New Video Shows the Simple Recipe for Poor Nations to Become Rich Nations – in Spite of Bad Advice from International Bureaucracies

The recipe for growth and prosperity isn’t very complicated.

Adam Smith provided a very simple formula back in the 1700s.

For folks who prefer a more quantitative approach, the Fraser Institute’s Economic Freedom of the World uses dozens of variables to rank nations based on key indices such as rule of law, size of government, regulatory burden, trade openness, and stable money.

One of the heartening lessons from this research is that countries don’t need perfect policy. So long as there is simply “breathing room” for the private sector, growth is possible. Just look at China, for instance, where hundreds of millions of people have been lifted from destitution thanks to a modest bit of economic liberalization.

Indeed, it’s remarkable how good policy (if sustained over several decades) can generate very positive results.

That’s a main message in this new video from the Center for Freedom and Prosperity.

The first part of the video, narrated by Abir Doumit, reviews success stories from around the world, including Hong Kong, Singapore, Chile, Estonia, Taiwan, Ireland, South Korea, and Botswana.

Pay particular attention to the charts showing how per-capita economic output has grown over time in these jurisdictions compared to other nations. That’s the real test of what works.

The second part of the video exposes the scandalous actions of international bureaucracies, which are urging higher fiscal burdens in developing nations even though no poor nation has ever become a rich nation with bigger government. Never.

Yet bureaucracies such as the United Nations, the International Monetary Fund, and the Organization for Economic Cooperation and Development are explicitly pushing for higher taxes in poor nations based on the anti-empirical notion that bigger government is a strategy for growth.

I’m not joking.

As Ms. Doumit remarks in the video, these bureaucracies never offer a shred of evidence for this bizarre hypothesis.

And what’s especially frustrating is that the big nations of the western world (i.e., the ones that control the international bureaucracies) all became rich when government was very small.

And while the bureaucracies never provide any data or evidence, the Center for Freedom and Prosperity’s video is chock full of substantive information. Consider, for instance, this chart showing that there was almost no redistribution spending in the western world as late as 1930.

Unfortunately, the burden of government spending in western nations has metastasized starting in the 1930s. Total outlays now consume enormous amounts of economic output and counterproductive redistribution spending is now the biggest part of national budgets.

But at least western nations became rich first and then made the mistake of adopting bad fiscal policy (fortunately offset by improvements in other areas such as trade liberalization).

The international bureaucracies are trying to convince poor nations, which already suffer from bad policy, that they can succeed by imposing additional bad fiscal policy and then magically hope that growth will materialize.

And having just spent last week observing two conferences on tax and development at the United Nations in New York City, I can assure you that this is what they really think.

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Is Defending Tax Competition Akin to “Trading with the Enemy”?

When I was younger, my left-wing friends said conservatives unfairly attacked them for being unpatriotic and anti-American simply because they disagreed on how to deal with the Soviet Union.

Now the shoe is on the other foot.

Last decade, a Treasury Department official accused me of being disloyal to America because I defended the fiscal sovereignty of low-tax jurisdictions.

And just today, in a story in the Washington Post about the Center for Freedom and Prosperity (I’m Chairman of the Center’s Board of Directors), former Senator Carl Levin has accused me and others of “trading with the enemy” because of our work to protect and promote tax competition.

Here’s the relevant passage.

Former senator Carl Levin (D-Mich.)…said in a recent interview that the center’s activities run counter to America’s values and undermine the nation’s ability to raise revenue. “It’s like trading with the enemy,” said Levin, whose staff on a powerful panel investigating tax havens regularly faced public challenges from the center. “I consider tax havens the enemy. They’re the enemy of American taxpayers and the things we try to do with our revenues — infrastructure, roads, bridges, education, defense. They help to starve us of resources that we need for all the things we do. And this center is out there helping them to accomplish that.”

Before even getting into the issue of tax competition and tax havens and whether it’s disloyal to want limits on the power of governments, I can’t resist addressing the “starve us of resources” comment by Levin.

