AS THE WORLD TURNS

...It outlined how French workers could game the system and make a good income without hard work...

...Tax rates were slashed, sound money adopted, American Democrats, however, long for the good old days of imbibing shot after shot of fiscal hemlock...

...Don’t they know you can’t tax an economy into prosperity...

...The average flat tax rate is 20 percent, which has made the 40 to 60 percent tax rates of Old Europe unsustainable if it is to maintain its industrial base...

...that the rest of the world is now emulating us...

...A r s e f u o b s s e o h b e s worry a here t is “ that airn as s American ” over p politicians ospe i rity s , 25-year comparative advantage in the global economy of having nearly the lowest tax rates in the industrialized world is being surrendered...

...In some cases lower tax rates have actually generated greater growth in the economy, higher tax receipts, and more balanced budgets...

...From 2000-05 alone, worker productivity, the key to higher wages, crawled ahead at a rate of 1 percent annually in Europe, but galloped at 2.5 percent in the U.S...

...f e b R U a R Y 2 0 0 8 T H e a M e R I c a n s P e c T a T o R 1 9 a s T H e W o R L d T U R n s The U.S...

...Being a country of slightly more than 300,000 people, when all these policies reversed, things really moved...

...The supply-side economics model that the Gipper started to install with such great controversy 27 years ago is now investment, low-priced imports, jobs, and rising meant two decades of new factories, technological United States than left, from 1982 to 2002...

...that’s the sound of tax rates around the world being chopped down in what clearly is the most momentous global economic trend today...

...This was also summarized in an editorial in the Wall Street Journal on October 25, 2004, titled “Are Europeans Lazy...

...What a U-turn...

...now has the unflattering distinction of having the developed world’s second-highest corporate tax rate of 39.3 percent (35 percent federal plus a state average of 4.3 percent), according to the Tax Foundation...

...That About $1.5 trillion more investment came into the a gravitational pull on foreign investment capital...

...In the information and technology age, borders don’t matter much anymore...

...Over that same time period the Europeans, with a larger population, have created around 24 million net new jobs...

...Ireland is the classic case of a nation on the “correct side” of this Laffer Curve...

...The liberally dominated Congress speaks primarily of higher income taxes, capital gains taxes, dividend taxes, payroll taxes, death taxes, energy taxes, and hedge fund taxes...

...He has recently been on the radio advocating supply-side policies for France against former comrades from the Socialist Party...

...What a concept: rewarding work...

...According to Frau Merkel, the purpose of the tax cuts is to boost “Germany’s attractiveness as a location for international investment...

...No, just overtaxed...

...For years European leaders denounced declining global tax rates and the unhealthy tax competition it fostered...

...Under Reagan, for the rich,” the rest of the world has seen impresliberal American politicians have decried “tax cuts prosperity boom of the last quarter century...

...Thanks to the tomfoolery of our own politicians who have deluded themselves into thinking that l e n t c c quen tax es, rates on the can tax be ut raised ing fro without t, we ar adv fal erse ing b conse ehind - even the French...

...In a Wall Street Journal editorial back in 1997 entitled “The Great Tax Cut of China,” Alvin Rabushka argued that “China has average 10 percent real growth annually for 19 years,” basically since the death of Mao in 1976...

...No example better illustrates what good economics can do, even under the most difficult circumstances...

...risk-taking to explode...

...An American Enterprise Institute analysis finds that “the Spanish wealth tax is among the highest in the world...

...Or how about the unlikely transition that is going on in France...

...Corporate tax rates are declining...

...Icelandic businesses are dominant in the economies of Scandinavia and the U.K...

...Small though it may be, its lesson to all who will listen is gigantic...

...Barack Obama and John Edwards want to nearly double the tax on capital gains to 28 percent...

...Federal Reserve Bank of Minneapolis, Research Department Staff Report 321, November 2003...

...Singapore, for example, recently approved a corporate tax cut to keep pace with low tax neighbor Hong Kong...

...Next door, even Spain’s Socialist prime minister, José Luis Rodríguez Zapatero, is sounding a Reaganite, tax-cutting message...

...When Nicolas Sarkozy, the flag bearer of France’s Gaullist right, was elected president last May, he promised a “real economic revolution,” including offering employees new tax incentives to earn more money by working longer hours...

