[HN Gopher] Portugal seeks to become low-tax haven for young people
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Portugal seeks to become low-tax haven for young people
Author : alephnerd
Score : 80 points
Date : 2024-10-10 14:10 UTC (8 hours ago)
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| ExoticPearTree wrote:
| https://archive.ph/jfRjL
| smackay wrote:
| The prices for housing, in any form, in the major metropolitan
| areas suggest this will not be successful.
| libertine wrote:
| This looks like is going to help increase the prices even more.
| Nifty3929 wrote:
| Indeed - people cannot live in money. Giving them more money
| will not help them get a place if there are not more places
| available to get. It would only drive up the price as the
| same people compete for the same housing with more money. Or,
| if they have some form of rent control - simply greater
| frustration all around.
|
| Another possible consequence is greater inter-generational
| friction as young people with more money out-compete
| existing, older tenants/owners for those homes.
| laweijfmvo wrote:
| > A worker in Portugal earning the average annual wage of about
| EUR20,000 currently pays a top income tax rate of 26 per cent.
| Anyone earning between roughly EUR21,000 and EUR27,000 pays a top
| rate of 32.75 per cent.
|
| ouch
| FaridIO wrote:
| Pretty nominal for Europe to be honest. Most Americans don't
| realize a) how much money they make and b) how little taxes
| they pay. Apples and oranges with all the social safety nets
| and such of course, but still most (healthy) Americans get much
| more money in their bank accounts after all is said and done
| than they would in Europe.
| baal80spam wrote:
| This is correct.
|
| Here's a handy table:
| https://en.wikipedia.org/wiki/Tax_rates_in_Europe
| rsynnott wrote:
| Top rates are kind of useless; some countries have many
| more brackets than others. The US used to have a 90% tax
| bracket, but that didn't make it a particularly high-tax
| country; effectively no-one paid it. Comparisons, are in
| practice, inherently difficult, because the curves caused
| by the tax brackets and credits can be very different. It
| really depends an awful lot on income.
| laweijfmvo wrote:
| I should look more into cost of living in Portugal, maybe,
| but one of the other commenters mentioned housing prices
| being... high. In US, making ~$20,000 you'd be considered
| poor (maybe not "officially") and probably pay zero federal
| tax and receive quite a bit of assistance.
| titanomachy wrote:
| $20k is technically above the US federal poverty line for a
| single person. I live in a state where anyone under $30k is
| considered low-income and qualifies for full benefits.
| benopal64 wrote:
| What happens to the unhealthy Americans? What happens to the
| Americans who are too poor they cannot pay health insurance
| and the cost of medicine/surgery. I think only the wealthiest
| Americans have much more money in their bank accounts than
| they would in Europe.
| InDubioProRubio wrote:
| Death and disease are not real, my mind zones them out. I
| never remember when i was the last time at the dentist, so
| why include that part in my lifes plan? That is just a
| blindspot of everyones mental model. They parked a whole
| scaming theme park in that in the us.
| sickofparadox wrote:
| This is a misconception. Even in the poorest state here in
| the US, the median income is far more than most countries
| in Europe, pre tax[1,2]. And unlike what the internet says,
| we do have government programs that provide healthcare for
| those that cannot afford it or are out of work.
|
| [1] https://www.statista.com/statistics/205960/median-
| household-... [2]
| https://www.euronews.com/business/2024/07/08/european-
| averag...
| hollerith wrote:
| Agreed. There are many reasons to prefer living in Europe
| to the US, but "more money in their bank accounts" of
| non-wealthy people is certainly not one of them even
| though the American must sometimes use the bank account
| to pay for things that are provided by the government in
| Europe.
| jajko wrote:
| Unless we talk about Switzerland. But that's like 2% of
| the continent so what you say is valid.
|
| And given too left-leaning and fanatical green-deal-at-
| all-costs push from Brussels economical situation won't
| get better, in contrary. They could be pouring money into
| defense, its not like in 20 years russia will stop
| wanting to subjugate/murder us all. Or they could try not
| killing their own automobile industry so quickly. Or...
|
| EU started a slow but steady decline given changes in
| global economies, it will take probably a long time due
| to various factors but trend is clear.
| alephnerd wrote:
| > And given too left-leaning and fanatical green-deal-at-
| all-costs push
|
| Investing heavily in renewable technology and R&D doesn't
| mean spending less on military or industrial capacity -
| in fact it's fairly dual use.
|
| Furthermore, US, China, SK, JP, and others manage to
| balance both.
|
| The issue is most EU members stopped funding their
| militaries following the fall of the Berlin Wall and
| redeployed that capital elsewhere - especially during the
| European Recession+Currency Crisis (1990-95), GFC
| (2008-11), and Eurozone Crisis (2008-2014).
| s1artibartfast wrote:
| And Switzerland is most like the US out of European
| countries, albeit an idealized version of the US.
|
| It has private healthcare mandated by the government, and
| an economy favorable to capital. It has a federal system
| where most of the power and spending resides with the
| cantons(states), and much closer to the voters.
|
| The Swiss constitution was actually modeled after that of
| the US.
| JumpCrisscross wrote:
| > _Swiss constitution was actually modeled after that of
| the US_
|
| "The Amercian national constitution, the Articles of
| Confederation, was constructed on the Swiss model of a
| confederacy of some over sovereign states. Then,
| Americans repudiated confederal government in 1787 as
| impotent and unworkable and adapted a new federal
| constitution. The opponents of the new charter, the Anti
| Federalists argued that a Swiss style government was
| still a viable model which offered the best hope for the
| preservation of American liberty. The Swiss themselves
| repudiated confederate government in 1848 using many of
| the same arguments Americans had marshalled against it in
| 1787 and adapted a Federal constitution modelled after
| the American constitution of 1787. After the Civil War
| many American state and local governments adapted
| constitutional reforms borrowed from the Swiss. The
| initiative and referendum - which continues to this hour
| to give the politics of California and other influential
| states their distinctive tone."
|
| https://www.legalanthology.ch/hutson_swiss-and-american-
| stat...
| s1artibartfast wrote:
| I think that supports what I said, but I love the added
| detail. There was more back and forth exchange than I
| remembered.
|
| Another fun fact about the Swiss government that I think
| is superior to the US is that the effectively have seven
| presidents which form an executive council. The executive
| council debates behind closed doors and presents a
| unified public front. Internal debates of the executive
| counsel are sealed for 20 years before release to the
| public.
|
| That said, my favorite thing about Switzerland is still
| that the vast majority of tax collection and public
| spending occurs at the local level. Federal spending
| revenue is approximately 30% with the rest being the
| local cantons. Swiss Cantons are smaller by population
| then a typical California county.
|
| I think this emphasis on local government results in
| Civic engagement, oversight, and empowerment while
| reducing political strife.
| throw_pm23 wrote:
| You said "A was modeled on B", the answer said "B was
| modeled on A".
| JumpCrisscross wrote:
| No, the Swiss federal constitution is based on America's
| federal constitution. The American Article of
| Confederation, our previous Constitution, was based on
| our Helvetic Confederation constitution. Strictly
| speaking our constitution is based on the American
| Constitution.
| JumpCrisscross wrote:
| > _seven presidents which former executive council. The
| executive council debates behind closed doors and
| presents a unified public front_
|
| This resembles the Athenian executive. It works in
| peacetime but less so in war. It's also bad if you
| polarise because it blamelessly deadlocks.
| alephnerd wrote:
| > cannot pay health insurance and the cost of
| medicine/surgery
|
| https://www.medicaid.gov/
|
| https://www.healthcare.gov/health-coverage-
| exemptions/forms-...
|
| > I think only the wealthiest Americans have much more
| money in their bank accounts than they would in Europe
|
| Well, you thunk wrong.
|
| Median household income in the US is $80,000 [0] and taxes
| like VAT are nonexistent.
|
| Throw on top of that access to subsidized plans like
| Medicaid or ACA plans for households that earn below the
| median, and most Americans come out ahead.
|
| The big issue with the US is the de facto inability to
| commit mental health patients to involuntary mental health
| holds unlike much of Europe due to the current
| interpretation of the 14th amendment, which has caused the
| mental health crisis to become a homelessness and drug
| crisis.
