Many people assume that Europe is the land of high-tax welfare states and America is an outpost of laissez-faire capitalism. We should be so lucky. The burden of government in America is still lower than it is in the average European nation, but the United States is a lot closer to France than it is to Hong Kong – and the trend is not comforting.
We recently endured the embarrassing spectacle of President Obama arguing with Europeans that they should increase the burden of government spending. Now we have a new report from the European Commission indicating that the average corporate tax rate in member nations of the European Union has plummeted to just 23.5 percent while the corporate tax rate in the U.S. has stagnated at 35 percent. In the past dozen years alone, as the chart illustrates, the average corporate tax rate in the European Union has dropped by nearly 12 percentage points. To make matters worse, the corporate tax rate in America actually is closer to 40 percent if state tax burdens are added to the mix.
This is not to say that European politicians are reading Hayek and Friedman (or watching Dan Mitchell videos on corporate taxation). Almost all of the positive reforms are because of tax competition. Thanks to globalization, it is increasingly easy for labor and (especially) capital to cross national borders to escape bad policy. As such, nations now have to compete for jobs and investment, and this liberalizing process is particularly powerful among nations that are neighbors.
[…] this policy so attractive – and vitally important – is that the rest of the world has been in a race to reduce corporate tax […]
[…] all over the world felt pressure to lower their tax rates on personal income. The same thing has happened with corporate tax rates, though Ireland deserves most of the credit for getting that process […]
[…] rule is what saved the E.U. from prior attempts to force member nations to adopt anti-growth […]
[…] all over the world felt pressure to lower their tax rates on personal income. The same thing has happened with corporate tax rates, though Ireland deserves most of the credit for getting that process […]
[…] all over the world felt pressure to lower their tax rates on personal income. The same thing has happened with corporate tax rates, though Ireland deserves most of the credit for getting that process […]
[…] this policy so attractive – and vitally important – is that the rest of the world has been in a race to reduce corporate tax […]
[…] this policy so attractive – and vitally important – is that the rest of the world has been in a race to reduce corporate tax […]
[…] policy so attractive – and vitally important – is that the rest of the world has been in a race to reduce corporate tax […]
[…] the process started, there have been major global reductions in tax rates, both for households and businesses, as governments have competed with each other (sadly, the US has fallen way behind in the contest […]
[…] (though not fully since there are varying amounts of tax competition between nations, both for investment and people) from the consequences of their reckless […]
[…] explains that his nation has a bloated welfare state, which has resulted in heavy taxes on workers (vigorous tax competition precludes onerous taxes on […]
[…] the right of low-tax nations to have competitive tax policy. This is a real issue in Europe. I noted back in 2010 that, “The European Commission originally wanted to require a minimum corporate tax rate of 45 […]
[…] the right of low-tax nations to have competitive tax policy. This is a real issue in Europe. I noted back in 2010 that, “The European Commission originally wanted to require a minimum corporate tax rate of […]
[…] certainly is true that tax competition has pressured politicians to lower tax rates, and the academic research shows that this is a good thing, notwithstanding complaints by leftists […]
[…] corporate tax rate has dropped by five percentage points. That’s progress, but other nations have moved more rapidly in the right direction. Back in 1995, the Spanish corporate rate was slightly lower than the EU average. Now it’s […]
[…] corporate tax rate has dropped by five percentage points. That’s progress, but other nations have moved more rapidly in the right direction. Back in 1995, the Spanish corporate rate was slightly lower than the EU average. Now it’s […]
[…] corporate tax rate has dropped by five percentage points. That’s progress, but other nations have moved more rapidly in the right direction. Back in 1995, the Spanish corporate rate was slightly lower than the EU average. Now it’s […]