He was in office from 1979-2015. During that time, federal tax receipts soared from $463 billion to $3.2 trillion. Even if you only count the time the Center for Freedom and Prosperity has existed (created in late 2000), tax revenues have jumped from $2 trillion to $3.2 trillion.

At the risk of understatement, Senator Levin has never been on a fiscal diet. And he wasn’t bashful about spending all that revenue. He received an “F” rating from the National Taxpayers Union every single year starting in 1993.

Let’s now address the main implication of the Washington Post story, which is that it’s somehow wrong or improper for there to be an organization that defends tax competition and fiscal sovereignty, particularly if some of its funding comes from people in low-tax jurisdictions.

The Post offer[s] an inside look at how a little-known nonprofit, listing its address as a post office box in Alexandria, became a persistent opponent of U.S. and global efforts to regulate the offshore world. …the center met again and again with government officials and members of the offshore industry around the world… Quinlan and Mitchell launched the center in October 2000. …The center had two stated goals. Overseas, the center set out to persuade countries on the blacklist not to cooperate with the OECD, which it derided as a “global tax cartel.” In Washington, the center lobbied the Bush administration to withdraw its support for the OECD and also worked to block anti-tax haven legislation on Capitol Hill. To spread the word, the center testified before Congress, published reports and opinion pieces in leading financial publications, and drafted letters to lawmakers and administration officials. Representatives of the center crisscrossed the globe and sponsored discussions in 2000 and 2001, traveling to London, Paris, the Cayman Islands, the Bahamas, Panama, Barbados and the British Virgin Islands.

To Senator Levin and other folks on the left, I guess this is the fiscal equivalent of “trading with the enemy.”

In reality, this is a fight over whether there should be any limits on the fiscal power of governments. On one side are high-tax governments and international bureaucracies like the OECD, along with their ideological allies. They want to impose a one-size-fits-all model based on the extra-territorial double-taxation of income that is saved and invested, even if it means blacklisting and threatening low-tax jurisdictions (the so-called tax havens).

On the other side are proponents of good tax policy (including many Nobel Prize-winning economists), who believe that income should not be taxed more than one time and that the power to tax should be constrained by national borders.

And, yes, that means we sometimes side with Switzerland or Panama rather than the Treasury Department. Our patriotism is to the ideals of the Founding Fathers, not to the bad tax policy of the U.S. government.

In any event, I’m proud to say that the Center’s efforts have been semi-successful.

In May 2001, the center claimed a key victory. In a dramatic departure from the Clinton administration, Paul O’Neill, the incoming Treasury Secretary appointed by Bush, announced that the United States would back away from the reforms pushed by the OECD. …fewer than half of the nations on the OECD blacklist pledged to become more transparent in their tax systems, a victory for anti-tax forces such as the center.

Even the other side says the Center is effective.

…said Elise Bean, former staff director and chief counsel of Levin’s Homeland Security Permanent Subcommittee on Investigations, which started investigating tax havens in 2001. “They travel all around the world and they have had a tremendous impact.” …“They were very effective at painting the OECD’s work as end-times are here for tax competition, and we’re going to have European tax rates imposed upon the whole world if the OECD’s work continued,” said Will Davis, the former head of OECD public affairs in Washington.

What’s most impressive is that all this was accomplished with very little funding.

Tax returns for the center and a foundation set up in its name reported receiving at least $1.4 million in revenue from 2003 to 2010.

In other words, the Center and its affiliated Foundation managed to thwart some of the world’s biggest and most powerful governments with a very modest budget averaging about $175,000 per year. And I don’t even get compensation from the Center, even though I’m the one who almost got thrown in a Mexican jail for opposing the OECD!

So while Senator Levin had decades of experience spending other people’s money in a promiscuous fashion, I work for an organization, the Cato Institute, that is ranked as the most cost-effective major think tank, and I’m on the Board of a small non-profit that has a track record of achieving a lot with very little money.

Yet another example of why we should be thankful that tax competition makes it more difficult for politicians to extract more revenue from the economy’s productive sector.

