July 7th - Tax Avoidance & Austerity

How does tax avoidance weaken democracy?

Erodes fairness, undermines state capacity, shifts the tax burden to individuals, promotes inequality

Broader implications of tax avoidance?

Weakened welfare state, social unrest, reduced social cohesion, and compromised justice

What are proposed solutions to tax avoidance from The Price We Pay?

Financial transaction tax (Robin Hood Tax) —> proposed tax on financial transactions, such as trading stocks, bonds, and derivatives; global tax regime; bank-government transparency, public education

What global structural issue encourages tax avoidance?

International competition for lower corporate tax rates

What happens when welfare states weaken due to tax burdens on individuals?

Increased inequality, risk of social unrest, and threats to democracy.

What is austerity?

Government policies that reduce budget deficits through spending cuts and/or tax increases

Why do governments implement austerity?

To reduce debt, signal fiscal responsibility, and restore investor confidence

What are common austerity-related spending cuts?

Limit unemployment benefits, reduce public worker wages, cut social programs

What tax reforms are part of austerity?

Increase income taxes (esp. on the wealthy), raise VAT (value-added tax), privatize state-owned assets

How can austerity deregulate labour markets?

Lower minimum wage, increase work hours, weaken worker protections

What were key Greek austerity measures (2014-2015)

Mass layoffs, 17% public wage cuts, pension cuts, tax hikes, and privatization of 85B (euros) in assets

How did Italy respond to its debt crisis?

Raised taxes, increased retirmeent age, and targeted tax evasion

What did the UK do under austerity?

Cut 490,000 jobs, increased retirement age, reduced child benefits

How did austerity manifest in the U.S. in 2011?

Budget crises, debt ceiling standoff, fiscal cliff threats, delayed sequestration

What does the IMF say about austerity?

It may reduce growth and worsen debt, especially in a recession

When is the best time to apply austerity measures?

During economic expansion, not recession

What can go wrong if austerity is applied during a recession?

Higher unemployment, lower consumer spending, weaker GDP

How has austerity affected politics globally?

Fueled populism and far-right movement in Europe and North America

What is central challenge discussed in this lecture?

Finding an optimal path forward that preserves democracy, fairness, and financial stability