Tax Success, and You Get Less Success

By April 5, 2007General

Sweden is preparing to drop its “wealth tax,” blamed for driving its more successful citizens overseas.

The move, expected to be approved by parliament later this year, underscores the country’s efforts to keep successful Swedes and their capital at home by changing its fabled but costly welfare state.

“It’s not sustainable to keep taxes that radically diverge from other countries,” Finance Minister Anders Borg, who is not related to the tennis great, told The Associated Press on Thursday. “Not if you want the money to stay in the country.”

Several European countries have dropped taxes on wealth in the last decade, including Denmark, the Netherlands and Finland. In France, taxes on the rich have become a top campaign issue before the presidential elections in April and May. Luxembourg and Spain are the only other EU countries that impose wealth taxes, according to the Swedish government.

In a related note, the NAM’s new white paper, “A 21st Century Tax Policy To Promote Job Creation and Economic Growth,” observes that France and Germany are debating signficant reductions in their corporate taxes.

Meanwhile, the United States — with a statutory corporate tax rate of 40 percent (combined federal and state) — now has the second-highest corporate tax rate among our major competitors, trailing only slightly behind Japan. This too could change. In March 2006, Japanese Finance Minister Koji Omi recommended lowering Japan’s corporate tax rate as part of a package of 2008 tax reforms.

Indeed, the 2006 U.S. corporate income tax rate is higher than the average OECD tax rate by more than 10 percentage points.

Statist, corporatist, high-tax social democracies leading the way toward low-tax policies that encourage capital investment? Well, even if it seems contrary to history and conventional wisdom, they are in fact leading. And in the competitive, global economy, if the U.S. stands still, we’ll fall behind.

(Hat tip: The Cato-at-Liberty blog.)