|
| That said, as a whole, most Americans live fairly
| comparable lives to most Western countries, as HDI shows.
| In fact, much of Europe has a much lower HDI than the US
| once you exclude Scandinavia, Germany, the British Isles,
| and Switzerland.
|
| When you look at a subnational level, it is the Deep South
| (Alabama, Mississippi, Louisiana, Arkansas) and Appalachia
| (West Virginia, Kentucky) that continues to lag, but they
| represent less than 5% of the entire population of the US.
|
| [0] - https://fred.stlouisfed.org/series/MEHOINUSA672N
| rsynnott wrote:
| > The big issue with the US is the de facto inability to
| commit mental health patients to involuntary mental
| health holds unlike much of Europe due to the current
| interpretation of the 14th amendment
|
| ... Eh? Large-scale involuntary committal largely ended
| in Western Europe decades ago. What figures are you
| basing this on?
| Muromec wrote:
| The God clearly doesn't like them so it's not worth making
| policy choices that take their problems into account
| profeatur wrote:
| Unhealthy people get left behind in Europe all the time. I
| hope as a European you'll never have to go through the hell
| of trying to deal with any kind of complex chronic illness.
| The doctors have no clue how to treat these kinds of
| problems, and any specialists are very few and far between.
| Go spend some time on forums for people dealing with
| chronic health problems and you'll find many Europeans
| who've had to empty out their savings in order to get
| treatment.
| CalRobert wrote:
| Honestly health care in Europe isn't great either. My Dutch
| GP seems to think acetaminophen is the cure for everything.
| They're decades behind on things like discussing menopause,
| TRT, etc.
| thatfrenchguy wrote:
| Medicaid expansion has fixed this for the poorest Americans
| unless you live in a few red states, and ACA subsidies cap
| private plans at 8.5% of your income (+ cost sharing on top
| of that obviously, but there is a maximum per year) for the
| rest.
| spookie wrote:
| Portugal is in a weird situation where it has high taxes and
| at the same time the median salary is too close to the
| minimum wage. This is difficult to overcome, and thus
| salaries are stagnated.
|
| The government has no reason, in the medium to long term, to
| have such high taxes. Since, by keeping high taxation the
| state retrieves less money in absolute terms than they would
| if they let wages increase and steer away from the minimum
| wage.
|
| I don't think you could say that about most EU countries.
| Portugal really is in a bad place.
|
| (Edit: just clarifying that the situation is different, yes
| taxation is high as most others but in the case of Portugal
| its much worse)
| alephnerd wrote:
| > The government has no reason, in the medium to long term,
| to have such high taxes
|
| It does - Debt.
|
| Portugal's debt as percent of GDP skyrocketed during the
| GFC and Eurozone crisis from 75.8% in 2008 to 129% by 2012.
|
| Unlike economies with a similar debt-to-GDP ratio like
| Italy, Portugal's economy is a relative minnow, and doesn't
| have a significant domestic capital market which can at
| least help stem some of the issues, nor can Portugal
| attract FDI at the same level as much more business
| friendly Spain, which made income taxes their only lever.
|
| That said, the Portuguese debt-to-GDP ratio has gotten much
| better (99.10% in 2023), but that was because of how much
| of the Portuguese budget was spent on servicing debt.
| rsynnott wrote:
| It's presumably very _cheap_ debt, though? Ireland's in a
| somewhat similar situation (don't be fooled by the
| headline debt to GDP figure; Ireland's GDP is distorted
| to the point that the government has had to make up its
| own adjusted metrics), though it's currently running big
| budget surpluses, and from time to time someone will ask
| "why, instead of lowering taxes and investing in
| infrastructure, are we not using this surplus to pay down
| debt?" And the answer is that the average cost of the
| debt is 1.5% (the expensive stuff from the financial
| crisis has largely refinanced). It makes little sense to
| aggressively pay down debt at those sorts of rates.
| s1artibartfast wrote:
| A quick google search indicated debt interest is about 5%
| of the national budget.
|
| This does seem low in comparison to the US, where ~17% of
| the national budget is spent servicing debt interest. For
| context, this is approximate 1.5X what we spend on
| national defense. [1]
|
| https://www.investopedia.com/why-interest-payments-are-
| blowi...
| rsynnott wrote:
| Huh. Ireland's is about 2.5% (3.1bn on 119bn budget next
| year). Slightly puzzled at what's going on with the US
| debt; that does seem very expensive. Though it's not
| _entirely_ comparing like for like, in that states have
| their own separate budgets in the US (local authorities
| in Ireland do too, but their own revenue raising
| capabilities are very limited and most of the money comes
| from central government).
|
| Looks like the US's cost of servicing works out to about
| 3.4%, which definitely seems rather high (though,
| probably still not high enough that you'd necessarily
| want to aggressively pay it down; 3.4% isn't a _great_
| return). Actually, I'd wonder how much of this is related
| to the debt ceiling stuff; I would assume that makes
| refinancing when debt is cheap more difficult.
| s1artibartfast wrote:
| for Ireland, are you talking about % GDP or %governmental
| budget.
|
| I don't know how or if the debt ceiling has any impact on
| refinancing.
| rsynnott wrote:
| % budget. Debt servicing is about 0.5% GDP, but Ireland's
| GDP is so massively distorted that it's not really worth
| paying attention to.
| s1artibartfast wrote:
| OK, I think we were using different units when comparing.
|
| My concern is that the US GDP is also fluffed up, and the
| situation is more dire.
| spookie wrote:
| I'm aware, but we have been in that situation for almost
| a decade now. I'm portuguese.
|
| I just think we would've gotten through this sooner by
| making use of the invisible hand and lead businesses to
| be able to prosper more and as a result, higher wages.
| This would lead to more modest taxes having a higher
| wield to the state.
|
| As it stands, they are taxing people for a very low
| absolute amount in the end. Not to mention that taxes go
| way lower the closer you are to minimum wage (a good
| thing, but it also shows how little they gain from this
| strategy). In the meantime they strangle any small to
| medium sized company, which are the ones driving the
| wages for most.
| thatfrenchguy wrote:
| It's not that weird, France is in the same situation.
| spookie wrote:
| It's similar, in relative terms. In France the minimum
| wage is currently at 75.5% of the median, in Portugal it
| is 73.1%.
|
| However, the issue lies in the absolute amounts. In
| France, the median (monthy) is 2340EUR, but in Portugal
| it is 1039EUR.
|
| When you are taxed in relative terms this amounts to
| quite a big difference when comparing what both
| government get from their citizens.
|
| I concur that France's cost of living is higher and that
| I'm wayyyy oversimplifying it.
| ryandvm wrote:
| That extra money comes in handy when you're paying $15K/year
| for health insurance because if you don't a few hours in the
| hospital would cost you triple that.
| HarHarVeryFunny wrote:
| Just looking at salaries and taxes makes for a very distorted
| view of wealth and affordable lifestyle in the US vs
| elsewhere. Even if you take into account ALL the major
| variables such as college costs/loans, housing prices, real
| estate taxes, cost of healthcare, retirement, etc, it is very
| difficult to compare.
|
| You can better see the reality by looking at actual examples
| of families with massively different incomes living in the US
| vs elsewhere. It takes WAY higher salary (5x?) in the US to
| enjoy the same lifestyle as someone in the UK, for example.
| CalRobert wrote:
| ..... really? I'd take $200k in the US over 40k GBP any day
| of the week. And in the US I'd have bug screens in my
| windows. And air conditioning. And food I can taste.
| HarHarVeryFunny wrote:
| Depends where in the US of course. $200K isn't going to
| go very far if you have to pay $1M for a house, 20K for
| r/e taxes, etc... One or two kids in college and you are
| f'd.
|
| I don't know exact salary figure, but my sisters family
| in UK have medium income (1.5 jobs) new BMW, two kids in
| college, foreign vacations every year, kids got latest
| Apple phones/watch/laptop growing up ... A bit like
| 1950's America living the dream on a single income with
| foreign holidays and iPhones added.
| CalRobert wrote:
| When did they buy their house (or flat)?