...That is exactly the wrong interpretation of what is happening in these supply-side nations...

...1 8 T H e a M e R I c a n s P e c T a T o R f e b R U a R Y 2 0 0 8 a R T H U R L a f f e R & s T e P H e n M o o R e From January 1, 1983 (when Reagan’s tax cuts took full effect), through 2007, the U.S...

...The Europeans surely don’t want to continue in the ways of their immediate past...

...Nobel laureate economist Edward Prescott wrote that Americans are working harder than Europeans.* Using labor market statistics from the Organization for Economic Co-operation and Development, he found that Americans aged 15-64 work 50 percent more than do the French...

...All of this is designed to attract foreign investment...

...But while they stood athwart history, In 2004 a best-selling book in France outlined how French workers could game the system and make a good income without hard work...

...To show just how deep-seated the recent French changes are, we cite a recent article by François Chevallier: In the wake of Mitterrand’s election, TuffierRavier Py, then the largest French broker, initiated a debate between the main economic advisors of both presidents...

...Then he added: “Their low tax rates are attracting all the capital of Europe and if we want to compete our rates need to fall to near theirs...

...countries, he wondered...

...But perhaps our favorite story comes from the other side of the planet...

...So since the implementation of Reagan’s economic policies, the U.S...

...The economy soared, inflation fell from a high of nearly 100 percent per annum to 3 percent, and the national debt has nearly vanished...

...dollar in 1994, thus completing the three legs of the supply-side economic stool—tax cuts, sound money, and free trade...

...The U.S...

...by contrast, with its near 40 percent rate, has been averaging less than 2.5 percent of GDP in corporate receipts...

...Even Zapatero himself seems to understand this economic reality as he has declared that the tax cut would ensure that “saving is no longer punished...

...Northern Ireland is making a bid to slash its corporate tax rate to 12.5 percent in order to try to catch up to the economic gazelle of Europe: Ireland...

...We’ve seen that in Ireland...

...Sarkozy is so far confronting a predictable wall of political opposition to his reforms, but at least he’s pointing his nation in the right direction...

...the flat tax revolution began to sweep across Eastern Europe...

...School children and workers in places from India to Africa will soon have a computer, meaning greater education and greater productivity...

...What’s wrong with this picture...

...The United States,” warns Kevin Hassett, an economist at the American Enterprise Institute, “appears to be a nation on the wrong side of the Laffer Curve: we might collect more revenues with a lower corporate tax rate...

...Don’t they know you can’t tax an economy into prosperity...

...At the time of this writing, Poland’s newly elected government has declared that its top priority is a flat tax of 15 percent by 2009...

...trade freed, and industries were privatized...

...The world has become one massive shopping market for capital...

...Their current leaders aspire to being Thatchers and Reagans rather than Carters or Nixons...

...by Arthur Laffer imber...

...is not the leader this time around [but] is lagging behind...

...Consider what is happening as we speak with corporate tax rates...

...For example, the UN report contends that laptop computers could in the near future cost less than $100...

...of the Democratic presidential field...

...This was not always the case,” he wrote...

...Rabushka reported in two nations, China and India, which have moved toward open markets, lower taxes, and capitalism...

...Well, 26 years later, Attali finally joined the Sarkozy team to bring in his considerable experience in French affairs to help the present supplyside government fine tune its “pro-growth” agenda...

...What seems to be motivating this sudden taxslashing fad in every country and on every continent save the United States is globalization and free trade...

...Even socialist leaders abroad have been mugged by an economic reality in this new age of globalization and quicksilver capital...

...economy...

...The new first minister of Scotland, Alex Salmond, recently told us the same thing: “Supply-side economics works...

...Now they are capitalists and flat tax fanatics...

...Individual income tax rates are being lowered...

...formance to “massive sustained tax reduction...

...stephen Moore is senior economics writer for the Wall Street Journal editorial page...

...That’s more than 1 billion people who will be pushed out of a miserable destitute existence...

...We call this global phenomenon Reaganwages and living standards...

...Now there are 22 such nations, most of them in Eastern Europe, with new converts added by the month...

...And who can blame them...

