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Back in 2009, I shared the results of a very helpful study by Pierre Bessard of Switzerland’s Liberal Institute (by the way, “liberal” in Europe means pro-market or “classical liberal“).

Pierre ranked the then-30 member nations of the Organization for Economic Cooperation and Development based on their tax burdens, their quality of governance, and their protection of financial privacy.

Switzerland was the top-ranked nation, followed by Luxembourg, Austria, and Canada.

Italy and Turkey were tied for last place, followed by Poland, Mexico, and Germany.

The United States, I’m ashamed to say, was in the bottom half. Our tax burden was (and still is) generally lower than Europe, but there’s nothing special about our quality of governance compared to other developed nations, and we definitely don’t allow privacy for our citizens (though we’re a good haven for foreigners).

Pierre’s publication was so helpful that I’ve asked him several times to release an updated version.

I don’t know if it’s because of my nagging, but the good news is that he’s in the final stages of putting together a new Tax Oppression Index. He just presented his findings at a conference in Panama.

But before divulging the new rankings, I want to share this slide from Pierre’s presentation. He correctly observes that the OECD’s statist agenda against tax competition is contrary to academic research in general, and also contrary to the Paris-based bureaucracy’s own research!

Yet the political hacks who run the OECD are pushing bad policies because Europe’s uncompetitive governments want to prop up their decrepit welfare states. And what’s especially irksome is that the bureaucrats at the OECD get tax-free salaries while pushing for higher fiscal burdens elsewhere in the world.

But I’m digressing. Let’s look at Pierre’s new rankings.

As you can see, Switzerland is still at the top, though now it’s tied with Canada. Estonia (which wasn’t part of the OECD back in 2009) is in third place, and New Zealand and Sweden also get very high scores.

At the very bottom, with the most oppressive tax systems, are Greece and Mexico (gee, what a surprise), followed by Israel and Turkey.

The good news, relatively speaking, is that the United States is tied with several other nations for 11th place with a score of 3.5.

So instead of being in the bottom half, as was the case with the 2009 Tax Oppression Index, the U.S. is now in the top half.

But that’s not because we’ve improved policy. It’s more because the OECD advocates of statism have been successful in destroying financial privacy in other nations. Even Switzerland’s human rights laws on privacy no longer protect foreign investors.

As such, Pierre’s new index basically removes financial privacy as a variable and augments the quality of governance variable with additional data about property rights and the rule of law.

P.S. When measuring the tax burden, the reason that America ranks above most European nations is not because they impose heavier taxes on rich people and businesses (indeed, the U.S. has a much higher corporate tax rate). Instead, we rank above Europe because they impose very heavy taxes on poor and middle-income taxpayers (mostly because of the value-added tax, which helps to explain why I am so unalterably opposed to that destructive levy).

P.P.S. Also in 2009, Pierre Bessard authored a great defense of tax havens for the New York Times.

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The Index of Economic Freedom is my favorite annual publication from the Heritage Foundation. It’s a rich source of information, using dozens of data sources, about economic liberty around the world.

I first wrote about the Index back in 2010 and shared the bad news that the U.S. score dropped dramatically in Obama’s first year.

Well, the new Index lets us see the net effect of Obama’s entire tenure. The worse news is that the U.S. score has dropped to 75.1 on a 0-100 scale. And the worst news is that this represents America’s lowest score in the twenty-plus years that the Index has been published.

The United States is ranked #17 in the latest Index. We’re only in the “Mostly Free” category, behind Luxembourg and the Netherlands and tied with Denmark.

The top-ranked jurisdiction, once again, is Hong Kong. And what’s really amazing is that Hong Kong actually increased it score. Indeed, all five nations in the “Free” category managed to increase overall economic freedom.

So congratulations also to Singapore, New Zealand, Switzerland, and Australia.

Here’s a map showing the entire world. The worst nations are in red, with North Korea at the very bottom, followed by Venezuela and Cuba.

By the way, Cuba jumped 4.1 points last year, so maybe Fidel’s death is the beginning of some much-needed liberalization.

For more information on the United States, here’s the breakdown of America’s score. As you can see, our worst category is “government size.” In other words, we tax too much and spend too much.