| HarHarVeryFunny wrote:
| House bought a while back before prices shot up, so maybe
| mortgage paid off ... I don't know. OTOH college costs
| alone make the US ruinously expensive.. $200K/kid
| perhaps... That's the point really - you need to look at
| full financial picture in the US - especially costs.
| Looking at income tells you nothing.
| CalRobert wrote:
| My alma mater is coming in around $16,000 a year or so
| for tuition, books, and fees -
| https://www.calpoly.edu/undergraduate-costs-
| attendance-2024-... . It's generally considered a not-
| terrible school. $200k is quite rare.
| arandomusername wrote:
| if you live in a major city in Europe you are going to
| also be paying $1M for a decent family sized house.
| xutopia wrote:
| They actually get healthcare and other services with that. It's
| not like it's just taken away in some black hole. They get
| value from the taxes they pay.
| matt-p wrote:
| Pretty similar to anywhere else in Western Europe. Includes
| health care and a state pension and things like that.
| stuaxo wrote:
| When counting your tax in the US add in your health insurance
| cost to compare to most of Europe.
|
| Or if it's parts of Europe like Portugal where there is health
| insurance check the cost - looks like 14 euros to 90 euros a
| month:
|
| https://www.beportugal.com/health-insurance-in-portugal/
| AdrianB1 wrote:
| It is realistically much more than 14 euros. In Eastern
| Europe I pay almost 700 Euro per month in mandatory state
| health tax (it is not an insurance, it is a tax because it is
| a percentage of income, not related to what you are covered
| for).
| profeatur wrote:
| Yes, there is a public health system, but people tend to
| avoid it when they can. Most opt to go private for their
| dental, for example. And if they have any kind of systematic
| (sibo, ibs, autoimmune, etc) problem the public system is
| useless and they will have to travel to find a private
| specialist. On the other hand, the private system is really
| good here, and also pretty cheap.
| insane_dreamer wrote:
| Dental is also typically not covered by medical insurance
| in the US (dental insurance is separate and works
| differently).
| johngladtj wrote:
| If you're counting that you should add the +30% for social
| security in Portugal as well.
|
| Straight up if you actually do the math and count every tax
| paid directly a d indirectly someone making minimum wage has
| a effective tax rate above 60%
| Me000 wrote:
| In America the tax rate is higher? People are reacting like
| this is a lot haven't seen a paycheck in the US in there
| lifetime. US is maybe 5% lower under some circumstances. I
| thought fake outrage was banned here?
| ativzzz wrote:
| Not even close, the marginal federal tax rate is 12% for
| income between $11k and $44k [0]. This doesn't take into
| account state/property taxes, but it's nowhere near
|
| [0]https://www.irs.gov/filing/federal-income-tax-rates-and-
| brac...
| lostmsu wrote:
| Both calculations should include VAT btw
| s1artibartfast wrote:
| you have to adjust for median income and PPP. also, state
| taxes are often substantial.
| wil421 wrote:
| At the levels OP described I'd be at 17% federal and state
| taxes rate. I'm at about 42% with state and federal but you
| need to add and zero and double the amounts to get close to
| our household income.
|
| Not sure if Portugal uses marginal tax rates or not.
| victorbjorklund wrote:
| _laughs in swedish_.
|
| 32.75% taxes. That is so low.
| speeder wrote:
| Portugal taxes are probably higher than Sweden.
|
| Many people ignore portugal mandatory social contribution, it
| is mandatory even if you earn minimum wage, and the tax there
| is about 34% (forgot exact number, the way they charge make
| it clunky to calculate). Most portuguese people think this
| tax is "only" 11% because the rest of the tax is "paid" by
| the employer. Average people don't understand that if your
| salary was supposed to be 1000 and you get only 650 after tax
| you paid 350 in taxes even if your paycheck says your pretax
| salary is 800.
|
| Note: the income tax is paid on top of the social
| contribution, so is easy to end paying 50%+ taxes if you are
| in tech. Then Portugal gets mad with all recent grads moving
| to Germany. (By the way, I still live in Portugal but all
| companies I worked for since moving here were German,
| Portuguese companies can't compete in wages)
| jcmfernandes wrote:
| It can go up to 48%. But as in most countries, it's
| progressive: you pay X% over the first AEUR, then Y% over the
| next BEUR, etc.
|
| Then you have Social Security (mandatory): 11% on the
| employee and 23,75% on the employer, or 21,4% for independent
| workers.
| Muromec wrote:
| Cries in throat sounds and having tax discount expiring at
| the end of this month
| radicalbyte wrote:
| I'm paying about 50% tax rate here in NL (we have a very high
| income), I just wish that those who have 10x and more than
| our income also had to pay a 50% tax rate. Only our tax rules
| have been written so that those who are very rich don't pay
| their fair share.
| whatshisface wrote:
| Going by elementary macroeconomic principles, currency
| unification will always result in "dead zones," because their
| exchange rates can't stabilize the balance of trade.
| MichaelZuo wrote:
| What does ' exchange rates can't stabilize the balance of
| trade' mean?
| AnimalMuppet wrote:
| If the US is trading with the EU, say, and the US is
| importing too much and exporting too little, eventually that
| affects the exchange rate between the dollar and the euro.
| That adjusts in a way that somewhat counteracts the trade
| imbalance.
|
| But if Portugal imports too much from France and exports too
| little, and they're both using the euro, then there is no
| exchange rate to adjust, and so you're just left with the
| trade imbalance and no adjustment.
| moffkalast wrote:
| So what, the exchange rate in that case would change so US
| consumers lose buying power for EU imports as a sort of
| automatic customs fee and as a result would prefer locally
| made alternatives?
|
| I would question how well that works outside completely
| generic goods that you can buy anywhere, since with
| economies of scale consolidating production there is often
| hardly any alternative anymore.
|
| Also, feels like there could be a way to manually address
| the balance without reducing people's standard of living.
| whatshisface wrote:
| The balance is not maintained for individual goods, but
| rather for the whole market. If the EU is better than the
| US at manufacturing everything, the exchange rate will
| fall until the US can at least do one thing cheaper.
| Exchange rates don't help raise people's standards of
| living, but they do prevent countries from becoming
| economic dead zones.
| MichaelZuo wrote:
| But there is an adjustment in the total wealth owned in
| aggregate by those in Portugal vs. France, which is what's
| important at the end of the day, right?
|
| Eventually those in Portugal will not have enough wealth to
| import above their exports, depending on how much stored
| wealth they have in aggregate.
|
| So it's still guaranteed to balance out on a century
| timescale...
| s1artibartfast wrote:
| The end states are different however.
|
| >So it's still guaranteed to balance out on a century
| timescale...
|
| Balance in what sense? In terms of trade, countries can
| perpetually run a deficit if they share a currency.
| Wealth isnt zero sum and is continually created. This can
| be used to pay a perpetual deficit at a cost to growth.
| MichaelZuo wrote:
| Isn't it the relative level that decides the balance
| between imports and exports? Not the absolute level of
| wealth?
| s1artibartfast wrote:
| relative level of what?
|
| I dont understand your question.
| MichaelZuo wrote:
| Relative level of wealth available for importing...
| s1artibartfast wrote:
| I see. Even if you have little wealth, I dont mind taking
| it all. It just means you cant buy much.
|
| Imagine of two families. Whenever one gets money, it buys
| food from the other. The 2nd keeps taking the money and
| investing in their garden, making it bigger and more
| efficient.
|
| IF they share a currency,
| MichaelZuo wrote:
| How can their be a 'perpetual deficit' in this case? Or
| in the case of Portugal and France trading?
|
| Eventually one party will exhaust all their available
| resources, be that money, gold, desirable trade goods,
| trust, credibility, etc... and won't be able to run a
| deficit anymore.
| s1artibartfast wrote:
| Countries continually produce new value. If one party has
| a gold mine, or scientists, or workers, or anything that
| produces net positive value, it generates wealth. If you
| retain that wealth and reinvest it, it can compound and
| this is called economic growth.
|
| Lets say you, with your human labor, can use 10 bricks to
| produce 20 bricks. If you do this every year, your wealth
| grows. first 10, then 20, then 40, then 80, ect.
