NCPA - National Center for Policy Analysis

European Leftists Enact Tax Cuts American Liberals Wouldn't Hear Of

April 20, 2001

Most of Europe's countries are run by left-of-center governments. But taxes are coming down across the continent -- even in tax-loving countries like the Netherlands, Sweden, France and Germany.

Moreover, the size of the tax cut is bigger in Germany, for example, than those proposed by President George W. Bush for Americans.

  • Bush's proposal would provide American taxpayers with cumulative relief of about 3.6 percent of gross domestic product between 2002 and 2006 -- even less if Congressional Budget Office growth projections turn out to have erred on the low side.
  • But Germany would hand back to taxpayers 4.1 percent of GDP between 2001 and 2005.
  • Rather than being targeted at low-income taxpayers, Germany's tax reform is heavily directed at slashing marginal tax rates.
  • The top marginal personal income-tax rate will fall to 42 percent by 2005 -- down 11 percentage points from its 1998 level.

Germans don't face any additional personal income taxes at the state level, as do many Americans. This means that high-income Americans living in California or New York will end up with a considerably higher tax rate than those of comparable income in Germany. In the case of California, the difference will amount to almost 7 percentage points.

All this is happening while Germany and many other European countries are still running budget deficits. But Europe's socialists have found out the hard way that high taxes hamper innovation, economic growth and job creation.

Source: Olaf Gersemann (Wirtschafts Woche), "Californian? In the Top Bracket? Move to Bavaria!" Wall Street Journal, April 18, 2001.


Browse more articles on International Issues