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America's Economic Health Has Improved

The U.S. rose four places in the International Tax Competitiveness Index, and this just the latest bit of good news.

Ingram Publishing/NewscomIngram Publishing/NewscomThere are some areas in which it's best to not be the leader—such as picking the pockets of the investors and businesses that create jobs and build prosperity. The U.S. has thankfully allowed somebody else to assume that role in recent years.

"Following tax reform in the United States, France now has the highest taxes on corporate income—a combined rate of about 34 percent," the Tax Foundation notes in its latest International Tax Competitiveness Index.

The U.S. rose four places in the tax competitiveness rankings.

This is just the latest bit of good news about America's economic health.

Not long ago, we learned that the U.S. has reversed its decades-long erosion of economic freedom to jump from eighteenth to sixth place in the latest "Economic Freedom of the World" index, published by Canada's Fraser Institute and the Cato Institute. The U.S. also improved its standing in the Heritage Foundation's Index of Economic Freedom.

The improved scores were especially impressive—and necessary—in a world in which economic freedom has improved overall in recent years. They make the United States a more attractive option for people seeking places to invest and to start businesses.

Increased economic freedom also puts Americans in the running for the improved prosperity, longer life expectancy, and enhanced civil liberties that come hand-in-hand with less state meddling in economic matters. Life expectancy "is about 20 years longer in countries with the most economic freedom than in countries with the least," and "greater economic freedom is associated with more political rights and civil liberties," according to the "Economic Freedom of the World" index.

The Tax Foundation's index is more focused than those produced by the Fraser Institute and Heritage Foundation, examining the degree to which governments keep their tax rates neutral—that is, not favoring one behavior or group over another—and low.

"In today's globalized world, capital is highly mobile," the Tax Foundation explains. "If a country's tax rate is too high, it will drive investment elsewhere, leading to slower economic growth." The 2018 Index adds that "a tax code that is competitive and neutral promotes sustainable economic growth and investment while raising sufficient revenue for government priorities."

In the latest Tax Competitiveness Index, the United States improves its standing from 28th place to 24th place—meaning that Washington, D.C. is doing better than in the past, but still lags behind many other countries competing for people and investment.

In first place is Estonia, which keeps things simple in order to compete with better-established markets. The tiny Baltic nation "has a 20 percent tax rate on corporate income that is only applied to distributed profits. Second, it has a flat 20 percent tax on individual income that does not apply to personal dividend income. Third, its property tax applies only to the value of land, rather than to the value of real property or capital. Finally, it has a territorial tax system that exempts 100 percent of foreign profits earned by domestic corporations from domestic taxation, with few restrictions."

Estonia also ranks at seven in the Index of Economic Freedom, and 13 in the Economic Freedom of the World report. In consequence, it's number eight out of 44 nations in terms of foreign direct investment per capita, according to European Chamber of Commerce. That's not to shabby for a country that was a communist-governed afterthought just a few decades ago.

By contrast, France "has the least competitive tax system in the OECD," according to the Tax Foundation, which ranks it at 35 worldwide. "It has one of the highest corporate income tax rates in the OECD (34.4 percent), high property taxes, an annual net wealth tax, a financial transaction tax, and an estate tax. France also has high, progressive, individual income taxes that apply to both dividend and capital gains income."

France also ranks 71 on the Index of Economic Freedom and 57 in the Economic Freedom of the World Report. The country has suffered from riots in recent weeks over draconian fuel tax hikes.

The U.S. definitely looks better by comparison. In recent years, the "United States adopted a comprehensive tax reform package that included a reduction of the corporate income tax rate from 35 percent to 21 percent, improvements to expensing of capital investments, and rate changes for the personal income tax," states the Tax Foundation report.

When the U.S. trends a bit more Estonia, and a bit less France, that's a good thing.