|
| In this senario, You can trade with your neighbor and run
| a 10 brick deficit every year, but you wont exponentially
| grow your production and wealth. You will have 10 the
| first year, make 20, trade away 10, then end up where you
| started. You are sustainable forever, but not growing.
|
| Your house will remain small, and the house of your
| trading partner will grow ever larger.
| MichaelZuo wrote:
| Yes... but these Portugese bricks have to be somehow
| better, in some aspect, than French bricks, for them to
| be traded in the first place.
|
| Be that quality, quantity, availability, pricing, etc...
|
| Eventually Portugal will exhaust all it's bricks, and
| future brick opportunities, that are better in some
| aspect, relative to French bricks and French future brick
| opportunities.
|
| And when that happens with every possible thing and
| opportunity in Portugal, relative to French things and
| opportunities, then the trade deficit naturally
| disappears.
| chucke wrote:
| You're focusing on the quantity aspect of the metaphor.
| Reinvesting can not mean only more bricks, but also
| better. But quantity also may helps sell them cheaper
| than your competition.
| HarHarVeryFunny wrote:
| Exchange rates are determined by markets based on supply
| and demand, with demand being based on things like
| investment opportunity, as well as structural demand such
| as for petro-dollar oil payments.
|
| Currency markets are mostly too big for governments to be
| able to manipulate (e.g. George Soros & GBP).
| whatshisface wrote:
| The market can adjust the exchange rate between the US
| and the EU, but not between the Portugal and Spain. This
| is in a sense the ultimate in government currency
| control, and if 1:1 is not the exact ratio that the
| market would have set, one of the two countries will be
| emptied out.
| HarHarVeryFunny wrote:
| If the Portuguese economy was booming relative to Spain,
| then "the market" (investors) can still take advantage of
| that by investing in other Portuguese assets such stocks
| and real estate.
|
| If a government wants to address a trade imbalance then
| import tariffs is one way to do it - or policy changes
| affecting cost of goods produced for export.
| eschulz wrote:
| I feel this has also been a challenge for Greece among other
| places. Can they adapt within the economic zone, say to become
| tourist havens while the bigger states provide industry and
| services? Should they leave the Euro?
| alephnerd wrote:
| Greece should have never joined the Eurozone, and are
| basically a middle income country despite their high GDP per
| capita (median household incomes are comparable to Mexico and
| Malaysia).
|
| That said, leaving the Euro would be too economically
| traumatic for Greece at this point.
| bobthepanda wrote:
| This is broadly true for any division of land with a single
| currency but it's not as if going to tiny city states with
| unique currencies is also a good idea.
| whatshisface wrote:
| You could have more currencies than states. That is how it
| used to work in the US.
| JumpCrisscross wrote:
| > _how it used to work in the US_
|
| For a definition of "work" which normalises constant
| financial crisis.
| whatshisface wrote:
| _Frequent_ financial crises. Constant financial crisis
| better describes our dying small towns.
| marcosdumay wrote:
| The balance of payments is always self-stabilizing. The trade
| component can only have a non-zero integral when somebody is
| injecting or removing money from the economy by some other
| means.
|
| What really means that no, economical dead zones have no
| relation at all with the balance of trade. And also, the
| balance of trade predicts almost nothing and is controllable by
| policy, anybody focusing on it is just throwing a red herring
| and hopping people don't look at actually important things.
|
| (What doesn't mean that currency unification doesn't cause dead
| zones. I know that this explanation is wrong, I don't know if
| it happens or not.)
| whatshisface wrote:
| > _The trade component can only have a non-zero integral when
| somebody is injecting or removing money from the economy by
| some other means._
|
| People late in their careers are buying imports, people early
| in their careers are leaving the country. That's as clear of
| a case of the integral going negative as I can imagine.
| marcosdumay wrote:
| "By some other means" literally means that how people trade
| can't impact the balance.
|
| People leaving the country carrying money is an example of
| those "other means", people buying imports isn't.
|
| Either way, it's a bad number to even look at. It
| meaningless.
| s1artibartfast wrote:
| >when somebody is injecting or removing money from the
| economy by some other means.
|
| Which should be considered the normal state for an economy
| that with growth and production.
|
| The issue is that a negative trade deficits are sustainable,
| but come directly out of the wealth growth of the importing
| country.
|
| If you have $2 of value per year, and loose net $1 across the
| boarder, you never accumulate wealth.
| whatshisface wrote:
| That's a little flattened because oftentimes that $1 will
| go across the border in exchange for ownership of foreign
| assets.
| s1artibartfast wrote:
| Yes, but the principle is the same for how a perpetual
| deficit can be maintained.
|
| A subsistence farmer can grow enough for themselves. It
| they make extra each year, they can buy something from
| outside each year, continually running an import deficit.
| chaosprint wrote:
| meanwhile Norway has started a controversial exit tax that can
| kill many tech startups:
|
| https://www.forbes.com/sites/danieladelorenzo/2024/04/09/nor...
| diggan wrote:
| > When the natural interest for start-ups is to scale up and
| expand in foreign markets, or to leave the country to seek
| better deals, the proposed 37.8% exit tax on unrealized assets
| over $46.5 thousand that have been accumulated in Norway, seems
| to be the last drop for any foreigner or Norwegian with big
| dreams to set a business in the Nordic country.
|
| As prior art, doesn't the US have something similar where if
| you want to leave your residency/citizenship, you have to pay
| up, even for unrealized gains and such? Seems like Norway is
| modelling something similar to what the US already has, and the
| US seems to still have tech startups coming out of it.
| chaosprint wrote:
| well. but these two countries are very different, so can't
| just copy paste policies.
| CalRobert wrote:
| I think the difference is that the US is where you'd want to
| found your startup anyway.
| diggan wrote:
| If I imagine being Norwegian, I bet the answer to that
| question is "Nope" more than "Yes".
| CalRobert wrote:
| I dunno, even Norwegians like money.
| HarHarVeryFunny wrote:
| The US exit tax isn't a fixed penalty for leaving, but rather
| a way to wring "pending taxes" out of citizens renouncing
| their citizenship. Per the exit tax you pay taxes as if all
| your assets had been sold, thereby forcing security gains to
| be "recognized" at that point.
| diggan wrote:
| How is that different from the thing Norway might
| implement? Besides the obvious difference of the US exit
| tax seems to be about citizenship while the Norwegian one
| seems to be about residency of the company itself.
| JumpCrisscross wrote:
| > _Besides the obvious difference of the US exit tax
| seems to be about citizenship while the Norwegian one
| seems to be about residency of the company_
|
| That's a big difference. (Also, is it company or personal
| residence?)
| diggan wrote:
| Sure, but also the least interesting because that
| difference is very obvious, that's why I'm asking for
| other differences...
| JumpCrisscross wrote:
| > _that 's why I'm asking for other differences_
|
| If the obvious difference explains the gap, this is
| unnecessary. Switch American taxation to a territorial
| system and you'd see a similar flourishing of start-ups
| and founders in Canada and Mexico.
| HarHarVeryFunny wrote:
| You're right - maybe it is the same - I don't read
| closely enough, but the Norwegian tax is on "unrealized
| assets" which may be the same thing.
| joncrocks wrote:
| The big difference is that the US will sting you for tax
| wherever you are in the world, whereas most will only tax
| residents (complexities in terms of tax treaties
| notwithstanding).
|
| Hence in both cases they are both looking to realise gains
| at the point where they no longer have control over the
| taxes being charged. A `penalty` for leaving their tax
| jurisdiction, notionally for the tax they are 'owed'.
| shtopointo wrote:
| Weird that they would even consider that - Norway is so rich
| from oil and gas, it may be able to keep going without
| collecting any taxes.
| blackhawkC17 wrote:
| Taxes make a government accountable to citizens. While not
| paying taxes because of oil wealth might seem enticing in the
| short term, it'll lead to disaster in the long term if a
| government becomes accountable mainly to the resource
| industry and neglects to invest in a diversified, productive
| economy.
|
| Norway has high tax rates despite having oil wealth-- this
| ensures citizens remain productive and don't get too
| complacent by depending on a fluctuating commodity.