P.S. I mentioned to the Post reporters that the world’s biggest tax haven is the United States, but that important bit of information was omitted from the article. Which is a shame since it would have given me a chance to laud Senator Rand Paul for blocking a very dangerous agreement that would undermine America’s attractive tax laws for overseas investors.

P.P.S. If politicians really want to hurt tax havens, they should adopt a flat tax. That would dramatically boost tax compliance.

P.P.P.S. All things considered, I think the reporters who put together the story were reasonably fair, though there was a bit of editorializing such as referring to one low-tax jurisdiction as a “notorious tax haven.” When they write about France, do they ever refer to it as a “notorious tax hell”?

Also, when writing about trips the Center arranged for congressional staff to low-tax jurisdictions, the article stated, “The staffers reported receiving from $900 to $2,360 for the trips”, which makes it sound as if the staffers got paid. That’s wrong. The sentence should have read, “The staffers reported that the Center’s travel and lodging expenses ranged from $900 to $2,360 for the trips.”

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Obamanomics and Big Government: Bad News for Young People

I periodically post TV interviews and the second-most-watched segment – edged out only by my debate with Robert Reich on Keynesian economics – was when I discussed how President Obama’s statist policies are bad for young people.

So there’s obviously some concern about the future of the country and what it means for today’s youth.

The Center for Freedom and Prosperity has examined this issue and taken it to the next level, cramming a lot of information into this six-minute video.

The video highlights four specific ways that government intervention disadvantages younger Americans.

1. Labor market interventions such as minimum wage mandates make it more difficult for young people to find employment and climb the economic ladder.

Government is even bigger in Europe…leading to even worse results for young people

2. Obamacare harms young people by requiring them to pay substantially more to prop up an inefficient government-run healthcare system.

3. Young people are trapped in a poorly designed Social Security system and politicians such as Obama think the answer is to make them pay more and get less.

4. Government has created a major third-party payer problem in higher education, putting young people on a treadmill of ever higher tuition and record debt.

What makes this situation so surreal is that young people – as noted at the start of the video – are the one group who think the “government should do more”!

I hope you share this video with every young person you know and help them understand that statism is the enemy of hope and opportunity.

And maybe also show them this poster if they need some extra help grasping the problem.

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New Video Is a Strong Indictment of Obama’s Dismal Record on Spending

The burden of federal spending in the United States was down to 18.2 percent of gross domestic product when Bill Clinton left office.

But this progress didn’t last long. Thanks to George Bush’s reckless spending policies, the federal budget grew about twice as fast as the economy, jumping by nearly 90 percent in just eight years This pushed federal spending up to about 25 percent of GDP.

President Obama promised hope and change, but he has kept spending at this high level rather than undoing the mistakes of his predecessor.

This new video from the Center for Freedom and Prosperity Foundation uses examples of waste, fraud, and abuse to highlight President Obama’s failed fiscal policy.

Good stuff, though the video actually understates the indictment against Obama. There is no mention, for instance, about all the new spending for Obamacare that will begin to take effect over the next few years.

But not everything can be covered in a 5-minute video. And I suspect the video is more effective because it closes instead with some discussion of the corrupt insider dealing of Obama’s so-called green energy programs.

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You’ve Met Julia the Moocher, Now Meet Emily

The Obama campaign’s “Life of Julia” ad is a disturbing sign. It suggests that political strategists, pollsters, and campaign advisers must think that the people living off government are getting to the point where they can out-vote the people paying for government.

If that’s true, America is doomed to become another Greece – which would be an appropriate fate since, for all intents and purposes, Julia is the fictional twin of a real-life Greek woman who thought it was government’s job to give her things.

In general, I think the best response to Julia is mockery, which is why I shared this Iowahawk parody and this Ramirez cartoon.

But we also need a serious discussion of why dependency is a bad thing, which is why I’m glad the Center for Freedom and Prosperity has produced this new “Economics 101” video.