...The world really is getting flatter by the day, and even the stodgy bureaucratic leaders of Old Europe are getting into the act...

...And she’s the moderate The United Nations’ study reports that much of the poverty reduction has happened China’s economic resurgence...

...Milton Friedman’s ideas ultimately triumphed over those of Chairman Mao...

...Despite being staunchly antiAmerican over the war in Iraq, he can still recognize a bad tax when he sees one...

...In the late 1980s there was one nation in the world with a true flat tax, and that was Hong Kong...

...As the World Turns As the World Turns T The globe is tilting to the supply-side, so why is the U.S...

...omics 2.0...

...So now, amazingly, Germany, which started this century with a 52 percent top corporate income tax rate, has sliced and diced that down to 19.8 percent...

...These onetime Soviet satellites endured suffocating economic controls and even real declines in living standards for half a century...

...And in the Middle East, Kuwait has cut its corporate income tax rate in two-thirds...

...His conclusion: “Tax rates alone account for most of these differences in labor supply...

...In the early 1970s, Americans allocated less time to the market than did the French...

...15 percent capital gains and dividend tax rates have been a magnet for foreign capital investment over the past four years, but now investors seem to have lost confidence that the rates will stay low...

...Iceland has gone from one of the poorest countries in Europe to close to the richest...

...Iceland, over the past decade or so under the able leadership of David Oddson, has provided a virtual laboratory for supply-side economic policies...

...Just the threat of this tax assault on wealth and capital is taking a toll on foreign investors’ confidence in the future direction of the U.S...

...And let us repeat: we are talking here about France, the country that has no word for entrepreneur or laissez faire, that invented the four-and-a-half-day work week, and where past leaders like François Mitterrand openly disparaged Reaganomics as a prescription for economic chaos and decline...

...Congress, and on the Democratic presidential hustings that tax rates don’t matter, the rest of the world has stopped listening to them...

...It notes that “while Ronald Reagan led the wave of corporate income tax rate reduction in the 1980s, the U.S...

...Stephen Moore The tax reduction revolution is happening so quickly it’s hard to keep a good tally of all the latest developments...

...The tax and welfare policy incentives became so perverted that in 2004 a best-selling book in France was entitled: Bonjour, Paresse, which translated means: “Hello, Laziness...

...Where Foreigners have witnessed with envy the American the economic operating system around the globe...

...The forces at play that have ignited these giant gains in living standards for the poor are, surprise, surprise, globalization and supply-side economics...

...In comparisons between Americans and Germans, the story is the same...

...Yikes...

...It was what Hillary, Obama, Rangel, Edwards et al...

...Under Chancellor Angela Merkel in 2007, Germany chopped its corporate income tax rate by 8.9 percentage points...

...Rabushka attributed China’s incredible perhe noted other policies begun by Deng Xiaoping such as coastal economic zones, foreign investment, liberalized trade, and a free market in agriculture, he clearly believed tax cuts were the sine qua non of that in China “the state sector now accounts for 34 percent of the gross output value of industry [as of 1997], down from 82 percent in 1978...

...From 1997 up to the present, China has maintained these growth rates...

...Years of overtaxing work and subsidizing laziness has slowed production and increased the ranks of those who live on the dole...

...Keeping tax rates low is key for a nation to compete in international markets and achieve rapid growth...

...The U.S...

...It penalizes savings and thrift...

...Two decades of slow growth and double-digit unemployment in Europe have made it necessary to turn to the supply-side economics model they once disparaged...

...If that trend continues, this story won’t have a happy ending for America...

...Nations find themselves in a frenzied contest to try to climb past each other in the race up the economic growth ladder...

...adise, completely eliminated its estate tax because T par er work t years ago, Sweden, the socialis r E l g k a t i d h i e g m cle s arest i n sig h n o that d in a u new ope economic is that jus ’s para t two - - political leaders finally realized the tax was economically counterproductive...

...He has pledged that if re-elected he will cut the corporate income tax by 10 percentage points and totally eliminate the nation’s wealth tax...

...While the Russians, Swedes, Poles, Chinese, Germans, and 2 0 T H e a M e R I c a n s P e c T a T o R f e b R U a R Y 2 0 0 8 arthur Laffer is president of Laffer Associates...