| ninalanyon wrote:
| The vast majority of oil tax revenue never enters the
| Norwegian domestic economy but is instead funnelled into
| the State Pension Fund (The Oil Fund) which invests outside
| the country. This means that the oil has little effect on
| inflation in the country. There is also a rule that only 3%
| or less of the fund can be used by the state in any one
| year. 3% is the expected real return so the fund should
| never shrink thus preserving the value for the future.
|
| Norway has successfully avoided the Dutch Disease. But
| whether we will be able to successfully negotiate the
| decline of oil in the long run remains uncertain.
| ninalanyon wrote:
| A typical bit of Forbes scaremongering.
|
| According to the local the threshold for share gains is 3
| million kr, about 300 thousand USD. You only pay the exit tax
| on amounts above that.
|
| "Those subject to the tax will have to address their tax
| obligations related to gains exceeding 3 million kroner on
| shares acquired during their time in Norway.
|
| They will have several options to fulfil this obligation,
| including immediate payment, interest-free instalments spread
| over 12 years, or deferred payment with accrued interest.
|
| The changes are part of the government's efforts to counter the
| recent outflow of wealth from Norway, with Switzerland being a
| popular destination for tax exiles."
|
| https://www.thelocal.no/20241007/whats-the-latest-on-norways...
| dosinga wrote:
| Yeah, but I think the point is that this applicable on
| unrealized capital gains too. So if I start a company in
| Norway, raise a bunch of money and then move to the US
| because the company wants to have a presence there, I now
| have to pay the tax on the basis of the money raised; It's
| quite common for a reasonable successful founder to be worth
| millions on paper while having no cash.
| christkv wrote:
| It is and the effect is immediate and destructive to any
| value creation in startups. It basically forces companies
| to leave before raising any serious money or founders will
| end up with tax bills that have to be paid out of
| investment money
| consteval wrote:
| Or just staying in the country, thereby bolstering their
| economy. Which is almost certainly the end goal. I mean,
| it kind of sucks if these countries provide the tools to
| create successful businesses and then those businesses
| just move to cheaper countries. You're kind of getting
| screwed over.
|
| Countries invest too. In their economy. Providing high
| quality education at a low price is a huge investment,
| for example. It's not a good deal if citizens take that
| and you don't get a return on your investment, i.e.
| they're not creating innovative companies in your
| country.
| jplrssn wrote:
| On the other hand, not taxing unrealized capital gains on
| exit would effectively create a loophole by which it would
| be possible to avoid taxation simply by moving to a tax
| haven for a while and realize the gains there.
| joelwilsson wrote:
| The Forbes article is from April, while The Local article
| you're quoting is from October. Back in April, the proposal
| was different, as The Local explains.
|
| And the biggest problem for startup founders remains: you're
| taxed, on leaving the country, on unrealized gains. Being
| taxed on 5 millions of profit sounds fair, being taxed on 5
| millions (or 30 millions) of valuation used for raising
| capital, in a startup that then fails and is worth nothing
| after a few years, maybe not so much. Neighboring countries
| do not have this kind of taxation.
| olieidel wrote:
| Not at all. As soon as you get VC money, your valuation
| likely is in the millions, and then you're already way beyond
| the threshold. Good luck with the exit tax then.
|
| Many sub-aspects of this are debatable, of course: Is VC
| money good? Are high startup valuations good? Also: Sure, you
| can defer the payment, you can pay it later with interest,
| etc., etc. But that's besides the point.
|
| The problem here is: Once your startup reaches a high
| valuation, exiting the country, for whatever reason, will
| become difficult. And this might happen for rather innocuous
| reasons: Temporarily moving to the US to open up a
| subsidiary, staying there > 180 days / year? --> Exit tax.
| Etc. The number of second-order consequences is high, and I'd
| wager most of them are not good if your goal, as a country,
| is to foster a startup ecosystem.
| lostmsu wrote:
| This is exactly the reason why we crossed out Austria as
| destination. Not only they have an exit tax, they want to tax
| the unrealized gains since the purchase of the asset instead of
| since entry to Austria. I wish they'd fix that weirdness.
|
| Or just let people move between there and US without forcing
| asset sales at bad times to cover tax payments on unrealized
| gains.
| robocat wrote:
| Why would anybody do unpaid sweat equity in founding a risky
| startup? A gamble that can only pay off if you were to _win_
| the startup lottery.
|
| The same issue in New Zealand. Anyone with a professional job
| invests $100k/year in lost wages founding their high risk
| venture. Lose taxes if you win. Lose 100% of your time if you
| lose. Hardly economically worth being a founder given expected
| return is so poor (worse than the standard figure of 90%
| businesses fail after 5 years). We don't have a capital gains
| tax yet in NZ but CGT means nobody sensible should found a
| startup by "investing" their time.
| InDubioProRubio wrote:
| A expected step. Nobody has a intention, to build a
| anti-(age)-statistic protection wall.
|
| Young, educated people are the gold of the western world- and the
| gold must not always flow towards rome as tax.
| JumpCrisscross wrote:
| > _Young, educated people are the gold of the western world_
|
| No, they (we?) are not. The better analogy is a gold mine. You
| still need to invest in it to get anything out, and it'll be a
| few years before you do. If you fail to do that, all you have
| is a Superfund site.
| s1artibartfast wrote:
| Different analogies, but both are true.
|
| Young, educated, [and motivated] workers are a desired and
| contested resource.
|
| Producing them is also important.
| JumpCrisscross wrote:
| > _Young, educated, [and motivated] workers are a desired
| and contested resource_
|
| Theoretically, sure. In reality this isn't reflected in the
| immigration policy of any large economy. Portugal makes
| news with this for a reason.
|
| > _Producing them is also important_
|
| The point is having lots of underutilised young people is a
| liability. Gold doesn't join gangs or riots.
| s1artibartfast wrote:
| Agreed. There are also interests that benefit greatly
| from them them being a highly contested resource with
| restricted supply.
|
| If you are holding gold, you dont want someone to flood
| your market with more.
| JumpCrisscross wrote:
| > _If you are holding gold, you dont want someone to
| flood your market with more_
|
| Right, this is why it's a stupid analogy. That's true for
| gold. But if you're hiring young, educated people, you
| _do_ want your country flooded with them.
| s1artibartfast wrote:
| It sounds like we mostly agree on this. To be honest, I
| was mostly reacting to how you initially responded with a
| flat negation, so Im not going to steel man a simple
| analogy as a universal truth.
|
| I agree that these analogies all depend on which
| perspective you are framed in. If you are a hiring
| manager, you want cheap effective candidates. If you are
| a worker, you want a labor shortage, at least for your
| role.
|
| Public policy is a whole different mess. It is set by
| competing self-interested parties and may or may not bear
| any relation to the aggregate public benefit.
| jcmfernandes wrote:
| Portugal already has tax breaks for the youth (aka _IRS Jovem_ ),
| but the new right-wing government is seeking to extend what the
| previous left-wing government introduced. That includes loosening
| requirements and extending the duration of the tax breaks.
|
| Now, while in Portugal people talk about these as measures to
| retain the Portuguese youth in the country, no political party
| has framed it as a measure to capture foreign youth. Puzzling to
| me.
| bluecalm wrote:
| I think in general the deal in EU is terrible for young and not
| so young productive people. Taxes on income are high, real estate
| is very expensive as the land is already taken by others (who
| usually pay very little tax on it). There is regulatory capture
| in many industries so you need to first spend years in school
| then more years to get various certificates and then often you
| need to work for basically free until you can jump to to the
| other side of the barricade and start exploiting newcomers.
|
| Taxes are high in Europe because we fund older generations and
| have oversized wasteful public sector. It has nothing to do with
| education (very low % of overall budget), healthcare (you are
| funding it mainly for old people paying multiple of you fair
| share if you have any kind of decent job) or "social safety
| nets". I hope more countries push against that. Portugal has
| fantastic weather and landscapes, same for Greece. Attract enough
| productive people who are fed up with being diary cows for
| pensioners and bureaucrats who never worked an honest day in
| their lives but are very qualified to spend your money and things
| will start happening there.
