This is why we can’t have nice things:
-because the government takes them. The U.S.A. has practically the worst tax system in the industrialized world. According to the Wall Street Journal, the Tax Foundation has ranked the U.S.A. 32 out of 34 countries in terms of “competitiveness and neutrality” in tax laws. In fact of the two countries worse than the United States in their taxing policies, one of them, France, has an actual Socialist as President.
A competitive tax code is one that limits the taxation of businesses and investment. Since capital is mobile and businesses can choose where to invest, tax rates that are too high “drive investment elsewhere, leading to slower economic growth,” as the Tax Foundation puts it.
By neutrality the foundation means “a tax code that seeks to raise the most revenue with the fewest economic distortions. This means that it doesn’t favor consumption over saving, as happens with capital gains and dividends taxes, estate taxes, and high progressive income taxes. This also means no targeted tax breaks for businesses for specific business activities.” Crony capitalism that rewards the likes of green energy with lower tax bills while imposing higher bills on other firms is political arbitrage that misallocates capital and reduces economic growth.
But What about Sweden, Finland, and Norway with their Safety Nets and Universal Healthcare?
All those countries liberals talk about as being way better than the U.S. in terms of what “the government provides” for the citizens; yea they have better tax systems. You see, in those countries their tax systems do not seek to “punish the rich”, so they can collect more tax revenue, without discouraging business. This in no way negates other arguments about why it is bad to have centralized and socialized government programs, but it does however show that America is essentially immature in their taxing policies.
America has an almost 40% corporate tax rate, and a progressive income tax. This means people who earn more money pay not only a higher amount of money, but a higher percentage of their income to the government. It should be obvious why this limits growth, and gives incentive to move money to better tax regions outside of the United states. The poster children of socialized nations however—Sweden, Norway, Finland–do no “punish the rich”. They are far less likely to tax an estate when a person has died, or capital gains: money made from investment.
Keeping estate taxes at bay means people save more money, knowing they will be able to pass it on, leading to more capital for banks to give out housing loans for instance. And taxing investment income less means people are more likely to invest, since the reward is greater. That type of tax code therefore rewards saving, fiscal responsibility, and economic investment, while deterring frivolous spending through consumption taxes, like a higher sales tax. The rich still pay more if they spend more, but not just for simply earning the money.
Newsflash: The U.S. is Corrupt
I know, we like to think of the U.S. as pretty good when it comes to governing. But the United States government uses its tax code to punish their “enemies” and reward their “friends”. This is crony capitalism: different companies and individuals play by different rules depending on who they know. Capital generally flows to the most successful prospective investment, but the government can change that by making one investment more risky, due to a higher tax burden. In turn, capital flows to companies who will not be as successful in general because they were chosen based on the tax breaks the government gives them, versus the quality of the product or service.
So here’s the recipe for a successful crony capitalist economy, where the government gets to pick the winners and the losers. 1) Set the corporate tax rate the highest in the world:
The accounting firm KPMG maintains a corporate tax table that includes more than 130 countries and only one has a higher overall corporate tax rate than the U.S. The United Arab Emirates’ 55% rate is an exception, however, because it usually applies only to foreign oil companies.
Check. 2) Now retain the ability to arbitrarily lower said tax rate on an individual basis, so that companies you favor have an economic advantage over companies who play by the rules you set. And there you have an economic dictatorship, or “Fascist” State. (Working definition of Fascism: Complete economic control by the government of a country; the system of government characterized by total control over the means of production, versus ownership of the means of production, as in Socialism).
But we could also take it one step forward and implement oppression over the proletariat using our high corporate taxes. You see, there is a misconception that somehow taxing businesses at a higher rate will be better for workers. This is absurd; if companies pay higher taxes this leaves less money for paying employees. While some of the difference is made up through higher prices for the consumer, workers’ pay also takes a hit.
Abundant economic research, by Kevin Hassett and Aparna Mathur among others, has shown that higher corporate taxes lead to lower wages.
Lower wages mean people must work longer hours, giving them less free time, and therefore a lower quality of life. But the cycle does not end there. Less free time means more dependence on government institutions to tell us which products are safe through the FDA, USDA, EPA, CFPB, etcetera, thus giving even more control to the government to pick the economic winners and losers. Diminished free time also means fewer people have the time to pay attention to politics, and must rely again on government controlled media to tell them who to vote for.
These are not the only factors, but some key economic methods used by government to control a population. Therefore based on the evidence, it would seem countries like Sweden, Norway, and Finland care less about controlling their population than the U.S., despite having arguably more socialist tendencies.