It’s narrated by Emily O’Neill, who contrasts the moocher mentality of Julia with how she wants her life to develop. To give away the message, she wants the kind of fulfillment that only exists when you earn things.

Emily’s view could be considered Randian libertarianism, conventional conservatism, or both. That’s because there’s a common moral belief in both philosophies that government-imposed coercion and redistribution erode the social capital of a people.

This is perhaps the key issue for America’s future, which is why I hope you’ll share this video widely. Otherwise, we my face a future where this Chuck Asay cartoon becomes reality. Speaking of Asay, this cartoon is a pretty good summary of what the Julia ad is really saying.

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Four Reasons Why Big Government Is Bad Government

A new video from the Center for Freedom and Prosperity gives four reasons why big government is bad fiscal policy.

I particularly like the explanation of how government spending undermines growth by diverting labor and capital from the productive sector of the economy.

Some cynics, though, say that it is futile to make arguments for good policy. They claim that politicians make bad fiscal decisions because of short-term considerations such as vote buying and raising campaign cash and that they don’t care about the consequences. There’s a lot of truth to this “public choice” analysis, but I don’t think it explains everything. Maybe I’m an optimist, but I think we would have better fiscal policy if more lawmakers, journalists, academics, and others grasped the common-sense arguments presented in this video.

And even if the cynics are right, we are more likely to have good policy if the American people more fully understand the damaging impact of excessive government. This is because politicians almost always will do what is necessary to stay in office. So if they think the American people are upset about wasteful spending and paying close attention, the politicians will be less likely to upset voters by funneling money to special interests.

For those who want additional information on the economics of government spending, this video looks at the theoretical case for small government and this video examines the empirical evidence against big government. And this video explains that America’s fiscal problem is too much spending rather than too much debt (in other words, deficits are merely a symptom of an underlying problem of excessive spending).

Last but not least, this video reviews the theory and evidence for the “Rahn Curve,” which is the notion that there is a growth-maximizing level of government outlays.

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Here’s How to Balance the Budget

Our fiscal policy goal should be smaller government, but here’s a video for folks who think that balancing the budget should be the main objective.

The main message is that restraining the growth of government is the right way to get rid of red ink, so there is no conflict between advocates of limited government and supporters of fiscal balance.

More specifically, the video shows that it is possible to quickly balance the budget while also making all the 2001 and 2003 tax cuts permanent and protecting taxpayers from the alternative minimum tax. All these good things can happen if politicians simply limit annual spending growth to 2 percent each year. And they’ll happen even faster if spending grows at an even slower rate.

This debunks the statist argument that there is no choice but to raise taxes.

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Halfway Around the World, Fighting for Freedom, Low Taxes, and Sovereignty

I’m in Singapore for two days to help fight the Organization for Economic Cooperation and Development, a statist international bureaucracy based in Paris. The OECD has something called a global tax forum, the purpose of which is to harass so-called tax haven in hopes of coercing them into acting as tax collectors for Europe’s decrepit welfare states. Here’s the executive summary from the memo I wrote, which warns low-tax jurisdictions that the OECD may push even harder to undermine fiscal sovereignty because of fears that a GOP takeover of Congress will make it more difficult to push for tax harmonization policies in the future.

The Paris-based Organization for Economic Cooperation and Development has an ongoing project to prop up Europe’s inefficient welfare states by attacking tax competition in hopes of enabling governments to impose heavier tax burdens. This project received a boost when the Obama Administration joined forces with countries such as France and Germany, but the tide is now turning against high-tax nations – particularly as more people understand that such an approach inevitably leads to Greek-style fiscal collapse. Looming political changes in the United States will further complicate the OECD’s ability to impose bad policy. Because of these developments, low-tax jurisdictions should be especially wary of schemes to rush through new anti-tax competition initiatives at the Singapore Global Forum.

The good news is that nothing dramatic took place on the first day of the two-day conference. the OECD continued to bully low-tax jurisdictions to sign information-sharing agreements and the low-tax jurisdictions kept asking for double-taxation agreements so they could get some benefit in exchange for weakening their human rights/financial privacy laws. The OECD and high-tax nations have been ignoring these requests for a two-way street, thus continuing their bad-faith behavior.