| alephnerd wrote:
| > Taxes are high in Europe because we fund older generations
| and have oversized wasteful public sector
|
| Everyone seems to forget the Eurozone Crisis from 2008-2014 and
| how government debt skyrocketed.
|
| A lot of that debt was also at bad terms due to the high risk
| profile during that time period.
|
| The only easy lever a lot of European countries had to service
| their budgets was taxes, because a lot of other levels were
| handed off to the ECB.
| rsynnott wrote:
| How much of that is still at high rates? Ireland's (at one
| point the second-highest debt to gdp ratio in the eurozone)
| average cost of debt servicing is ~1.5%; at that rate you
| don't _want_ to pay it off. At least in Ireland it was
| largely refinanced since the crisis; I'd guess it's similar
| in the other high-debt nations (except possibly Greece, where
| refinancing might be difficult).
| alephnerd wrote:
| Portugal is in a similar boat to Greece.
|
| Ireland is very business and FDI friendly, has a fairly
| decent budget, and worked very hard to resolve it's debt
| problem in the 2010s.
|
| Ireland now has a ratio similar to that of Germany's, and
| Ireland has a credit rating of AAA for years now while
| Portugal only recently made it to BAA in the past year.
| EasyMark wrote:
| But life isn't just about money, it's about being able to enjoy
| it, and that is so much easier in countries like Portugal,
| Spain, Italy, and Germany compared to say the USA. Obviously
| that's a stated opinion and everyone wants different things
| from life.
| seydor wrote:
| More than a million greeks have emigrated since the debt
| crisis. Life is enjoyable for tourists
| randomNumber7 wrote:
| This is exactly what I think as a young and educated person.
| insane_dreamer wrote:
| Could reduce the number of bureaucrats, but supporting the
| elderly is part of having a stable somewhat equitable society.
| The post Ww2 boom and the birth rate decreasing has made that a
| greater burden on the younger generation than it would
| otherwise be.
| intellectronica wrote:
| Whenever I read about these schemes I wonder ... did it not occur
| to the people running the governments of these countries that
| people are not purely economic maximisers, and that they can
| attract and retain people by having a country that is fun and
| comfortable and safe to live in? People in Denmark pay a lot in
| taxes, but I haven't seen many of them rushing to leave.
| alephnerd wrote:
| > People in Denmark pay a lot in taxes, but I haven't seen many
| of them rushing to leave.
|
| The issue is salaries in Portugal are VERY VERY low - they are
| comparable to Poland, Romania, and Greece - yet their tax
| burden and cost of living is comparable to Denmark.
|
| A 25 year old Portuguese college graduate can immigrate visa
| free to Denmark and double-to-triple their salary almost
| overnight.
|
| The same can't be said for a Dane unless they immigrate to the
| US, but they're in the H1B queue like everyone else so it just
| isn't worth the hassle unless it's a high paying white collar
| job.
|
| The EEC has a massive disparity in incomes, with average
| monthly wages ranging from EUR700 to EUR5,000 depending on the
| country, and as EEC members tend to have fairly simplified
| immigration policies between each other, this causes a brain
| drain in the countries with lower wages.
| intellectronica wrote:
| Right, but there are two variables in that equation. If the
| economy were stronger and more productive people could earn
| higher salaries. Don't get me wrong, I don't like taxes
| either (I live in Switzerland and pay relatively low rates of
| income tax) but it just seems like a loser move to decide
| that the solution is to fiddle with the taxes, rather than
| figure out how to make it a place people can build a great
| life in, including salaries, services, fun, comfort, safety
| ... all the different things that are important to people.
| alephnerd wrote:
| > If the economy were stronger and more productive people
| could earn higher salaries
|
| The issue is Portugal is very business unfriendly and human
| capital is weak.
|
| It's hard to make the case to invest in Portugal when you
| can invest a similar amount in neighboring Spain and get a
| much better return.
|
| Nor do local businesses earn enough to pay comparable to
| higher income countries in the Single Market - especially
| because Portugal essentially penalizes large employers
|
| This means the only way to make up the salary differnce
| that is the cause of the brain drain is to decrease taxes
| for early career Portuguese.
|
| Denmark and Portugal are nowhere near the same level of
| development, and what works for Denmark does not work for
| Portugal.
| intellectronica wrote:
| > business unfriendly and human capital is weak
|
| Exactly. So I would focus on improving that, rather than
| try a quick and desperate trick of tax cuts. Why not
| collect the taxes and then invest them wisely in great
| modernised services, for example?
| alephnerd wrote:
| Becuase such changes are extremely difficult and take a
| generation.
|
| Easing hiring means pissing off unions, which means you
| piss off voters and donors.
|
| Simplifying entry of foreign businesses and competitors
| means pissing off small and medium businesses, which
| means you piss off voters and donors.
|
| Shrinking Portugal's notorious bloated public sector will
| save money, but means firing a significant number of
| Portuguese, which means you piss off voters.
|
| Shrinking Portugal's notoriously large spending on social
| programs will save money, but means you piss off voters.
|
| You can't just "modernize services" overnight. It
| requires a generation, a lot of capital, and strategy to
| invest in building a High Tech industry.
|
| > Why not collect the taxes and then invest them wisely
| in great modernised services, for example?
|
| Because Portugal has had an elevated debt-to-GDP ratio
| for almost 20 years now, which makes it extremely
| difficult to get the capital to do any of the above,
| which means a significant amount of Portugal's tax
| revenue is spent on servicing those debts.
|
| The average Portuguese gets paid too little, the average
| Portuguese business is too small to generate significant
| business taxes, and every individual Portuguese person
| who has hireable skills has no incentive to be paid a
| fraction of what they would earn in London, Frankfurt, or
| Madrid.
|
| Lowering taxes for early career Portuguese in order to
| entice them to stay until they become mid-career is the
| least bad option of the multiple bad options Portugal
| has.
| intellectronica wrote:
| Thanks for describing the complexity clearly. I think I
| agree now. It's a disappointing solution that is quite
| possibly better than other options.
| crubier wrote:
| PIGS Countries don't have capital available to invest in
| salaries / services / fun / comfort in the first place, due
| to historical reasons, the 2010s debt crisis etc.
|
| So the move of bringing people and capital by available
| means (tax breaks) and be less hostile to startups &
| companies (they have been very hostile and bureaucratic
| historically) is one of the few things they can do, and it
| works.
| Moldoteck wrote:
| Romania total taxes are quite high, because we don't have tax
| ladders, it's one size fits all solution and it's a lot. It's
| that cost of living here is smaller and as result it's not
| that bad
| alephnerd wrote:
| Yep, but realistically, Romania (as well as Poland and the
| rest of Eastern Europe) will end up in the same kind of
| middle income trap just like Portugal within the next 10-20
| years.
| chucke wrote:
| Indeed. Portugal got by in Europe while it could
| advertise its services as significantly cheaper (Italy
| and Greece did the same). Romania, Poland and all will
| live to see another nation take its place, and if not
| finding a way to produce high value add products and
| processes, face the same kind of stagnation as Portugal.
| outworlder wrote:
| > a country that is fun and comfortable and safe to live in
|
| I think Portugal is fun, comfortable and safe. It is a
| fantastic place if you want to visit.
|
| Living there can be an issue. One of the problems, as another
| comment says, is that salaries are really low. That's probably
| compounded by the amount of bureaucracy one needs to wade
| through to do anything, and the overall 'old school' thinking
| of folks.
|
| Generalizing(perhaps unfairly), the Portuguese seem to look
| fondly at the rear view mirror, but more progressive ideas are
| not viewed in the same light.
|
| You would probably see more people staying if they had a space
| for their ideas, and a living wage.
| aleph_minus_one wrote:
| > That's probably compounded by the amount of bureaucracy one
| needs to wade through to do anything
|
| That does not sound like the description of a "fun" or
| "comfortable" country to live in. :-(
| intellectronica wrote:
| I've been to Portugal and it's lovely. But I don't think
| earning a low salary and not having enough is fun. Wouldn't
| be for me, at least.
| more_corn wrote:
| My friend created a tech company there because salaries are
| low. He employs a dozen capable smart professionals. He pays
| them well for the local economy and arbitrage of tech works
| means he's able to offer low rates and high quality on the
| international market. He's a rich expat gobbling up a housing
| unit but also creating jobs. It's probably a net win for the
| locals.