America’s best score is for “regulatory efficiency,” which helps to explain why the U.S. gets a top-10 score from the World Bank’s Doing Business.

Let’s close by comparing the United States with Hong Kong. This charts shows how our scores have changes over time, and also shows the average score for the entire world.

The biggest takeaway is that the U.S. basically is halfway between Hong Kong and the world average.

The great unknown, of course, is whether America’s score will go up or down under Trump.

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Most folks in Washington are still digesting last night’s debate between Tweedledee and Tweedledum. If that’s what you care about, you can see my Twitter commentary, though I was so busy addressing specific issues that I failed to mention the most disturbing part of that event, which was the total absence of any discussion about the importance of liberty, freedom, and the Constitution.

But let’s set aside the distasteful world of politics and contemplate U.S. competitiveness. Specifically, let’s examine America’s position in the latest edition of the World Economic Forum’s Global Competitiveness Report. This Report is partly a measure of policy (sort of like Economic Freedom of the World) and partly a measure of business efficiency and acumen.

The bad news is that we used to be ranked #1 and now we’re #3.

The good news is that being #3 is still pretty good, and it’s hard to beat Switzerland and Singapore because they have such good free-market policies. And that’s where America falls short.

Indeed, if you look at the top-10 nations and the three major measurements, you’ll notice that the United States ranks extremely high in “efficiency enhancers” and “innovation and sophistication factors,” both of which have a lot to do with the private sector’s competitiveness. But we have a mediocre (at least for developed nations) score for “basic requirements,” the area where government policy plays a big role.

Moreover, if you look at the the biggest obstacles to economic activity in the United States, the top 4 deal with bad government policy.

The tax treatment of companies is easily the main problem, as you might expect since we rank #94 out of 100 nations in a study of business tax policy.

Let’s now look at the indices where the United States scored especially low out of the 138 nations that were ranked.

America’s lowest scores were for exports (#130) and imports (#134), though I take issue with the Report‘s methodology, which is based on trade flows as a share of GDP. The problem with that approach is that the United States has a huge internal market, equal to about 22 percent of the world’s economic output. That’s why our trade flows aren’t very large relative to GDP. Being surrounded by two major oceans also probably has some dampening effect on cross-border trade flows. Yes, America is guilty of some protectionism, but I think our ranking for trade tariffs (#33) is the more appropriate and accurate measure of the degree to which there is a problem.

America also got a very bad score (#128) for government debt, though at least we beat Italy (#135), Greece (#137), and Japan (#138). In case you’re wondering, Hong Kong was #1, as you might expect from a well-run jurisdiction with small government and a flat tax.  Though I must say that it is rather disappointing that the Report doesn’t include rankings for the overall burden of government spending. After all, government debt is basically a symptom of an underlying problem of a bloated public sector.

And there also was a very low score for the business cost of terrorism (#104), which is probably an unavoidable consequence of being the world’s leading superpower (and therefore a target for crazies). That being said, I imagine America’s score could be improved if we weren’t engaging in needless intervention – and thus generating needless animosity – in places such as Syria and Libya.

Here are two indices that deserve special attention. As you can see the United States gets a poor score for wasteful spending and a terrible score for the punitive taxation of profits.

With this information in mind, let’s now remind ourselves about last night’s debate. Did either candidate propose to control spending and reduce pork-barrel programs? Nope.

Did either candidate put forth a realistic plan to lower the corporate tax rate? Hillary’s plan certainly doesn’t qualify since she wants a bunch of class-warfare tax hikes. And while Trump’s plan includes a lower corporate rate, it’s not a serious proposal since he is too timid to put forth a plan to restrain government outlays.

And since neither candidate intends to address America’s looming fiscal crisis, it will probably be just a matter of time before America drops in the rankings.

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Exactly five years, I created a Declaration of Dependence for my statist readers.

It was supposed to be satire, but after looking at some new estimates of dependency, I now wonder whether I accidentally foretold America’s future.

Anyhow, here’s how my attempt to be funny began.

We hold these truths to be self-evident, that all people should be made equal, that they are endowed by their government with certain unalienable Rights, that among these are jobs, healthcare and housing.–That to secure these rights, Governments must rule over the people, deriving their just powers from the consent of the elite.

