(I’m not so much concerned with where these numbers are today as where they will be if Obama and the Dems have their way with us.)
Raising the Roof
Jack Anderson, 03.26.09, 05:00 PM EDT
Forbes Magazine dated April 13, 2009
Government taxing and spending is about to explode globally as countries confront the meltdown. Time to consult our annual entrepreneur’s guide to world taxation.
2009 Tax Misery & Reform Index
The Misery score is the sum of the taxes shown in the colored bars, at the highest marginal percentage in each locale.
It’s our best proxy for evaluating whether policy attracts or repels capital and talent.
The countries at the top of the chart impose the harshest taxes while those at the bottom are the most tax friendly.
The Reform column reflects a reduction in misery (a negative number highlighted in red) or an increase in misery in the past year.
In most of the world local governments are usually funded from property taxes, which aren’t part of the Misery Index.
Tax Burden & Spending (for the year 2007, except where noted)
This chart takes into account the total taxes, including “stealth” taxes (green and carbon taxes, for example) imposed by a country at all levels, national and local, as a share of GDP.
It includes as well overall government spending, which will only get worse in reaction to the economic meltdown and contracting economies around the world.
Some countries, such as Norway, are running large surpluses because of North Sea oil taxes.
Others, such as France, are spending more than they’re taking in.
The resulting deficits are covered by public debt repaid through future taxes and stealth taxes.
This breakdown is available only for OECD member countries (smaller than our Misery set) and uses the latest official 2008 data from the OECD for the year 2007, except where noted.
Why turn to Keynesian policies that will take a generation to undo? (Good Question)
Is the only response to the current financial and economic crisis the abandoning of the Reagan supply-side fiscal policy that spread around the world? That U.S. President’s success in lowering tax misery encouraged the private sector and, at least in part, resulted in the great U.S. expansion of 1982 to 2007. It is commemorated in our annual Tax Misery & Reform Index. Will declining tax misery now be replaced with a worn-out Keynesian fiscal policy of more government tax-and-spend and stagflation?
President Barack Obama’s Panglossian budget plans call for increasing tax revenue annually by over 40% of current levels by 2013 and eliminating President Bush’s tax reforms in 2011.
(Pan⋅gloss⋅i⋅an — characterized by or given to extreme optimism, esp. in the face of unrelieved hardship or adversity.)
Will the U.S.’ new tax policy thinking also lead Asia and the rest of the world into a new round of tax misery? India got a head start, going up a walloping 24 points on our index this year, by far the biggest one-year gain. India is part of an Asian trend toward the social coverage costs of Europe, with a jump in social security charges for both the employer and employee (replacing an employee provident fund).
Other Asian countries inflicting pain: China and Thailand, which were up seven and five points, respectively. China, suffering from the economic slowdown, is putting in place massive infrastructure spending. For workers suffering from the slowdown, the country is further expanding its social security coverage and related levies. The sensitive and changing political environment in Thailand is allowing upward tax drift.
New Zealand is where it’s at!
Going the other, brighter direction, New Zealand leads Asia-Pacific by reducing tax misery by nine points, mainly through individual income tax and social security reductions that are designed to give a stimulus to personal spending. Other places that have reduced tax pain: Korea, which lowered top rates and provided tax incentives for research and development; Taiwan, which lowered tax burdens at lower income levels; Singapore; and Malaysia.
Worst Country in the World
This year’s “winner” is, again, France, with a leader who said, “I was not elected to increase taxes.” Despite President Nicolas Sarkozy’s assertion, France added 1.1 points.
The deeper but financially insolvent European-level social safety net and health care benefit programs
At the upcoming G-20 meeting in London there will be a lot of talk about how the U.S. and Asia should Europeanize their Misery Index rates to higher levels of social and income taxes (including adopting new sources of green and carbon taxation) to provide the deeper but financially insolvent European-level social safety net and health care benefit programs as a partial response to the crisis, while at the same time generating more tax revenue to cover Keynesian stimulus spending.
But will Asia find this a competitive move? China, Japan and India are already on this road, as shown.
Capital gains rates are not included in the Tax Misery Index. Why? Because the rates vary by asset type, period of retention and the adjusted cost basis of the assets sold.
In France the cap-gains rate varies from a low of zero, tax free on certain assets, to 52.1% after a six-year holding period and, if it is missed, to a high of total taxes being as much as 118%.
Next door there are no capital gains taxes in Belgium and Switzerland except on stock options.
Asia is generally again the direction for inspiration. There is no capital gains tax in Hong Kong and Singapore nor, with exceptions, in Taiwan, New Zealand or Vietnam.
Even China, Korea, Malaysia and Thailand have no capital gains tax for sales of listed securities.
However, there is full taxation on capital gains in Indonesia, India, Japan and the Philippines.
A crisis is an opportunity not to be lost; Asia faced difficult times not long ago and mostly stuck to a low-tax course. Why turn to Keynesian policies that will take a generation to undo?