|
| A cool policy would be every newcomer has to construct (or
| cause to be constructed) at least one housing unit. If that
| was a condition of the golden visa everyone would do it and
| the benefits would be in injecting significant additional
| supply into the local rental and real estate market
| preventing supply and demand from raising housing costs.
| kevin_thibedeau wrote:
| The US investor visas get abused by elites building their
| own apartments as "economic development".
| newaccount74 wrote:
| > I think Portugal is fun, comfortable and safe.
|
| Yeah, apart from the pickpockets in Lisboa. They are really
| the most brazen I have ever seen anywhere. They don't seem
| dangerous, but constantly having someone trying to pick a
| wallet from your bag is pretty annoying.
| itake wrote:
| Is there any place in the world that is "fun and comfortable"
| that isn't an economic maximiser?
|
| Thailand comes to mind, but its only "fun and comfortable" if
| you're an economic maximiser, bringing western money in. For
| locals, it is not fun or comfortable.
|
| Denmark pays the highest wages in the EU [0], so you can't
| consider there.
|
| [0] - https://nordicbusiness.media/denmark-pays-the-highest-
| wage-i...
| steveBK123 wrote:
| Portugal is an interesting microcosm of the general economic
| problems in EU vs US.
|
| I don't think tinkering with income tax brackets/credits is going
| to fix the actual problem - robust and steady job creation of
| good paying jobs.
|
| There are ~11M people in Portugal, 3M of which are in Lisbon
| metro and 2M are in Porto metro areas. This leads them to having
| the same problem as Japan - the population is decreasing, BUT the
| countryside and 2nd/3rd tier cities are emptying out.
|
| So housing affordability in the major cities remains poor. The
| youth therefore get squeezed out and emigrate, leaving an
| increasing tax burden problem paying for all the benefits given
| to the increasingly aging population.
|
| My father visited his home town in the countryside in the last
| decade and found much of the town essentially abandoned. No one
| lived in the home he grew up in. His uncle owned an inn that had
| no guests, etc.
|
| Meanwhile, Portugal remains a beautiful place and I will visit
| more in the future, and could even see wanting to retire there.
| klipt wrote:
| The EU and USA both have free movement between states.
|
| But the USA has massive federal tax revenue and spending which
| redistributes wealth from rich states to poor states. Federal
| taxes are much higher than state taxes.
|
| By comparison the EU has high state taxes, but very tiny
| "confederal" EU level revenue. So much less ability to balance
| things between rich and poor member states.
|
| This puts poor states like Portugal into a bad position where
| they suffer from brain drain due to the free movement, but
| don't get enough monetary benefits from the EU to counteract
| that.
|
| This turns Portugal into a gateway country for the EU: they
| have loose immigration rules because they want to attract young
| workers. But as soon as those workers live in Portugal long
| enough to get an EU passport, many brain drain away to other
| (better paying) EU countries, and need to be replaced with even
| more immigrants.
| alephnerd wrote:
| > This puts poor states like Portugal into a bad position
|
| The only reason Portugal (and Ireland, Spain, Greece, etc) is
| counted as a "Developed Country" today is because of the EU.
|
| These countries received the lion's share of EU Development
| Funds until EU expansion in the 1990s-2000s.
|
| If Portugal didn't join the EU, it would have been similar to
| Argentina - it's economic peer until EU ascension in 1986
| melenaboija wrote:
| Spain is x3 the nominal GDP of Ireland and x6 Greece and
| the 15th economy in the world and the three together are of
| the size of Canada.
|
| Maybe your comment about what defines a developed country
| might be overly simplified...
| alephnerd wrote:
| > developed country
|
| Developmental indicators, nominal GDP per Capita, and
| median household income.
|
| Before Spain, Ireland, Greece, and Portugal ascended into
| the EU in the 1970s-80s, their developmental indicators
| largely mirrored those of developing countries from that
| era (Malaysia, Turkey, Argentina, Iran).
|
| It was EU developmental funds that helped these countries
| not fall into the middle income trap.
|
| The only developing countries that were able to escape
| the middle income trap without EU Development Funds or
| oil were South Korea, Taiwan, Singapore, and Israel.
|
| Also, having a large GDP does not mean a country is
| developed. China and India have the 2nd and 5th largest
| GDP in the world, yet their median household incomes are
| less than that of Thailand, Mexico, or Malaysia - let
| alone countries defined as developed by the IMF.
| lastdong wrote:
| Portugal, like Spain and Argentina, faced significant
| historical challenges in the 20th century. Portugal's
| fascist regime, which lasted until 1974, limited
| investment in infrastructure and economic development.
| Spain, under Franco's dictatorship, also faced political
| and economic constraints. Argentina, too, experienced
| political instability and economic turmoil, particularly
| during the 1970s military dictatorship.
|
| Also were mentioned Malaysia, Turkey, and Iran, which
| have their own unique historical contexts that I'm not as
| familiar with.
| alephnerd wrote:
| Absolutely.
|
| And that doesn't have anything to do with my point that
| Spain was a developing country well into the 1990s, and
| that most of the post-Franco era development was
| subsidized by EEC and EU Developmental Funds
|
| Read this, it's a good overview of the process - https://
| www.elibrary.imf.org/display/book/9781557753199/ch02...
| johngladtj wrote:
| None of that about Portugal is true.
| steveBK123 wrote:
| Yes, EU is hurt a lot by being a currency union with freedom
| of movement without being a true federal state.
|
| It is helpful to the core rich countries and to elite/upwards
| mobile across countries. But it hollows out the periphery.
|
| A lot of the GFC era EU debt crisis was German banks lending
| to southern European states to then buy goods/services from..
| German industry. So I was not as understanding of the
| northern countries looking down at the "lazy south". It was
| far more complicated than this and they were happy to look
| the other way while it worked for the first decade.
|
| I'm honestly not sure where EU goes from here as the GFC &
| the response dampers any enthusiasm for a true federal
| government, unified military, etc. Not that there was much
| appetite to hand over that much sovereignty to start with.
| Nor does it help that post-GFC, even the rich parts of EU
| have further diverged in terms of wealth/income from the US,
| so they are probably feeling even less "generous".
|
| Draghi wrote a whole report on EU competitiveness recently
| and in standard Eurocrat form its like a 500 page paper no
| one will read, let alone action.
| fakedang wrote:
| And that is precisely the issue with the EU.
|
| I was always supportive of the spirit of the European Union
| and its ultimate objectives, but in its current state, it's
| a brutalized self-sabotaging entity that has disillusioned
| the general public to veer rightwards. And with furthermore
| technological lagging vis-a-vis China and the US, and the
| immigration crisis, not to mention the Russian Axis round
| the corner and the collective inaction of a number of EU
| states around that, and it's no wonder the EU is falling
| back into 3rd place.
|
| And for some reason, the EU still thinks net uncontrolled
| refugee migration is good for their economics,their
| population and their electability, as is letting American
| private equity buy up large swathes of residential
| properties. Guess that's what you get when you let
| freeloaders who haven't worked a real job in their lives
| hold unelected positions of power.
| randomNumber7 wrote:
| From my impression of Germany I can tell you they would
| do the same suicide without the eu.
| xk_id wrote:
| > it's a brutalized self-sabotaging entity that has
| disillusioned the general public to veer rightwards
|
| It hasn't, it only disillusioned those people (like the
| brits) who didn't understand the purpose of the EU to
| begin with. The economic benefits were always considered
| secondary objectives, subordinated to the main principle
| of cooperation. This is public knowledge, it was made
| very clear in the foundational documents of the EU. And
| therefore the EU has indeed been very successful and its
| effect is unprecedented: since its inception, we are
| seeing the longest period ever recorded without a war
| between European countries.
| mytailorisrich wrote:
| The Brits perfectly understood _one_ of the aims of the
| EU and always disagreed with it.
|
| One of the aim is political integration and weakening of
| each member's sovereignty. The UK does not want this but
| was OK with the common market.