While I like to think I came up with a few clever lines, it’s hard to laugh when you think about what’s happened ever since America’s real Declaration of Independence.

Here’s what the Tax Foundation tells us about the evolution of taxation.

Since our country’s founding, we have witnessed…federal revenues taking up less than 5 percent of our economy to more than 20 percent. …Taxation in the United States in 1776 was incredibly different than what it is today. There were no income taxes, no corporate taxes, and no payroll taxes.

Instead, the government relied on a relatively modest set of tariffs and excise taxes.

…taxes primarily existed on imports of goods and services to the colonies, as well as on the sale of particular products. What sort of items were these tariffs imposed on? Primarily, they were levied on ships on a per-tonnage basis, slaves, tobacco, and alcoholic beverages. In all, the average tariff worked out to about 10 percent of the value of imports.

Amazingly, this very modest form of taxation lasted for more than 100 years. It wasn’t until that wretched day when the 16th Amendment was approved that the stage was set for the oppressive tax system that now exists.

By the way, when there was no income tax, there also was very little government spending.

For much of our nation’s history, federal outlays consumed less than 3 percent of economic output. The burden of Washington spending today, by contrast, amounts to more than 20 percent of GDP. And I hate to even think about the long-run projections since I become suicidal.

Oh, and let’s not forget the regulatory burden. We’ve gone from a system that had virtually no red tape to a nation that is now suffocating from a blizzard of bureaucratic edicts.

All of which makes today more costly, as the Washington Examiner reports.

Hundreds of federal regulations on beer, fireworks, hamburgers and even corn-on-the-cob cost families an additional $40, according to a new report on the July 4th tax. American Action Forum regulatory policy director Sam Batkins researched the regulations on the holiday treats to determine the costs. And they are huge.

Here’s the infographic he created.

Red tape adding $40 to our costs today? That will leave a bad taste in your mouth.

Let’s close on an upbeat and inspirational note by reading Professor Randy Barnett on the drafting of the Declaration of Independence.

The Committee of Five consisted of the senior Pennsylvanian Benjamin Franklin, Roger Sherman of Connecticut, New York’s Robert Livingston, the Massachusetts stalwart champion of independence John Adams, and a rather quiet thirty-three year old Virginian named Thomas Jefferson. After a series of meetings to decide on the outline of the declaration, the committee assigned Jefferson to write the first draft. …Jefferson did not have three leisurely weeks to write. He had merely a few days. Needing to work fast, Jefferson had to borrow, and he had two sources in front of him from which to crib. The first was his draft preamble for the Virginia constitution that contained a list of grievances, which was strikingly similar to the first group of charges against the King that ended up on the Declaration. The second was a preliminary version of the Virginia Declaration of Rights that had been drafted by George Mason in his room at the Raleigh Tavern in Williamsburg where the provincial convention was being held. …Mason’s May 27th draft proved handy indeed in composing the Declaration’s famous preamble. Its first two articles present two fundamental ideas that lie at the core of a Republican Constitution. The first idea is that first come rights, and then comes government.

To be sure, the Founders’ view of rights was grossly imperfect. Blacks and Indians were grossly mistreated and women were not full citizens.

But by the standards that existed then, the America’s Founders did a remarkable job of curtailing the power of the state and enhancing the rights of individuals.

The good news is that there have been some significant expansions of liberty ever since the Declaration of Independence. A bloody war was fought in part to end the scourge of slavery. The toxic combination of racism and statism embodied by the Jim Crow laws has been abolished. And women now have full political and economic rights.

The bad news is that there also have been significant contractions of liberty in the economic sphere. It started with the so-called Progressive Era, particularly the disastrous tenure of Woodrow Wilson. It then accelerated during FDR’s economy-stifling New Deal. Government’s size and power further expanded during the grim LBJ-Nixon years. And, more recently, we witnessed the debacle of a Supreme Court ruling that the very limited enumerated powers in the Constitution somehow give the federal government the right to coerce individuals to buy products from private companies.

Notwithstanding all this bad news, I’m not quite ready to pack my bags for Australia.

The United States was the only nation founded on a set of philosophical principles and I’m very patriotic – in the proper sense of the word – about being an American.

