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Interesting fact of the day:
In the USA current estimates have the total Tax Avoidance of the top 1% wealthy at 500 million per year collectively or 5 trillion per decade.
By comparison the total tax avoidance of all the middle class and poor who work under the table totals about 2 trillion per year, four times more.
Remind me again how the rich avoiding taxes are the main problem?
Sources:
https://www.cnbc.com/2019/11/19/tax-avoidance-by-the-rich-could-top-5-trillion-in-next-decade.html
@freemo That npr interview was a great read, thanks.
In your analysis, however, you are comparing 2 very different things - tax avoidance in the formal economy (where 70% is due to the rich) and the informal economy itself (not tax avoidance). The interview talks about these indirectly.
@prasoon informal economy tends to be a bit of a loaded term that can mean anything from, a job that is illegal and thus can not be taxed in any meaningful way, to jobs that technically require you to post your wages, but easily slip under the radar (such as washing windows on a street corner).
Can you give examples of jobs you consider part of the informal economy that would not be tax avoidance?
@freemo
This is the subject matter of the research that npr interview covers. It is a complicated question is what the researcher say. That's why I think you might be comparing 2 different things that are not really disjoint to make the claim that you did.
@prasoon Do you happen to have any better figures to compare?
I've seen different figures to approach this problem and while admitidly they do vary wildly it seems in most cases the tax evasion of the middle class and poor tends to be much higher than that of the rich.
If you think about it makes sense really. If you dont make much money its pretty easy to get away with working under the table. No one will ever even know. Ont he flip side its hard to do when your dealing in billions. Just think of all the lower income people you know who work under the table and cheat on 100% of their taxes. Rich people lying on taxes happens too sadly, but they have a lot more eyes on them and a lot more to risk, so they would naturally do less of it.
Obviously if you have any figures that might contradict what I'm saying I'd love to see it.
@freemo
I'm thinking of 2 models - one with a long tail (most wealth with poor) and another with a big sharp hump of the rich. How we tax, target the IRS resources, exempt should depend on what the economy looks like.
But then, I'm not an economist so I rely on mathematics which is not always very popular with at least the economist friends I have :)
@prasoon I am pretty strong in math as a data scientist and while not an economist I do study that aspect of it as well.
I'd be curious to hear of any mathematical models for an ideal economy you have floating around in your head.
@freemo
I think modeling an economy as a graph where each entity is a node and the flow of currency and resources as the measure of its health makes a lot of sense to me.
When the flow is restricted we have few leaves dying. Our policies, then, just need to ensure that there's a healthy flow and no hoarding (of wealth and/or resources).
@prasoon I can see where your going with that. Its interesting because im in the middle of developing a private economy right now (a cryptocurrency but a bit more specialized than a general currency).
The biggest question on my mind is how to model the internals of the system to help encourage a healthy economy. When do we produce new money, how do we determine who gets that new money, and how do we do that in a way that ultimately responds to the health of the economy as we do.. all in an automated way, therefore needs a strict mathematical representation.
So something like you suggest is worth considering, but its debatable if hoarding money is even damaging in and of itself (it can be at certain extremes of course, but may not be a big deal in moderation).
For me the flow of money itslef is misleading because money is not a fixed quantity of wealth. It seems more valuable in my mind to be able to quantify where and how wealth is being generated and try to maximize the generation of wealth, rather than the mobility of bank notes.