For more information on this issue, here’s a link to my video on tax competition, and here are a handful of TV appearances where I discuss the issue. This is a challenging issue to debate, so I’d welcome feedback on which arguments you think are most effective.

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Should American Taxpayers Subsidize Left-Wing Bureaucrats in Paris (Who get Tax-Free Salaries) so They Can Advocate Higher Taxes in America?

The federal government is capable of enormous waste, which obviously is bad news, but the worst forms of government spending are those that actually leverage bad things. In a previous video on the economics of government spending, I call this the “negative multiplier” effect, and one of the worst examples is the $100 million that taxpayers spend each year to subsidize the Paris-based Organization for Economic Cooperation and Development.

There are many other examples of the negative multiplier effect.

The old welfare system, for instance, paid people not to work and have babies out of wedlock (this still happens, but it’s not as bad as it used to be). Paying exorbitant salaries to federal bureaucrats is bad, but it’s even worse if they take their jobs seriously and promulgate new regulations and otherwise harass people in the productive sector of the economy.

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New Video Exposes Nightmare of IRS Complexity

Here’s a new Economics 101 video about the cost of the tax code from the Center for Freedom and Prosperity. I won’t spoil the surprise by giving the details, but you if you’re not angry now, you will be after watching.

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The Flat Tax: Good for America, Bad for Washington

America’s biggest fiscal challenge is excessive government spending. The public sector is far too large today and it is projected to get much bigger in coming decades. But the corrupt and punitive internal revenue code is second on the list of fiscal problems. This new video, narrated by yours truly and produced by the Center for Freedom and Prosperity, explains how a flat tax would work and why it would promote growth and fairness.

There are two big hurdles that must be overcome to achieve tax reform. The first obstacle is that the class-warfare crowd wants the tax code to penalize success with high tax rates. That issue is addressed in the video in a couple of ways. I explain that fairness should be defined as treating all people equally, and I also point out that upper-income taxpayers are far more likely to benefit from all the deductions, credits, exemptions, preferences, and other loopholes in the tax code. The second obstacle, which is more of an inside-the-beltway issue, is that the current tax system is very rewarding for the iron triangle of lobbyists, politicians, and bureaucrats (or maybe iron rectangle if we include the tax preparation industry). There are tens of thousands of people who make very generous salaries precisely because the tax code is a playground for corrupt deal making. A flat tax for these folks would be like kryptonite for Superman. But more than two dozen nations around the world have implemented a flat tax, so hope springs eternal.

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Should Banks Be Forced by the Government to Spy on Consumers?

There’s a principled Fourth Amendment argument against anti-money laundering laws. In  this video, however, I mostly focus on the cost-benefit issue, explaining that the fight against crime will be more effective if law enforcement is not forced to look for a needle in a haystack.

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Obamacare Will Be a Budget Buster

This video provides 12 reasons in less than 7 minutes.

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A VAT Would Finance the Road to Serfdom

This blog has been warning about the danger of a value-added tax. We’ve cited the salivating comments of Speaker Pelosi. We’ve noted the favorable comments by Obama insiders like the former Co-Chairman of his transition team. We know the battle is coming. Now we need to fight. This newly-released video from the Center for Freedom and Prosperity provides the data showing that this is a do-or-die fight. If we lose, there is no hope of stopping statism. Blocking a VAT is not a sufficient condition to protect America from becoming a French-style welfare state, but it is a necessary condition.

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New Video Reviews Empirical Evidence Against Big Government

The burden of government spending has skyrocketed during the Bush-Obama years. Many politicians claim that all this new spending represents necessary “investments” to boost economic growth. But as this new video explains, both cross-country comparisons and empirical analysis suggest government is far too big – not only in Europe, but also in America.

This is the second of a two-part series. The first installment, which focuses on eight theoretical reasons why excessive government undermines growth, can be viewed here.

