Economic Freedom Needs Low Taxes

That’s for the obvious reason that if the government takes your money, you can’t spend it. Predictably, all the Republican presidential candidates understand this, and the collectivist Democrats and Brit socialists do not.

The Heritage Foundation just published its 2008 Index of Economic Freedom – here are the top 10:

Rank Country Score
1 Hong Kong 90.25
2 Singapore 87.38
3 Ireland 82.35
4 Australia 82
5 United States 80.56
6 New Zealand 80.25
7 Canada 80.18
8 Chile 79.79
9 Switzerland 79.72
10 United Kingdom 79.55

The scores average 10 different measures shown here and of course the higher the freer.

Excluding the tax havens and dubiously free Hong Kong leaves the core Anglosphere plus Chile. However the Foundation says of the UK (my ellipsis and emphasis):

Its overall score is 0.5 percentage point lower than last year, reflecting worsened scores in four of the 10 economic freedoms…

The U.K. scores far below (i.e worse than) the world average in government size and fiscal freedom. Total government spending equals more than two-fifths of GDP, and tax revenue and rates are very high.

At this rate the UK will drop out of the top 10 next year, as Brown’s socialists pile on more taxes. That’s a very severe competitive loss, since the UK is now largely a financial service economy, and global investment will go elsewhere as the nation becomes less economically free. Since the UK is the world’s second largest debtor and so needs inwards investment, that means the UK is going to take a big economic hit.

All US Republican presidential candidates – even the liberal ones – are smart enough to avoid this trap:

…all of the GOP candidates want to make the Bush tax cuts permanent, and each is talking about some kind of new tax cut or reform. Rather than burying Reaganomics, as many in the media want to do, these candidates are trying to update it for our current economic challenges.

But if Americans elect a democratic president:

With Democrats insisting on a giant tax increase, taxes will be a major issue this fall no matter who wins the GOP nod. And if a Republican does win the White House, a tax reform showdown is inevitable in 2009.

The AMT continues to swallow more taxpayers, the death tax is due to expire for a single year in 2010 and then rise back to 55%, and the Bush tax cuts expire after 2010.

This is a perfect storm that means the next President will have no choice but to make taxes a political priority.

So a Dem victory means the US will join the UK in the less free and hence poorer sector of the global economy along with the likes of Belgium.

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