I hope all American readers enjoy Independence Day. And in the spirit of the Founding Fathers, break a few rules. Dodge a tax, set off some illegal fireworks, and drive over the speed limit!

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Two days ago, I contrasted the views of Pope Francis and Walter Williams about capitalism and morality.

I explained that Walter had the upper hand because free markets are a positive-sum game based on voluntary exchange while redistribution (at best) is a zero-sum game based on coercion.

That’s the theoretical argument. Now let’s look at the empirical data, specifically focusing on which approach is best for the less fortunate.

Thomas Sowell, the great economist at Stanford University’s Hoover Institution, is not impressed by the Pope’s analysis. Here some of what Prof. Sowell wrote for Investor’s Business Daily.

Pope Francis has created political controversy…by blaming capitalism for many of the problems of the poor. …putting aside religious or philosophical questions, we have more than two centuries of historical evidence… Any serious look at the history of human beings over the millennia shows that the species began in poverty. It is not poverty, but prosperity, that needs explaining. …which has a better track record of helping the less fortunate — fighting for a bigger slice of the economic pie, or producing a bigger pie? …the official poverty level in the U.S. is the upper middle class in Mexico. The much criticized market economy of the U.S. has done far more for the poor than the ideology of the left. Pope Francis’ own native Argentina was once among the leading economies of the world, before it was ruined by the kind of ideological notions he is now promoting around the world.

I briefly discussed the failure of the Peronist Argentinian model last month, but let’s take a closer look at Professor Sowell’s assertions about the U.S. and Argentina.

My colleague at the Cato Institute, Marian Tupy, has put together a great fact-filled website called Human Progress, and it allows users to access all sorts of databases to produce their own charts and tables.

And here’s what the data shows about per-capita economic output in Argentina and the United States.

Not exactly a ringing endorsement of the supposedly more compassionate system in Argentina.

As you can see from this table, Argentina actually was slightly richer than the U.S. back in 1896. But that nation’s shift to statism, particularly after World War II, hindered Argentina’s growth rates.

And seemingly modest differences in growth, compounded over decades, have a huge impact on living standards for ordinary people (i.e., inflation-adjusted GDP per person climbing nearly $27,000 in the U.S. vs an increase of less than $6,700 in Argentina).

By the way, this is not an endorsement of America’s economic policy. We have far too much statism in the United States.

But compared to Argentina, which generally has ranked in the bottom quartile for economic freedom, the United States has a more market-friendly track record.

To help make the bigger point about the importance of economic liberty, let’s now compare the United States with a jurisdiction that consistently has been ranked as the world’s freest economy.

Look at changes in economic output in America and Hong Kong from 1950 to the present. As you can see, Hong Kong started the period as a very poor jurisdiction, with per-capita output only about one-fourth of American levels.

But thanks to better policy, which led to faster growth compounding over several decades, Hong Kong has now caught up to the United States.

What’s most remarkable, if you look at the table, is that per-capita output over the past 65 years has soared by more than 1,275 percent in Hong Kong.

Needless to say, if the U.S. is out-performing Argentina and Hong Kong is out-performing the U.S., then a comparison of Hong Kong and Argentina would yield ever starker results.

I actually did something like that back in 2011 and the results further underscore that there’s a very powerful relationship between economic policy and economic performance.

Which brings us back to the fundamental issue of what system is best for the less fortunate in society?

I suppose that’s a judgement call, but poor people obviously have higher incomes and more opportunity when there’s strong economic growth.

But as Margaret Thatcher famously explained, some people are so consumed by disdain for success that they’re willing to accept more suffering for poor people if they can simultaneously lower the incomes of rich people.

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Last month, I cited data from Economic Freedom of the World to explain that the United States was becoming less competitive because of creeping protectionism and reductions in the rule of law and property rights.

Now I have more bad news to share.

Last year, the United States ranked #12 for economic liberty.

But according to the new rankings released yesterday, the United States now has dropped to #16. Here are the new rankings (based on a 0-10 scale), with Hong Kong and Singapore once again leading the pack.

Why did the United States drop? In part, because our score fell from 7.81 to 7.73, but also because of what happened to the scores of other nations.

The bottom line is that Georgia, Taiwan, Qatar, Ireland, and the United Kingdom jumped ahead of the United States, while Finland fell behind America.