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Hypocrisy Alert: International Bureaucrats Seek to Create Global Tax Cartel – Yet They Get Tax-Free Salaries

Richard Rahn has an excellent column in the Washington Times, discussing how the Organization for Economic Cooperation and Development is working with high-tax nations to bully low-tax jurisdictions into adopting bad policy. Yet these bureuacrats rather conveniently don’t have to pay any income tax. No wonder they are oblivious to the real-world destructive impact of punitive tax rates. The column also explains that this bullying campaign is backfiring against America since some foreign financial institutions have decided to pull money out of America in order to avoid being turned into stooges for the IRS:

The high-tax countries are using the OECD to threaten low-tax jurisdictions to sign this agreement. It is worth noting that the tax bullies at the OECD and at other international organizations, such as the United Nations, International Monetary Fund and World Bank, who demand that others pay higher taxes, enjoy tax-free personal income courtesy of the world’s taxpayers. Freedom House, an organization that keeps its eye on human rights abuses and anti-democratic activities by countries, lists a number of the countries on the OECD list of cooperating jurisdictions as “not free” or only “partly free” — including Russia, China and the United Arab Emirates. Yet some democratic and free jurisdictions have been listed as noncooperating by the OECD. According to the OECD, the U.S. should be sharing tax information with nondemocratic and/or corrupt countries on its list. Worse yet, the Obama administration is supporting the OECD in this wholesale violation of basic rights. …The good news is that some in low-tax jurisdictions are beginning to fight back. Last week, the head of the oldest bank in Switzerland (who holds a doctorate in economics from a leading U.S. university) said he was no longer going to invest in the United States because he found the new IRS regulations — which foreign banks must follow — so vague, onerous and incomprehensible that he could never be sure his bank was not at risk. In addition, he argued that the economic path the U.S. is taking can only lead to slower growth, and his bank sees better opportunities elsewhere. From the time of the Reagan economic reforms a quarter of a century ago until last year, the United States had the highest average rate of growth of the major developed countries. A substantial part of this growth was fueled by foreign investment in our nation. Those in the Obama administration’s Treasury Department (including the IRS) who are working with the tax bullies at the OECD are driving away much of the foreign investment at a time when it is most needed.

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Should It Be a Tax Offense to Get a Mortgage or Quit Smoking?

The title of this post is a joke, but not really. As mentioned in an earlier post, the Organization for Economic Cooperation and Development (OECD) tried to categorize tax avoidance as something to be fought as part of its anti-tax competition project. This implies, of course, that any decision we make to lower our taxes is suspect, even if we are following the law! For those who care about tax competition, fiscal sovereignty, and financial privacy, I explore the implications of what happened in Mexico City in this Strategic Memorandum.

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Final Report from Mexico

I managed to stay out of jail, and was even able to sneak past security at the closing press conference in order to get headphones for the Spanish and French translations. But that’s the only positive thing to report.

Here are some preliminary thoughts (and here is a press release issued by the Center for Freedom and Prosperity):

The most noteworthy development to report is that the OECD (with lots of support from Brazil) tried to officially expand its mission so that it could fight tax avoidance. This is remarkable since tax avoidance, by definition, is completely legal. For all intents and purposes, this effort indicates that the OECD wants to restrict tax planning by multinational companies. The good news is that the OECD was forced to back down – at least in the sense that they were unable to include language in the final report. The bad news is that the OECD is an unaccountable international bureaucracy and will pursue this anti-business agenda anyhow.

The other development worth noting is that the bureaucrats at the OECD have perfected the bait-and-switch maneuver. Every time the so-called tax havens would raise good points and begin to press the OECD to live up to previous statements and commitments, the bureaucrats would assert that it was time for a new subject. Then, when the time came to publish the final report of the conference (which none of the delegates were allowed to see, much less vote on), the OECD wrote its interpretation of events. If it wasn’t for the fact that the OECD is pursuing an agenda that will reduce living standards and cause misery, one would almost have to admire their cleverness.

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Who Will Bail Me Out of a Mexican Jail?

