Growls

The Center for Freedom and Prosperity provides a link to a “thorough new study, (which) shows America’s tax system (is) getting worse” and is “ranked in (the) bottom half of industrialized nations.”

The study, “Tax burden and individual rights in the OECD: an international comparison (requires Adobe Reader),” by Pierre Bessard of the Institut Constant de Rebecque in Lausanne, Switzerland.  In a forward to the study, Pascal Salin, professor emeritus of economics at the Universite` Paris Dauphine, writes:

“(W)hen a private producer sees the arrival of a competitor likely to offer better products at lower prices he fears that he might lose clients and that this competition will be “harmful” for him. He might be tempted, against all logic and any moral sense, to denounce this competition – a competition that will perhaps be called “unfair” – and call for the intervention of state coercion in order to put an end to the other producers’ freedom to produce and sell. Of course, if his complaints are heard and if a state sets the protections necessary to allow him to continue offering products that are less satisfactory for his clients than his competitors’ products, there will be victims. Namely, the consumers deprived of potential gains and the other private producers deprived of their normal markets. It is therefore not competition that is harmful, but the lack thereof.

“The very same holds true for public policies, in particular tax policies. By trying to prevent tax competition, OECD or EU member states wish to deprive the world’s citizens of their freedom to choose for themselves or for some of their activities the tax environment that they deem best . . .

“By restricting tax competition, for instance by trying to harmonize tax policies or by fighting “tax havens”, high-tax states – tax hells – deprive their citizens of one of the great benefits of competition, experimentation. As Friedrich Hayek often pointed out, competition is a “discovery process”. In a purely imaginary world of perfect knowledge, competition would surely be unnecessary, for everyone would know what the best solutions to any problem are. But we are not in a world of this kind. Yet that is precisely what the high-tax states fighting against tax competition would like to make us believe. They assume that their tax policies are the best possible and that any competition would lead to a “race to the bottom”. But if the tax rates applied in the tax hells – for instance for the taxation of capital – were optimal, capital would not flee. For a long time, drastic foreign exchange controls have allowed many states to despoil capital. They cannot tolerate that their “tax slaves” can flee to more favorable areas. And yet, as this study so opportunely underscores, the whole world benefits from the existence of low-tax areas. For these areas not only lead to capital movement, but also create incentives to accumulate more capital.”

The study presents a “tax oppression index,” which “is based on 18 representative criteria measuring fiscal attractiveness, public governance and financial privacy in the 30 member states of the OECD. In the study, “Switzerland appears as the country with the lowest tax oppression – due to a relatively low tax burden and a more liberal institutional order, including its citizens’ right to veto legislation, political decentralization, and protection of financial privacy. Germany and France, on the other hand, whose governments have supported the OECD’s efforts, are among the most questionable states in terms of safeguarding their residents’ individual rights.”

Using the tax oppression index, the 30 OECD (Organization for Economic Cooperation and Development) countries are ranked from the most oppressive (Italy and Turkey with indices of 6.0) to the least oppressive (Switzerland with an index of 2.0). The United States index is 5.3 (tied for 10th most oppresive with the United Kingdom).

Gee, one might think that with the current economic conditions in the United States, e.g., unemployment at 9.5% and expected to increase to over 10%, the President and Congress would be working to reduce tax oppression rather than increasing tax oppression through burdening America with universal health care.

Wait a minute, lower taxes and letting Americans have the freedom to choose where and how they receive their medical care would mean more liberty and less tyranny.What a concept!

The following cartoon is used with permission of William Warren and Americans for Limited Government.