It's not all positive news, unfortunately. Coming in at number 24 in terms of tax competitiveness is better than number 28, and moves us in the right direction. But you might expect better of a country historically held up as an exemplar of free economies. Complying with taxes is still an exercise in frustration for companies doing business in the U.S., requiring 87 hours of work each year, compared to an average of 44 hours across the OECD—and just five hours in Estonia.

In addition, the Trump administration's protectionist policies have slammed some manufacturers that saw their costs rise as a consequence of high tariffs on imported goods. Harley-Davidson is among the businesses announcing the movement of production overseas to escape the price of tit-for-tat trade disputes with Europe. The world is watching to see if the U.S. and China can refrain from launching an outright trade war.

To make matters worse, the "opposition" Democrats have largely embraced protectionism, too, along with their traditional love for taxes and regulation. Sen. Charles Schumer is gung ho about making Americans pay more for goods imported from China, while Sen. Elizabeth Warren (D-Mass.) thinks domestic steel producers should get even more stroking from the government.

Remember, having a free and welcoming economy isn't just about competing for rankings in reports. It's directly related to prosperity, to long life, and to civil liberty. By and large, to escape the heavy hand of the state in economic affairs is to have a much better shot at being well-fed, healthy, and unburdened by official intrusions into your personal life.

The U.S. is generally moving in the right direction at the moment—towards more economic freedom and less-burdensome taxation. But, if we're not careful, we could backtrack and lose that freedom and its resulting benefits.

Photo Credit: Ingram Publishing/Newscom

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  • loveconstitution1789||

    Thanks Obama! Your comments in 2017 and 2018 got us to where we are.

    Hahha.

  • loveconstitution1789||

    I'll say it again, Trump is going down as best president in 80+ years.

    Imagine what Trump could have pulled off if the media was on his side like they were with Obama.

  • Still Curmudgeoned (Nunya)||

    He would've been as Teflon coated as Obama. Hope is that a good thing?

  • Bowerick Wowbagger||

    I'm not a very big fan of Trump at all...but I will give him credit where it is deserved...not just in areas like reducing corporate taxes and regulations, but just as importantly as helping put the brakes on some fairly aggressive marches towards globalization and centralization

    (mind you he has his own issues in some of these areas....it's just his issues aren't as dire as the previous administrations...so relatively speaking, i consider it a slight win, albeit, far from what I would want)

  • Bowerick Wowbagger||

    I'm not a very big fan of Trump at all...but I will give him credit where it is deserved...not just in areas like reducing corporate taxes and regulations, but just as importantly as helping put the brakes on some fairly aggressive marches towards globalization and centralization

    (mind you he has his own issues in some of these areas....it's just his issues aren't as dire as the previous administrations...so relatively speaking, i consider it a slight win, albeit, far from what I would want)

  • loveconstitution1789||

    I agree with you that the braking period Trump pushed for is the real win for the USA.

    I heard for years how "its going to happen" with the inevitable government increases in size, spending, and more oppressive rules.

    Trump's election allowed for the Silent Majority to say that we are not going to implode as a Nation without a fight.

  • Peter Duncan||

    It's amazing how LC1789 takes every opportunity to tell everyone how sweet Trump's cock tastes.

    Especially revealing are the subliminal messages in his sentences such as "going down" and "pulled off" when describing his savior in such, dare I say, gushing terms.

    Keep marching lemming!

  • loveconstitution1789||

    Its amazing that new troll Peter Duncan lets us all know how Hillary's dick tastes.

  • Peter Duncan||

    Hmm..."new troll"? Try again, statist!

    I've been verifiably commenting around here longer than you. In there you'll find that I'm consistent in my distain for both denominations/tribes or whatever you call your little statist clubs these days.

    The choice for president in '16 was between either drinking Drano or bleach. It has been and always will be as long as Progressives like you swoon for an imperial presidency.

    Go back and read that document that is embedded in your handle about the duties of the office. Move lips if necessary.

    Oh, and fuck off, slaver!!

  • gaoxiaen||

    Least bad. FIFY.

  • buybuydandavis||

    This Libertarian Moment brought to you by Trump and the Deplorables over the objections of Reason's Orange Man Bad crew.

