Tax Havens Are Good for Growth, Part I

As part of my presentation earlier this month to IES Europe, I discussed topics such as comparative economics and federalism.

I also had a chance to explain why tax havens are good for global prosperity.

Many of the points I made will be familiar to regular readers.

1. Because politicians have been worried that the “geese with the golden eggs” can escape – thanks to tax havens and tax competition – governments around the world reluctantly have lowered tax rates and reduced discriminatory taxes on saving and investment.

2. The Paris-based Organization for Economic Cooperation and Development (heavily subsidized by American taxpayers) is a bureaucracy that is controlled by high-tax governments and it seeks to undermine tax competition and tax havens by creating a global tax cartel – sort of an “OPEC for politicians.”

3. When tax competition is weakened, politicians respond by increasing tax rates.

4. There is an economic theory that is used to justify tax harmonization. It’s called “capital export neutrality” and I shared a slide in the presentation to show why CEN doesn’t make sense. Here’s a new version of the slide, which I’ve augmented to help people understand why tax havens and tax competition are good for prosperity.

The bottom line is that we should fight to protect tax havens and tax competition. The alternative is “stationary bandits” and “Goldfish Government.”

P.S. My work on this issue has been…umm…interesting, resulting in everything from a front-page attack by the Washington Post to the possibility of getting tossed in a Mexican jail.

P.S.S. This column has four videos on the issue of tax competition, and this column has five videos on the issue of tax havens.