Impact of taxes

Boyes makes a key point in yesterday's post regarding the expansion of the US tax system. This evolution should not be analyzed in isolation but as in relative terms.

Dennis Mitchell in a perceptive study found:

Seven nations in the European Union cut their corporate income tax rates this year. In the past five years, 16 EU nations have cut their corporate tax rates.

This is not trend restricted to Europe, although as Boyes correctly points out, the US is notable for not following what appears to be a significant and world wide trend.

European nations are not the only ones cutting corporate tax rates. In 2002, Australia cut its corporate tax rate to 30 percent, and now New Zealand has announced
that it will cut its rate to match Australia’s. Singapore’s rate is scheduled to fall from 20 percent to 18 percent.

And, over the last 25 years what has happened in the US? This is clear evidence of the statism that Boyes and I have observed in the US. This lack of responsiveness to competitive pressures from other countries is the inevitable outcome of a belief system in our country that now bases political and policy decisions on a distrust of market orders and an enthusiastic confidence in the state.

All European nations—even the bloated welfare states of France and Sweden—have lower corporate rates and generally better corporate tax systems than America. The shift to lower corporate tax rates has been particularly pronounced since the mid-1990s. The average corporate tax rate in Europe has dropped 14 percentage points since 199. Meanwhile, the sum of the federal rate and average state rate in the United States has remained at 40 percent.

Click here to read Mitchell's outstanding set of positive analysis. This reflects my post that beliefs, norms and conventions trump "facts" or a more empirical view of the world. In our country leaders(what Sowell and Hayek call the elite or the intelligensia, the apparatus that support the state) of all stripes - both right and left (think Limbaugh or Palin v Maddow or Emmanuel) do not include data such as the Mitchell study in their calculus. They correctly understand that the mass of Americans base their understanding and action on beliefs rather than analytics.