being like a game to them.
As I said in one of your previous posts, the term tax is only for ordinary people such as us. They cut it even before your salary is paid.
Yes. It is for normal people like us. The corporations and the extremely wealthy aren't counted as people by the system. They can operate outside it, but enjoys all the benefits of it still.
Here is US we don't publish the list of highest paid individuals, but the rest of the system is the same. Super rich and corporations find ways not to pay their share of taxes...
Perhaps they should start publishing anyone who qualifies in 1% - might be interesting to see!
What should definitely happen though, is all government and corporate earnings should be on an immutable blockchain and openly audited.
Having children is and will be the way to perpetuate our presence on earth. We cannot pretend that a child will meet our needs and that should not be the purpose of having them. Supporting a child is not easy, of course, but it is not difficult. For me, Matthew has filled all those empty spaces left by the early departure of my daughter Sofia, I am sure Smallsteps, he is not a burden, he is a relief that with a smile makes you fly, those are the best moments in life, make the most of them.