Sunday, November 2, 2008

"“but if the intention was to attract back high value Australian workers who have temporarily moved to Hong Kong or Singapore, it may not be enough.”

Interesting news from Cato:

"When rates become too high, it is now increasingly easy for productive resources - including labor - to escape across national borders. This is leading politicians, even in places such as France and Germany, to lower top tax rates. In our new book, Global Tax Revolution, Chris Edwards and I explain how this process of tax competition is an amazing liberalizing force in the world economy. But for those of you who inexplicably don’t want to buy our book, this excerpt from a report in Tax-news.com provides ample evidence:

Top personal income tax rates around the world have fallen by an average of 2.5% in the past six years, as governments strive to balance their need for revenue with the impact of increasing global labor mobility, a new study from KPMG International has found. Worldwide, top personal tax rates have fallen from an average of 31.3% in 2003 to 28.8% in 2008. "

And:

“We do not foresee a time when personal income taxes will fall so far that they become irrelevant to people moving from country to country. But it is entirely possible that the relative level of indirect taxes will begin to play a much greater part in people’s decisions on where in the world to go for work,” Garnon concluded."

This is precisely why I don't fear governments getting bigger in the long run. This is a long term and irreversible change. Not no government, but smaller government. Also, this crisis will lead to less moral hazard in the future. The numbers are way too large for a repeat.

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