Greetings from the OECD Global Tax Forum in Mexico City.

Our erstwhile friends at the OECD are not very tolerant of dissent, and this trip is a good example. First, they bullied the hotel in Cabo into canceling my reservation. Apparently, my mere presence would create a disturbance to their plans for one-size-fits-all taxation. But then the conference got moved to Mexico City because of the hurricane and the bureaucrats did not have the ability – at least on short notice – into coercing the new hotel into denying me the ability to get a room (not that it would have been a big deal to register someplace else, but it is somewhat galling that petty bureaucrats seem so intent of throwing roadblocks in the way of the folks who pay their bloated – and tax free – salaries).

Today, however, the OECD upped the ante. I have been hanging out in the public lobby outside of the OECD’s conference room. This location makes it easy to communicate with the delegates from low-tax nations. This apparently irritates the bureaucrats, so they sent one of their security officials to ask me to leave. I asked what right he had to make such a request, especially since I was in a public area. He claimed that the lobby – which also serves as the entrance to a restaurant and the business center – was reserved for the conference. I said that was absurd and would like to see the hotel management. Perhaps more important, I turned to the reporter next to me and started explaining that this was a typical example of the OECD’s reprehensible strong-arm tactics. This flustererd the security guy and he backed down.

But I suspect that this is not the end of the story. And since I’m not overly confident that the Mexican government respects the rule of law, I do have visions of getting carted off to an unpleasant jail. If you don’t see anything in this space tomorrow morning, that won’t be a good sign.

For those interested in more background on the issue, read this memo and/or watch my videos on tax competition and tax havens.

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No Longer Battling Hurricanes, Now Just Fighting Pro-Tax Governments

The good news is that the hurricane caused the OECD to pull the plug on its Global Tax Forum in Cabo. The bad news is that the Paris-based bureaucracy packed all the delegates onto Mexican government jets and moved the conference to Mexico City. 

Not surprisingly, I was not offered a ride, which left me in the unenviable position of scrambling to get a ticket from Cabo to Mexico City – a task that was complicated by an airport full of people looking to escape the hurricane. I vaguely felt like I was an extra in the John Candy-Steve Martin 1987 comedy, Planes, Trains, and Automobiles, but eventually I shoe-horned myself onto a flight.

Today, I’ll be spending my time offering assistance and advice to the low-tax jurisdictions being persecuted by the OECD. For those interested in learning more, this three-page memo has all the details.

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Battling Hurricanes and Fiscal Imperialism

I’m at the Denver Airport, waiting to fly to Phoenix and then on to Los Cabos, Mexico. But I’m not going for sun and fun. In part, this is because Los Cabos is facing a hurricane watch. But the main reason is that I’m going to Mexico to help low-tax jurisdictions fight against fiscal imperialism. The Organization for Economic Cooperation and Development (OECD), an international bureaucracy based in (where else) Paris, is persecuting so-called tax havens because they are attracting jobs and investment from high-tax welfare states such as France and Germany. This fight has been going on for about 10 years, and we’ve done a fairly decent job of thwarting the bureaucrats (who, by the way, get tax-free salaries). But the election of Obama has given the OECD some momentum. This raises the risk that the bureaucrats will succeed in imposing a global tax cartel – sort of an “OPEC for politicians.” To that end, the OECD is hosting a conference in Los Cabos designed to bully low-tax jurisdictions into surrendering their fiscal sovereignty.

Like most government entities, the OECD does not believe in open and fair discussion. The bureaucrats already have used their leverage to kick our delegation out of the main conference hotel (though delegation is probably an overstatement since it is just me and Andy Quinlan of the Center for Freedom and Prosperity.

Maybe the huuricane will thwart the OECD’s pernicious plans to impose bad tax policy on free-market jurisdictions. If not, keep your fingers crossed that Andy and I somehow can throw sand in the gears and defend tax competition, fiscal sovereignty, and financial privacy.