    You're welcome.

  • Jerry B.||

    Funny. I didn't see anything at all about this in the Washington Post.

  • John||

    Peter Suderman has a sad reading this.

  • Cynical Asshole||

    By contrast, France "has the least competitive tax system in the OECD," according to the Tax Foundation, which ranks it at 35 worldwide. "It has one of the highest corporate income tax rates in the OECD (34.4 percent), high property taxes, an annual net wealth tax, a financial transaction tax, and an estate tax. France also has high, progressive, individual income taxes that apply to both dividend and capital gains income."

    France... Christ, what a shithole.

  • Earth Skeptic||

    Yes, and they can serve as a warning sign to us and others, as we eagerly rush down the road to institutionalized partisanship.

  • Rock Lobster||

    At the risk of being the proverbial turd in the punch bowl:

    Lower taxes are great in principle, and in the short term they are indeed having a positive effect, but as a nation we have lived beyond our means for far too long. The black cloud looming over all this happy talk--which is invariably associated with partisan politics--is the completely unrestrained growth of entitlement spending. As the national debt driven by this spending continues to increase as a percentage of the GDP (and the percentage of the annual federal budget that must be dedicated to servicing this debt grows accordingly in the relentless feedback loop of compounding), it is highly inaccurate to say that America's economic health has improved.

    No politician except for a few marginalized Cassandras wants to talk about this, and virtually no one wants to hear about it, anyway. Therefore this cycle will continue unabated right up until the moment when it becomes unsustainable, then it will stop, suddenly and with great disruption. Unless we develop the self discipline and wisdom to stop voting ourselves largesse from the public treasury (fat chance), this is inevitable. And no one knows what will happen next.

    It is what it is. And it damned sure isn't improving.

  • ||

    I agree and I'm pessimistic that our bi-polar political system will ever make this any better. Republicans buy support from voters with tax cuts and Democrats with increases in spending for social programs. This is an obvious recipe for financial disaster, but until disaster takes place I don't think the political class will have the courage to do anything. I shudder to think what their solutions will be when the disaster hits. The math shows that we cannot grow our way out of the demographic/spending dilemma, and the electorate seems happy to remain blissfully unaware of the approaching doom. The commenters on here that make this issue something about #Trump are completely missing the point.

    Someday we will run out of "other people's money," and I hope I'm not around to see it happen. It's been fun.

  • Rock Lobster||

    It has been said that we get the government we deserve. Given the willful ignorance of financial realities that should be obvious to anyone who has a job, a checking account, and a credit card, it appears we are indeed screwed.

  • gaoxiaen||

    I'm living in Taiwan. Checking accounts and credit cards are disfavored. Cash is king. People here buy houses and cars with cash.

  • Enemy of the State||

    In Cyprus, they are experimenting with the opposite. No-cash society so that banks can impose negative interest rates with no ability to escape them...

  • Gaear Grimsrud||

    I agree with your assessment. But the article is about tax competitiveness and economic freedom and I think Trump clearly deserves credit for that. But I fully anticipate a brutal economic meltdown in the near future regardless.

  • chipper me timbers||

    All they have to do is cut spending down to the dark days of 2010 I believe....

  • ford-poker||

    But, if we're not careful, we could backtrack and lose that freedom and its resulting benefits.

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  • tlapp||

    The enigma of Trump. Regulation and tax cuts, judicial nominees leave much for a libertarian to commend. Then it is tempered by his authoritarian instincts to attack specific companies and issues with the same type executive orders as Obama. Also wish he would have followed his instincts to end the war in Afghanistan and not caved to those entrenched in government who seem to love never ending foreign wars.

  • Enemy of the State||

    ^^^This guy^^^

  • Paloma||

    ^^^YES

  • Enemy of the State||

    More freedom = more prosperity.

    More government = less freedom = less prosperity.

    Every elementary school kid should have this tattooed in his brain...and on his arm if that helps...

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