NCPA - National Center for Policy Analysis


August 31, 2007

While the U.S. Congress has proposed higher tax rates on personal income, capital gains and dividends, the Reagan economic philosophy of lower taxes, less regulation and free trade has never been more in vogue abroad, says Stephen Moore, member of the Wall Street Journal's editorial board.

The most remarkable attitudinal shift on taxes has been in Europe, says Moore:

  • French President Nicolas Sarkozy has plans to cut his country's business income tax by at least 5 percent as part of his economic rehabilitation plan.
  • Spain and Italy are negotiating plans to lower their corporate tax rates, and the United Kingdom already did so earlier this year.
  • Sweden and Russia last year eliminated their estate taxes because they said the tax was economically counterproductive.
  • In Germany, under Chancellor Angela Merkel, the corporate tax rate has been lowered to less than 30 percent from 39 percent.

One of the biggest factors influencing Old Europe has been the impact of the flat-tax revolution:

  • Austria cut its corporate tax rate to keep pace with its neighbor, Slovakia which recently adopted an 18 percent flat tax.
  • Singapore is cutting taxes to compete with its 16 percent flat-tax rival Hong Kong.
  • Northern Ireland wants to cut its tax rates so that it can compete with the economic gazelle of Europe, the Republic of Ireland.

The idea that jobs, businesses and wealth follow low tax rates is widely accepted, says Moore.  Nguyen Van Ninh, head of the Department of Taxation in Vietnam is typical.  He concedes that the corporate tax cuts may lose revenues, but the business environment will become more and more attractive, resulting in increased investment.  Alas, there's only about one place on the planet where politicians hold Reaganomics in outright disrepute today -- and that is here.

Source: Stephen Moore, "Reaganomics 2.0," Wall Street Journal, August 31, 2007.

For text: 


Browse more articles on Tax and Spending Issues