Diary

On Tax Policies, Washington Is Out Of Step With The World

I’ve suddenly been finding myself saddled with a surprising amount of travel – both recently-done and on the short-term schedule.

If there’s a possible theme, it relates to what the next onset of economic growth will look like. And these days, it’s about a great deal more than what will drive the next surge of economic growth – it’s also about where the next surge of growth will occur.

And on that count, contemporary Washington is badly, badly out of step with much of the world – and is dangerously oblivious to that reality.

More below the fold.

Personally, I like “emerging markets” – because many of them really are determined to actually emerge. Which jurisdictions have their acts together?

Sensible tax policies are another attractive feature of many emerging markets. The highest tax rate in Brazil is just 27.5%. Flat-tax structures have become the norm in places like Russia, the Czech Republic and numerous other countries that were once behind the Iron Curtain. And dynamic Asian markets like Singapore, Malaysia and Taiwan have long since done away with capital gains taxes.

Where would you invest funds and build facilities (and create jobs)? (I actually have to worry about things like that first-hand.)

Meanwhile, Sweden – long the iconic end-of-human-social-evolution utopia-of-dreams of domestic “progressives” – is now frantically trying to back itself out of that swamp:

Anders Borg has a message for those who look to government to take over health care, rescue the financial system and run troubled corporations: I have seen the future–and it doesn’t work.

As the finance minister of Sweden, Borg is the chief financial officer of a country long known as a walking billboard for a social welfare state. In Borg’s view, the 1970s and 1980s were lost decades for Sweden. Left-leaning politicians pushed government spending, excluding investment outlays, from 22% of gross domestic product in 1970 to 30% in 1980. Real growth fell from an average of 4.4% annually in the 1960s to 2.4% in the 1970s and remained low for the next two decades.

….

His government has slashed the tax rate on low incomes from 30.7% to 17.1%. The combined tax take (national and local; income and other) has fallen by 2.5 percentage points in three years to 46.6% of gross domestic product.

For a good 35 or more years now, domestic “progressives” have been hectoring everyone about how the United States has long been somehow out-of-step with “the rest of the world.”

Maybe now would be a good time for these cooks to begin to eat their own cooking….