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When Governments Are Forced to Compete, the Result Is Better Policy and More Liberty

A story in USA Today is a perfect illustration of the liberalizing power of tax competition. In an effort to attract more jobs and investment, states are competing with each – even taking the aggressive step of advertising in high-tax states. This does not guarantee that states will always use the best approach since states sometimes try to lure companies with special handouts, but tax competition generally encourages states to lower tax rates and control fiscal and regulatory burdens. The same process works internationally, which is precisely why international bureaucracies controlled by high-tax nations are seeking to thwart fiscal competition between nations:

Las Vegas is running ads in California warning businesses they can “kiss their assets goodbye” if they stay in the Golden State. In New Hampshire, economic development officials pick up Massachusetts business owners at the border in a limousine and give them VIP treatment and a pitch about why they should relocate there. Indiana officials, using billboards at the borders and direct appeals to businesses in neighboring states, are inviting them to “Come on IN for lower taxes, business and housing costs.” As states struggle to keep jobs in a continuing recession, they are no longer hoping businesses in other states happen to notice their lower taxes, cheaper office space and less-stringent regulations. They are taking the message directly to them and taking shots at their neighbor’s shortcomings. …No one does it more unapologetically than the Nevada Development Authority. The agency has picked on California before, but its $1 million campaign, launched this month, ratchets up the mockery of California’s budget deficits and IOU paychecks. “It’s all done tongue-in-cheek. But the underlying deal is, we want this business,” Nevada Development Authority President and CEO Somer Hollingsworth said. …”They do mask the nastiness of their message with humor, but this time, their ads are over the top,” said [California Assemblyman] Solorio, a Democrat from Santa Ana.

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How and Why Government Spending Diminishes Economic Performance

In a new mini-documentary released by the Center for Freedom and Prosperity, I explain several of the ways that government spending hinders economic growth.

Feb 23, 2021 addendum: This screenshot from the video summarizes the various ways government spending can undermine prosperity.

Costs #1 and #2 apply to every penny in the budget, as explained in the video.

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Punitive Corporate Tax Rate Hurts Jobs and Investment in America

It is somewhat disconcerting that every single European welfare state – even France and Sweden – has a lower corporate tax rate than the United States. But embarrassment is the least of the problems. The real issue is that a high corporate tax rate means it is more likely that jobs will migrate to nations that don’t treat companies as milk cows to nourish big government. As Investor’s Business Daily explains, a high corporate tax rate means less investment:

Four more developed nations have cut their corporate tax rates this year. Yet the U.S. sticks with second-highest corporate rate among OECD nations. This puts us at a competitive disadvantage. Only Japan, at 39.54%, has a higher corporate rate than the U.S., which at 39.1% is a bit lower than last year but still far higher than the average (26.29%) of the 30 Organization for Economic Cooperation and Development nations. That average was brought down from 26.55% after the Czech Republic, Sweden (yes, the country where soft socialism has supposedly been perfected), Canada and South Korea cut their rates. …High corporate rates are unwanted — or should be unwanted — because they put a drag on a nation’s capital stock. An economy needs investment to increase jobs and pump productivity. High corporate tax rates repel rather than attract foreign companies and can even send domestic firms overseas. Capital flows easiest where the resistance is light. This is not our fantasy but an outcome that’s been observed in the real world. In 2003, economists Ruud de Mooij and Sjef Ederveen found that if a country cuts its corporate rates by a single percentage point, it can expect to boost capital investment by about three percentage points.

The Center for Freedom and Prosperity’s first video also addressed these issues. And while the production values and quality leave a bit to be desired, the message is very timely.

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New Laffer Curve Paper Shows Why Obama’s Proposed Higher Tax Rates Are so Misguided

The Center for Freedom and Prosperity just released a paper analyzing the Laffer Curve.

The central lesson is that tax increases do raise more revenue in most cases, but at a very high cost in terms of economic growth. However, the tax increases proposed by the Obama Admininstration – based on class-warfare ideology – are especially destructive and may actually lose revenue if taxable income falls enough to offset the impact of the higher tax rate.

The three-part video series on the Laffer Curve can be seen here.

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