British Studies Confirm: Small Government Works

(H/T: The Foundry)

There might still be hope yet for Europe, or at least Great Britain. Two recent studies have reinforced what we’ve known all along: small government works. The first one is from the Centre for Policy Studies (founded by Margaret Thatcher!). It’s called “Small is Best: Lessons from Advanced Economies”, and the full study can be found here (PDF file).

But for those of you who don’t want to read the whole report, the CPS has released a fun little video summing it all up:

Here’s what Bourne and Oechsle (the guys behind the study) conclude:

The statistical analysis presented here is supportive of the assertion made by supply-side economists that the growth performance of countries with smaller governments will be better than those with bigger governments. Furthermore, small governments do not appear to deliver worse social outcomes.

Looking at the study and their video, the difference in those statistics really is telling: small government is what works best.

Beyond the jump, you’ll find the second study.

This one comes courtesy of the TaxPayer’s Alliance, and it studies Britain’s income tax system. You can find it here. Granted, their tax system is not ours. In fact, Britain’s system is more complicated than ours. As the guys at the Foundry note, this isn’t the kind of study you read quickly. It is long, and it requires some digestion, so to speak. If you check nothing else out, view the Prologue, where they lay out their vision, and the Conclusion, where they tie it all together. This report argues that Britain’s taxes are too high, the system too complicated, and that they are not conducive to economic growth. Like the first study, they find that a large private sector is conducive to economic growth in a country.

And to fix Britain’s tax code, they push for a single income tax set at 33 percent of national income, the marginal tax rate should not exceed 30 percent, all other taxes but consumption taxes should be abolished, and that local authorities should raise their money from local taxes. They conclude:

Lower marginal rates of tax on labour income, and not repeatedly taxing capital income, will produce dramatic economic results…Serious tax reform is an essential part of any meaningful plan for growth. In turn that is the only way we can effectively respond to the scale of the fiscal crisis confronting Britain, and avoid being locked into an indefinite period of austerity.

European countries confronting their fiscal crises would do well to take heed of those words.

An appendix includes an assessment of various taxes reform proposals that have been put forward in Britain, the United States, and elsewhere, including an assessment of Paul Ryan’s Roadmap on page 390 (yes, it’s that long of a paper). A few U.S. state proposals also merit mentions in the appendix, as does the plan put forward by the city of Philadelphia’s Tax Reform Commission.

To sum things, up, I think the folks at Heritage put it best:

The substantial overlap between the plans is an encouraging sign for our times and testimony to the fact that both nations are only as powerless to alter their fiscal destinies as they want to be.

We can right our ship of state. We can straighten out the fiscal mess we are in. We just need to stand on the courage of our common sense conservative convictions to do so.