| xk_id wrote:
| When the question of whether to join the EU, the brits
| were actually manipulated by their politicians, who
| presented the EU as an "economic" project. This
| perception never went away, so when the EU proceeded as
| it had intended from the beginning, the brits started to
| resist and realised they had been mislead. The EU
| stipulates very clearly that the common market and its
| potential economic benefits are simply a means to an end;
| that end is to get European countries to see each other
| as equals.
| mytailorisrich wrote:
| No, the end is to destroy national identities and
| cultures and we are seeing an increasing pushback against
| that.
|
| I feel that if British concerns, including about
| immigration and free movement had been addressed Brexit
| and the current turmoil within the EU would have all been
| averted. This disconnect with the people's concern is a
| key issue the EU has to face or be torn apart.
|
| Germany suddenly deciding to reintroduce border control
| is especially telling and highly ironic.
| namaria wrote:
| Portugal's GDP PPP is about 485 billion dollars. About the
| same as Tennessee.
|
| Portugal received about 3 billion dollars from EU funds in
| 2021. About the same Tennessee received from the US federal
| government in that same year.
|
| I fail to see how a nominal difference in internal
| organization leads to much different outcomes.
|
| edit: I got some bad data on my search, my bad, will leave my
| mistake up.
| alephnerd wrote:
| Loans and Bonds are not serviced in purchasing power - they
| are serviced in exchange rate $s and EURs.
|
| Portugal (and a significant portion of EU members) had an
| economic meltdown during the Eurozone crisis from 2008-14,
| and are still trying to service those loans and bonds to
| this day.
|
| Also, Portugal's GDP is half that of Tennessee's.
|
| In fact, Portugal has the same population size as Michigan
| and North Carolina, yet a GDP that is ~50% and ~33% in size
| respectively.
| namaria wrote:
| PPP is used solely to compare Portugal to a US federation
| unit. The economy of Portugal happens in Euro and
| Tennessee in Dollars, and that is immaterial to this
| argument.
| alephnerd wrote:
| PPP is not a useful comparison unit when nominal $-EUR
| conversions and costs are extremely well understood.
| namaria wrote:
| Which US state has an economy of a size comparable to
| that of Portugal?
|
| Does that change when the relative value of Euro to
| Dollar fluctuates?
| alephnerd wrote:
| > Which US state has an economy of a size comparable to
| that of Portugal
|
| Oklahoma, but Oklahoma also only has 40% of the
| population of Portugal.
|
| Despite being in the Western half of Europe, Portugal is
| economically comparable to an Eastern European country
| like Poland or Slovakia.
|
| The only US territory (not state - even poor Mississippi
| has a higher median household income and GDP per capita
| than much of Western Europe excluding Germany and
| Scandinavia) that is comparable to Portugal is Puerto
| Rico.
|
| In fact, the problems Puerto Rico faces today in the US
| mirror those that Portugal faces in the EU.
| steveBK123 wrote:
| If you are comparing the aid an EU country gets vs the
| aid a US state gets.. You do not really need to do any
| PPP or currency conversion.
|
| Take the GDP, in local value, against the aid they
| receive, in local value.
|
| Then you have a percent, which you can compare between
| the two agnostic of PPP/currency/etc.
| steveBK123 wrote:
| Right, Portugal nominal GDP is 300B EUR so that 3B EUR
| subsidy is 1% of GDP.
|
| Tennessee nominal GDP is $420B and the last figure I
| found for federal aid to TN was $10B but this was 2014
| data, at which point TN GDP was $350B. So ~2.5-3% of GDP
| in aid from the feds, quite a lot more than Portugal.
|
| Also this is simply the direct aid in TN budget that
| comes from Feds. Often there are other direct
| payments/transfers from Feds to individuals who file
| federal taxes while living in TN, which is not captured
| in that $10B number.
| alephnerd wrote:
| Yep.
|
| A major issue was the ascension of then poorer CEE states
| in the 1990s and 2000s.
|
| This meant the bulk of EU Development Funds which used to
| go to Southern European countries like Portugal and
| Greece ended up getting diverted to countries like
| Hungary, Poland, Romania, Bulgaria, Slovakia, etc.
|
| Unlike the CEE countries, Portugal's pre-EU era rulers
| (eg. Salazar, post-Revolution military junta, trade
| unions) did not invest in human capital to the same
| degree that CEE's pre-EU rulers did.
| klipt wrote:
| In 2021, USA federal government spent $113.3 billion in
| Tennessee according to
|
| https://www.usaspending.gov/state/tennessee/2021
|
| Including $72.6 billion in direct payments.
| steveBK123 wrote:
| Indeed - TN budget shows individual departments like DOT
| getting $1B+ of federal money alone.
|
| https://www.tn.gov/content/dam/tn/finance/budget/document
| s/2...
| s1artibartfast wrote:
| This misses the component of interstate distribution.
| Depending on how much federal taxes Tennessee paid, that
| 113 B could become positive or negative.
|
| It looks like in 2023, the IRS collected ~96 billion from
| TN
|
| https://www.irs.gov/statistics/soi-tax-stats-gross-
| collectio...
| brm wrote:
| I mean you've also accurately described Pennsylvania...
| steveBK123 wrote:
| American doomers generally underestimate how much better we
| have it than the rest of the developed world on just about
| every economic measure - income, wealth, employment, etc.
|
| Like sure the EU, healthcare & education is cheap/free, but
| your taxes at the low end will are double to pay for that.
| And they pay nurses similar to what we pay fry cooks. Even
| higher pay places like London, UK pay 1/3 to 1/2 what you can
| make in NYC or SF for similar jobs.
| chgs wrote:
| The U.K. has the same problem. Remove London from the equation
| and the U.K. is poorer than the poorest US state.
|
| And like the EU there's very little investment from London out
| to the regions
|
| This leads to increased demand for housing in London (and to a
| lesser extent Manchester and a couple other big cities) and a
| vicious cycle.
|
| Even worse, an ambitious young person can't go anywhere else
| other than London thanks to Brexit.
|
| In the U.K. the median wage outside London is about 20% above
| the minimum wage. There's basically no point in doing anything
| other than the lowest shittest job you can find. Hell a masters
| degree will only net you about 30% more than minimum wage in
| many sectors.
|
| I've just spent 2 weeks in the US, including being in Florida
| since Sunday. A young colleague has been working in our DC
| office for much of the last 2 years on a non immigrant visa. He
| went for a h1b and has got it, he'll be leaving for a local
| employer by the end of the year.
|
| For the first time ever I'm actually thinking the problems of
| the US are now less than those of the U.K., and even
| potentially Europe, and were I 20 again I'd be looking at the
| US as a target.
| steveBK123 wrote:
| Yes I've worked nearly 20 years with teammates in London and
| watched how much even London & NYC have diverged in that
| time.
|
| There was a brief period post GFC where it seemed like the US
| had lost its way and Europe had the right idea. Europe leaned
| hard into austerity and self immolated while the US just grew
| our way out of it and into the future.
|
| As an American, I've always sort of held the stereotype of
| Europe as being a fun place to vacation. Nice lifestyle if
| you've made your money already, probably elsewhere.
|
| Unintentionally or not, Eurocrats seem to have done
| everything they can to perpetuate this further and further.
| Between austerity, regulation, bureaucracy, etc it just seems
| like the whole continent is encased in amber, focussed on how
| to slice up a static/shrinking pie.
| nickip wrote:
| What does "young people" entail? What age group?
| jasode wrote:
| Excerpt from the article: _> The current proposal would apply
| to everyone under 35._
| pjmlp wrote:
| As Portuguese I have my doubts about this actually being
| successful.
| lostmsu wrote:
| I'd love to move to Portugal, but I have kids that are about to
| enter school age, and Portuguese education seems much worse
| (judging by outcomes) than the rest of EU, especially former
| eastern block.
| Nifty3929 wrote:
| Policies lead to results.
|
| If Portugal wants to keep the young people from leaving, why
| don't they look at where those people are going - and why - and
| emulate the policies of those destination countries?
|
| If you don't want to adopt the policies that lead to the results
| that you want, then you don't really want those results.
|
| Maybe most of the voters and politicians in Portugal don't want
| to change those things that the young people don't like.
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