> As long as those money are flowing, it helps the economy. The only instance where it wouldn't is if it disappeared from the market.
This is naive. In what sense does it help the economy if I take $1000 from my account and give it to my friend who puts it into his account? There's no extra money in circulation, no projects funded, no growth, nothing. Money moved and it did nothing.
> This is even more obvious in Europe where a large chunk of all taxes payed comes from VAT; which are like sales taxes in the U.S. except everybody pays them.
I'm not clear how that proves that money flowing always helps the economy. What the VAT indicates is that the EU believes in taxing at all points along the chain of production.
if I take $1000 from my account and give it to my
friend who puts it into his account?
I am not really familiar with the U.S. but here's what happens in Europe, regardless of the legality of that transfer (in my country you cannot give 1000 USD as a gift and not pay taxes, unless you're using some kind of offshore account or other means of tax-evasion):
As soon as your friend spends it, in my country 240 USD will go to VAT. Out of the remaining sum, the company receiving the payment may have to pay salaries. Not even Google can get away with not paying taxes on salaries and taxes on salaries are somewhere north of 40%.
So lets say something like 450 USD (out of that 1000 USD) will end up in the pocket of some employee. Then that employee spends it on something -- another 100 USD will go to VAT, and ~ 340 USD going to the company receiving the payment. Some part of that 340 USD will go to salaries, which are taxed and then employees are buying stuff, so they get taxed again.
Companies also pay taxes on investments or sunken costs, not only salaries. So if Apple brings home some of those billions, but acquires some U.S. company, than a lot of money will still go as taxes.
It really goes round and round.
Also, here's an anecdote -- I live in Romania. We are not like Greece, we are not currently in danger of defaulting. Do you know the main reason for that? It's not because we pay our taxes -- in fact, I think we do more tax evasion than Greece is.
The reason has to do with money getting in. We've got more than 4 million people with foreign jobs and residences that are sending money home to their families. Those money are not getting taxed, but it has been enough for our economy to not completely go downhill, and I know this little fact from good sources.
You've changed the scenario. You're now talking about spending the money, which is wholly different from the scenario I described. In my scenario, money flowed but did not help the economy. In your scenario, you're assuming the $1000 was spent and then following the trail of its expenditure. But if the money is never spent, none of that revenue will ever get to the government.
I also think you might be wrong about the legality of a tax-free wealth transfer. According to this site, Romania has no gift tax.
And if we are extending the metaphor to wealthy individuals and corporations, they have plenty of people on staff to help avoid or minimize taxes. Ironically, I also read that Banks are specifically excluded from the VAT in Romania.
> Companies also pay taxes on investments or sunken costs, not only salaries. So if Apple brings home some of those billions, but acquires some U.S. company, than a lot of money will still go as taxes.
I'm pretty sure that's not the case. If Apple brings home those billions, they'll pay whatever taxes are owed for that profit. They won't pay extra if they then use the remaining money to buy up another company.
As for why Romania is doing better than Greece, I think it has a lot to do with the fact that Greece's debt is about 144% of its GDP while Romania's is about 34%.
Romania's revenue/expense ratio is also better than Greece's. There are probably a lot of reasons why Romania is doing better than Greece. It's not just because Romanians send money home to their families.
This is naive. In what sense does it help the economy if I take $1000 from my account and give it to my friend who puts it into his account? There's no extra money in circulation, no projects funded, no growth, nothing. Money moved and it did nothing.
> This is even more obvious in Europe where a large chunk of all taxes payed comes from VAT; which are like sales taxes in the U.S. except everybody pays them.
I'm not clear how that proves that money flowing always helps the economy. What the VAT indicates is that the EU believes in taxing at all points along the chain of production.