NCPA - National Center for Policy Analysis

Globally, Tax Cutting Becomes Fashionable

May 19, 2000

A number of countries, particularly in Europe, are considering hopping on the tax-cutting bandwagon. The movement is being prompted by brighter prospects for government budgets and enhanced economic growth.

  • France's finance minister, Laurent Fabius, has proclaimed his country's tax burden "too high" and vows to increase the momentum toward tax reduction.
  • German Chancellor Gerhard Schroeder's government is pushing a reduction in the top marginal income tax rate, as well as a cut in the corporate income-tax rate.
  • Italy has pared individual income-tax rates in the past several years and combined several corporate taxes and fees into one lower business tax.
  • Britain's Labor government has cut the country's main corporate tax rate, and the latest budget has cut the basic income-tax rate for individuals and reduced capital gains taxes.

Outside Europe, Canada's governing Liberal Party is offering the deepest tax cuts in the country's history -- proposing to cut both the general corporate tax rate and make substantial cuts in individual income tax rates.

These trends have upset officials at the Organization for Economic Cooperation and Development and the International Monetary Fund. The OECD recently cautioned governments against "throwing away" what improvements had been made in public finances during the 1990s. The IMF says governments should cut spending if they want to cut taxes. The IMF and the European Commission are urging euro-zone governments with the hottest economies -- notably Ireland and Spain -- to avoid tax cuts and use fiscal restraint to brake their economies.

The Irish finance minister responded by calling the commission a bunch of Communists who always oppose tax cuts.

Source: Joel Baglole, Marc Champion and David Woodruff, "Tax Cuts Loom Globally as Economies Grow," Wall Street Journal, May 19, 2000.


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