OK: I think I missed that you’re implying that the cases where companies in fact move to low-tax jurisdictions count as growth, rather than all cases. It makes sense that if you model choice of how much taxes to pay as a choice of how much of some manufacturing input to buy, then companies only do that if it increases efficiency, and my argument above doesn’t make sense taken totally straightforwardly.
I still think you can be wrong for a related reason. Suppose the government spends taxes on things that increase economic growth that no private company would spend money on (e.g. foundational scientific research). Suppose also that that’s all it does with the money: it doesn’t e.g. build useless things, or destroy productive capabilities in other countries. Then moving to a lower tax jurisdiction will make your company more efficient, but will mean that less of the pro-growth stuff governments do happens. This makes the effect on growth neutral. Is this a good model of government? Well, depends on the government, but they really do do some things which I imagine increase growth.
My main objection is that thinking of government as providing services to the people who pay them is a bad model—in other words, it’s a bad idea to think of taxes as paying for a manufacturing input. When you move out of a state, the government probably spends less on the people still in there, and when you move in to a new state, you mainly benefit from other people’s taxes, not your own. It’s as if if you stopped buying glass from a glass company, they made everyone else’s glass worse: then it’s less obvious that your lightbulb company buys less glass, society will get richer.
OK: I think I missed that you’re implying that the cases where companies in fact move to low-tax jurisdictions count as growth, rather than all cases. It makes sense that if you model choice of how much taxes to pay as a choice of how much of some manufacturing input to buy, then companies only do that if it increases efficiency, and my argument above doesn’t make sense taken totally straightforwardly.
I still think you can be wrong for a related reason. Suppose the government spends taxes on things that increase economic growth that no private company would spend money on (e.g. foundational scientific research). Suppose also that that’s all it does with the money: it doesn’t e.g. build useless things, or destroy productive capabilities in other countries. Then moving to a lower tax jurisdiction will make your company more efficient, but will mean that less of the pro-growth stuff governments do happens. This makes the effect on growth neutral. Is this a good model of government? Well, depends on the government, but they really do do some things which I imagine increase growth.
My main objection is that thinking of government as providing services to the people who pay them is a bad model—in other words, it’s a bad idea to think of taxes as paying for a manufacturing input. When you move out of a state, the government probably spends less on the people still in there, and when you move in to a new state, you mainly benefit from other people’s taxes, not your own. It’s as if if you stopped buying glass from a glass company, they made everyone else’s glass worse: then it’s less obvious that your lightbulb company buys less glass, society will get richer.