Stephen Moore in a commentary piece in the Wall Street Journal entitled "Reagonomics 2.0" explains how so many nations have accepted the self-evident fact that lower taxes produces wealth (READ). Why don't we have a flat tax?
"French President Nicolas Sarkozy has plans to cut his country's business income tax by at least five percentage points as part of his economic rehabilitation plan. Spain and Italy are negotiating plans to lower their corporate tax rates, and the U.K. 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 reduced to less than 30% from 39%.
"Some of this tax chopping in Old Europe is a response to the success of the U.S. tax rate reductions and the fast pace of job creation that ensued from economic growth -- though few European officials will acknowledge that reality. But a bigger factor more recently has been the impact of the flat-tax revolution in Eastern Europe. Dan Mitchell of the Cato Institute says there are now 14 nations with flat taxes, 10 of them in nations formerly behind the Iron Curtain. "The pace of tax reform in these nations is so frantic, that it's hard to keep up to date with the changes," he says. Poland hasn't yet established a flat tax, but recently cut its business tax to 19% from 27%.
"Austria cut its corporate tax rate to keep pace with its neighbor, Slovakia which recently adopted an 18% flat tax. Singapore is cutting taxes to compete with its 16% 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. In 1988 Ireland was a high-unemployment stagnant economy with a 48% corporate tax rate, today that rate is 12.5% and the rest of the world is now desperate to match its economic results. Meanwhile German Finance Minister Peer Steinbrueck sold the latest tax cuts as "an investment in Germany as a business location."...
"...Alas, there's only about one place on the planet where politicians hold Reaganomics in outright disrepute today -- and that is here. The Democratic leadership in Congress believes that tax rates don't matter much if at all, and that the Bush tax cuts were a giveaway to the rich. Presidential candidate John Edwards has even suggested a near doubling of the U.S. capital gains tax rate as part of his economic program, and his rivals all have schemes to soak the wealthy as well.
"All of this threatens to move America from leader to laggard in the global race for job creation, capital investment and prosperity."
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