[…] a competitive global economy, where even Europe’s welfare states recognize reality and have lowered their corporate tax rates, on average, to 23 percent, the President’s proposal at best is a tiny step in the right direction. Rate this: Share […]
[…] take a vivid imagination to understand that Obama’s class-warfare approach would drive jobs and investment to the nations with better tax policies. Rate this: Share […]
[…] tax rates. This virtuous form of rivalry helps explain why so many nations in recent years have lowered tax rates and adopted simple and fair flat tax […]
[…] last thing worth mentioning is that most European governments have territorial tax systems and the average corporate tax rate in “socialist” Europe is down to 23 percent. Rate this: Share this:PrintEmailFacebookTwitterMoredeliciousDiggFarkLinkedInRedditStumbleUponLike […]
[…] o The corporate income tax rate will fall to no higher than 29 percent as well, something that is long overdue since the average corporate tax rate in Europe is now down to 23 percent. […]
[…] o The corporate income tax rate will fall to no higher than 29 percent as well, something that is long overdue since the average corporate tax rate in Europe is now down to 23 percent. […]
[…] Daniel Mitchell of Cato has a little beauty today titled CAP Leftists Have Accidental Encounter with the Laffer Curve, Learn Nothing: The U.S. corporate tax rate is more than 39 percent and the average corporate tax rate in Europe is less…. […]
[…] But here’s some information that CAP didn’t bother to include in the study. The U.S. corporate tax rate is more than 39 percent and the average corporate tax rate in Europe is less…. […]
[…] But here’s some information that CAP didn’t bother to include in the study. The U.S. corporate tax rate is more than 39 percent and the average corporate tax rate in Europe is less…. […]
[…] race-to-the-bottom tax cuts for evil corporations and sinister rich people. Well, it is true that tax competition over the past 30-plus years has resulted in lower tax rates. But do lower tax rates mean less tax revenue, as implied by Sachs’ […]
[…] race-to-the-bottom tax cuts for evil corporations and sinister rich people. Well, it is true that tax competition over the past 30-plus years has resulted in lower tax rates. But do lower tax rates mean less tax revenue, as implied by Sachs’ […]
[…] tax rates. This virtuous form of rivalry helps explain why so many nations in recent years have lowered tax rates and adopted simple and fair flat tax […]
[…] tax rates. This virtuous form of rivalry helps explain why so many nations in recent years have lowered tax rates and adopted simple and fair flat tax […]
[…] tax rates. This virtuous form of rivalry helps explain why so many nations in recent years have lowered tax rates and adopted simple and fair flat tax […]
[…] tax rates. This virtuous form of rivalry helps explain why so many nations in recent years have lowered tax rates and adopted simple and fair flat tax […]
[…] forma di rivalità creativa aiuta a spiegare perché così tanti paesi, negli ultimi anni, abbiano abbassato le tasse ed adottato sistemi fiscali semplici ed equi basati su un’aliquota […]
[…] tax rates. This virtuous form of rivalry helps explain why so many nations in recent years have lowered tax rates and adopted simple and fair flat tax […]
[…] with the golden eggs to fly across the border. Indeed, competition between governments is surely the main reason that tax rates have dropped so dramatically in the past 30 years. This video […]
[…] with the golden eggs to fly across the border. Indeed, competition between governments is surely the main reason that tax rates have dropped so dramatically in the past 30 years. This video […]
[…] also worth noting that the average corporate tax rate in Europe has now dropped to less than 24 percent, so even welfare states have figured out that a high tax burden on business doesn’t make […]
[…] also worth noting that the average corporate tax rate in Europe has now dropped to less than 24 percent, so even welfare states have figured out that a high tax burden on business doesn’t make sense in […]
[…] also worth noting that the average corporate tax rate in Europe has now dropped to less than 24 percent, so even welfare states have figured out that a high tax burden on business doesn’t make […]
[…] part to tax competition, the average top tax rate on individuals has fallen to about 41 percent. Corporate tax rates also have dropped dramatically, from an average of around 48 percent (this data is not as easy to pin down) in 1980 to 25 percent […]