Now let’s get more depressed.

If you dig through the archives and get the rankings for 2000, you can see that the latest fall from #12 to #16 is part of a very disturbing pattern. The United States used to be #3 in the world, with a score of 8.5.

Wow, falling from 8.5 to 7.73. That’s definitely an indictment of statist policy during the Bush and Obama years.

But I’m going to share even more depressing data.

The folks at the Fraser Institute who put together Economic Freedom of the World retroactively alter scores and rankings as they get more data (sort of the way the U.S. government periodically revises GDP and employment data).

So if you look at their big excel spreadsheet, you’ll see that the United States actually wound up ranked #2 in 2000 with a score of 8.65, marginally ahead of Singapore, which had a score of 8.61.

So we’ve actually dropped from #2 to #16 in the rankings, and our score has plunged from 8.65 to 7.73.

I’ve saved the worst for last. I crunched the numbers to see which nations suffered the biggest declines since 2000. As you can see, the United States has the unfortunate distinction of being on a list with basket case economies such as Venezuela and Argentina.

To make matters worse, at least the U.K. has been moving in the right direction in recent years, with a slight increase from 7.80 to 7.87 between 2010 and 2013. And Iceland also has been trying to improve. Its score has jumped from 6.43 to 6.87 over the past three years.

The United States, by contrast, has downward momentum.

P.S. The nation with the biggest improvement since 2000 is Romania. Thanks to reforms such as the flat tax, its score has skyrocketed from 5.31 to 7.69, an increase of 2.38 points. At this rate, they’ll easily pass the United States in next year’s rankings.

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This century has not been good news for economic liberty in the United States.

According to Economic Freedom of the World, America has dropped from being the 3rd-freest economy of the world in 2001 to the 12th-freest economy in the most recent rankings.

Perhaps more important, our aggregate score has fallen from 8.20 to 7.81 over the same period.

So why has the U.S. score dropped? Was it Bush’s spending binge? Obama’s stimulus boondoggle? All the spending and taxes in Obamacare? The fiscal cliff tax hike?

I certainly think all those policies were mistaken, but if you dig into the annual data, America’s score on “size of government” only fell from 7.1 to 7.0 between 2001 and 2012.

Which means economic freedom in the United States mostly declined for reasons other than fiscal policy. In other words, our score dropped because of what happened to our scores for trade policy, monetary policy, regulatory policy, and property rights and rule of law.

That triggered my curiosity. If America is #12 in the overall rankings, how would we rank if fiscal policy was removed from the equation?

Here are the results, showing the top 25 jurisdictions based on the four non-fiscal policy factors. As you can see, the United States drops from #12 to #24, which means we trail 14 European nations in these important measures of economic freedom.

If you look in the second column, you’ll notice how many of those European nations have double-digit increases when you look at their non-fiscal rankings compared to their overall rankings.

This is for two reasons.

First, their fiscal scores are terrible because of high tax rates and a stifling burden of government spending.

Second, these same nations are hyper-free market on issues such as trade, regulation, money, rule of law and property rights.

In other words, the data back up points I’ve made about policy in nations such as Denmark and Sweden.

In an ideal world, countries should have free markets and small government. In Northern Europe, they manage to get the first part right. Which is important since non-fiscal factors account for 80 percent of a nation’s overall grade.

Now let’s return to the issue of America’s decline.

Here are the non-fiscal rankings from 2001. As you can see, the United States was #5 at the time, scoring higher than even Singapore and Hong Kong. And the U.S. was behind only three European nations back in 2001.

For what it’s worth, America’s score has fallen primarily because of a significant drop in the trade category (from 8.7 to 7.7) and a huge drop for rule of law and property rights (from 8.7 to 7.0).

In other words, it’s not good for prosperity when a nation begins to have problems such as protectionism and politicized courts.

P.S. The erosion of America’s score for non-fiscal factors is particularly disappointing since improvements in those factors have played a big role in protecting the world from the negative economic consequences of more spending and taxes.

P.P.S. I think this is an example of correlation rather than causation, but the above rankings for non-fiscal economic liberty seem somewhat similar to the rankings I shared last week looking at overall societal freedom.

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