The good old competition
Competition, and its benefits for consumers, can be very effective also when it comes to taxes. Apparently many European states discovering that it is better to charge lower tax rates than keeping the higher rates and not get anything:
May 29 (Bloomberg) — A tax-cut war is spreading across Europe as leaders of the continent’s biggest economies give up criticizing smaller neighbors for slashing business rates and decide to join them instead.
The move toward lower levies on corporate profits in Spain, Germany, France and the U.K. is aimed at wooing companies and reinforcing the strongest economic expansion in six years. It comes after Ireland and new European Union members from eastern Europe succeeded in attracting investment, and irking their larger rivals, with tax rates of less than 20 percent — among the world’s lowest.
[...]
Supporters of lower corporate taxes point to the success of Ireland, whose 12.5 percent rate, the lowest in the developed world, is down from 47 percent in 1988.
That proved a magnet for such U.S.-based technology companies as Microsoft Corp., Intel Corp. and Dell Inc. and helped Ireland’s economy grow more than three times the rate of the euro-area in the past decade, while still running a budget surplus in nine of the 10 years
A similar phenomena, although on much smaller scale, was observed in the US when many states had to reform their tax code or loose the corporations. However, and as blessed the tax cuts, several questions come to mind. First, if many in European countries start to realize the benefits of lower, and simpler, tax why aren’t they moving toward flat-tax rate?
And second, and for me this is the more important question, what about the residential taxes? The logic in the base of the welfare states was to take money from those who have it (like corporation) and use it for the benefit of those who don’t have it, or have less of it. But now these states start to take less from those who have, and the same from those who have less. shouldn’t the tax cut be done across all levels? But the move of businesses to places where the tax burden is lower expose the fallacy of the entire taxing as a wealth distribution method. Since I wasn’t under the delusion that welfare state is working, and is more efficient than the free market, I’m not surprise to see that it is running into such paradoxes.
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