3 thoughts on “Tax competition

  1. it’s a good video, Terje. i hadn’t appreciated the extent of the OECD’s anti-tax competition witch hunt. i also hadnt realised their staff pay no tax!

    what is the Centre for Freedom and Prosperity btw?

  2. Fortunately, the widespread teaching of neo-classical macroeconomic theory at most major U.S. universities assures that the OECD will never be able to over-rule our American desire for low tax rates. We have too much empirical data on the beneficial results from low taxes for the OECD to get its way.

    Domestically, several U.S. states have no state income tax, or deliberately offer a much reduced personal income tax rate next door to a high-tax state. Low-tax Connecticut since 1970 is famous for the mega-billions of investment that poured into its southern portion of the state when next-door New York became a confiscatory, high-tax state. Tax-free, libertarian Nevada’s twenty-five year boom is the opposite of next-door California’s high-tax bust. Microsoft located its world headquarters in tax-free Washington state. Those many thousands of Ohio manufacturing jobs that Mr. Obama and Mrs. Clinton recently alleged went to China, India, and NAFTA’s Mexico?–actually, they went from high-tax, economically-depressed Ohio to tax-free, booming Texas.

    ‘Be free.’

  3. Pommy,

    I didn’t know about the tax free income status of the OECD staff either before I saw the video but I knew it used to be the case with IMF employees. IMF employees would be working in a poor third world country recommending higher taxes (they called it austerity) and recommending inflation (they called it currency devaluation). The first was supposed to cure indebtedness and the second was supposed to improve terms of trade. Generally it would kill the domestic economy and generate political violence. The IMF staff were insulated from their own policy advice in two ways. Firstly their salaries would be tax adjusted so that changes in the domestic tax code did not effect their after tax income and secondly they were often paid in US dollars thus insulating them to a large extent from domestic inflation.

    One of the reasons I bang on about the tax arrangements in the EU is that it is a rare federal system (or transnational institution if you prefer) that makes the centralisation of taxation prohibitively difficult. Brussels can make awful rules until the cows come home but without agreement from 100% of the EU nation states it can not assume any direct tax powers. Any single EU nation can veto such a move and every EU expansion increases the number of potential vetos. Basically Brussels must finance itself from tariffs and from a small percentage of VAT which is levied by the nation states themselves and paid as a sort of membership fee. Even the recently failed move to a formal constitution retained this provision regarding tax. I’d agree that there is a lot to lament regarding the EU but to the extent that it has cemented a permanent state of tax competition in Europe it is to be praised. And if Europeans maintain the current provincial attitude then all the better. EU patriotism would be a depressing development although perhaps as with the USA and Australia somewhat inevitable in the longer term. Internally anti-americanism and anti-europeanism have a few quite positive elements to them.

    The video implies that moves towards global tax harmonisation (ie reduced competition) is a European endeavour. However the USA can also be seen often enough applying pressure to low tax nations. The reality is that there are statists everywhere in the world. Hopefully the world has an increasing number of liberals to take on the statists.

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