...Sometimes the greatest truths are revealed in microcosms of the macro reality...

...If the UN is right, then this is the greatest human triumph in history...

...philosophy: work harder, less government spending, less civil service, lower taxes and so on...

...On behalf of Ronald Reagan, stood Arthur Laffer, the well-known father of supply-side economics...

...The leaders of the former Communist nation Vietnam announced this summer that they intend to reduce the corporate rate from 28 percent to 25 percent while removing other governmental barriers to growth...

...Wealth taxes are falling or disappearing altogether...

...They are slowly shedding many of the excesses of cradle to grave socialism and the confiscatory tax rates required to pay for the super-sized Nordic welfare states...

...Yet Attali looked at Laffer at the time as a cowboy, giving his ideas little credence...

...Russia’s 13 percent flat tax generates more revenues than the old “progressive” system with rates well over 50 percent...

...Those policies proved to be the incentives for production, work, investment, and inflation rate from 13 percent to 3 percent, allowing tax rates went from 70 percent to 28 percent and the sive and sustained rates of growth...

...Why anyone would want to reverse these policies or vote for someone who espoused a reversal is beyond our comprehension...

...economy created 48.5 million jobs, or almost 160,000 a month...

...Senator Hillary Clinton says that she wants to repeal the Bush investment tax cuts, “because they benefited the wealthiest 1 to 10 percent...

...Products like computers and modern drugs that were once unaffordable luxuries are now available to a huge share of the world’s population...

...American Democrats, however, long for the good old days of imbibing shot after shot of fiscal hemlock...

...Moreover, due to creative accounting, f e b R U a R Y 2 0 0 8 T H e a M e R I c a n s P e c T a T o R 1 7 it is one of the easiest taxes to avoid and therefore tends to ensnare middle-class Spaniards rather a s T H e W o R L d T U R n s than the wealthy...

...Why are there such large differences in labor supply across these * “Why Do Americans Work So Much More Than Europeans...

...Art Laffer very clearly and neatly presented the new U.S...

...As a result of all strategic corporate tax chopping around the globe, the U.S...

...A new report by the United Nations entitled “The State of the Future” finds that between 1985 and projected to 2015, the global poverty rate will have fallen in half...

...It has a 12.5 percent corporate rate, nearly the lowest in the world, and yet collects 3.6 percent of GDP in corporate revenues, well above the international average...

...China also pegged the renminbi to the U.S...

...The United Nations’ study reports that much of the poverty reduction has happened in two nations, China and India, which have moved toward open markets, lower taxes, and capitalism...

...So now Sweden and more recently Russia have no estate tax, but the land of the free, America, taxes death at 45 percent...

...H d n a h t l ics model has created so much we econom Reagan the or F s e tory re is . where 25 we years come to the sad iron a y of this - prosperity in the U.S...

...On the other side, Jacques Attali, a representative of the typical elite French bureaucracy, was supposed to present the new French president’s political guidelines...

...T ’ a c r e m they are putting both at risk...

...Foreigners are also discovering the magic of the Laffer Curve...

...A little more than three decades since the end of the Vietnam war we now know which side won: Capitalism...

...would describe as the shining city on the hill...

...But how long it took him to rethink in depth what was good to his country...

...While the New Left in America continues to argue on the pages of the New York Times, on the floor of the U.S...

...left growls that these tax cutting policies are a mere ploy to enrich the already super-rich and to force a “race to the bottom” where the world’s poorest get an even smaller slice of the pie...

...Bulgaria has gone further and already instituted a 10 percent 1 6 T H e a M e R I c a n s P e c T a T o R f e b R U a R Y 2 0 0 8 flat rate income tax...

...Now the one leading country in the world that is bucking the low tax rate, supply-side trend is the United States...

...The story of the transformation of Iceland is just such a story...

...has added four to five new jobs for every single new job in old Europe...

...In the 1980s and early 1990s, Iceland had a profligate monetary policy with an unhinged paper currency, state ownership of a vast number of industries that were private in other countries, massive deficit spending, protectionist trade policies, and horrendously high tax rates on virtually anything that walked, ran, swam, jumped, or stood still...