Steven Malanga is one of my favorite columnists. He consistently provides much more meaty data than other economic writers with bigger reputations.
His column today, sums up the reality that much of the rest of the world is not planning on raising taxes on the wealthy like Barack Obama, they are cutting them. They are not moving to more progressive tax systems, but flat taxes.
The tax-cutting binge is taking place in what some have called “Old Europe.” France, Germany, Italy, and Spain have cut their top personal income tax rates since 2003. Germany, Italy, Spain and the U.K., meanwhile, have trimmed corporate tax rates, too, in just the past year.
Driving the Western European governments is aggressive tax policy in New Europe, that is, Eastern European countries, which are competing for workers and investment. Many of these countries had the opportunity to design their own tax systems after the fall of the Soviet Union and they have often opted for tax schemes that are simpler than the U.S. or Western European systems. Many feature only a few tax brackets and a few are flat tax schemes. Bulgaria has a new flat tax rate of 10 percent, down from a top tax rate of 29 percent in 2004. Estonia has cut its flat tax rate to 21 percent from 26 percent, while the Slovak Republic has trimmed its top rate from 38 percent to a flat tax rate of 19 percent. Romania has eliminated its top rate of 40 percent and gone to a flat tax of 16 percent.
In Asia-Pacific, Hong Kong’s low taxes (top rate, 16 percent) have continued to make it a magnet for both people and money and prompted tax cuts in other countries. Australia cut its top income tax rate two percentage points to 45 percent to try and lure back talent fleeing to Hong Kong and Singapore, but Australia has a long way to go to be competitive. Singapore has countered by slashing its top rate to 20 percent from 22 percent.
How embarrassing that we have regressed into the past.