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A lesson in economics from Hong Kong

It is widely agreed upon by independent sources that Hong Kong is one of the most, if not the most, free economy in the world. As such, let us review a few numbers:

  • Population: 7 Million; Working population: 3.75 Million
  • A single person can earn HK$108,000 a year (about US$14,000) before owing any tax
  • a married person with a dependent spouse can earn HK$216,000 (US$28,000) tax-free. 
  • For those who do pay tax, the maximum rate tops out at 17%, and most people pay less. 
  • No Sales tax, VAT, capital gains tax, or taxes on dividend income.

Result:

  • projected budget surplus of 3.5% of GDP for the fiscal year ending March 31, 2012.
  • Cash reserves of about HK$662 billion (US$85 billion), or 22 months worth of expenditure. 
  • Roughly US$12,150 in spare cash for every man, woman and child in the territory, and they are rebating much of this to citizens over the next few months.

Is this not a model that highly-taxed, indebted nations can learn from? If you do not tax me highly today, will I not have more revenue to spare tomorrow? Will I not (to paraphrase Friedman) have savings to allocate more efficiently than those that would confiscate it? Could it be that taxing less could lead to higher revenue, higher savings and higher productive capacity simultaneously?

6 notes
Friday, February 10th, 2012
  1. tjslater posted this