The Death of Reaganomics...Only in America
By Scott Sowby
March, 10, 2008
This blog entry is for my friend Bryce Johnson, who is a Communist.
In 1982 Ronald Reagan chopped the highest tax rate from 70 percent to 28 percent. Inflation fell from 13 percent to 3 percent. Incentives for investment, production, work, and risk-taking exploded. Reagan ushered in a period of economic growth and prosperity unparalleled by anything the world had ever seen. The rest of the world has watched with envy the American economic boom of the last 25 years. They are done watching. Reaganomics, the supply side economic model installed with great controversy 25 years ago, is now the global economic model of choice.
Consider:
Everywhere you look (except America), corporate and individual tax rates are falling. In many cases, wealth and death/estate taxes are disappearing altogether. Even Socialist leaders from different parts of the globe are embracing the economic reality that the key to wealth creation and competing in the International marketplace is to keep tax rates low.
Europe, who has long disparaged the supply side model, has seen itself forced to accept its virtues after 20 years of double digit unemployment and painfully slow growth. Germany, who less than 10 years ago prided itself on a 52 percent corporate income tax rate, has slashed its rates time and again. Today, Germany’s rates sit below 20 percent, and Germany has become a mini-Mecca for International investment. Poland’s new government has made public that its number one priority is instituting a flat tax of 15 percent. Singapore and Ireland recently approved legislation to cut tax rates to 13 percent. Countries like Bulgaria, Albania and Kuwait are quickly reaping the rewards for instituting 10 percent flat income tax rates. New converts are being added by the month.
What about our friends from France? They are experiencing nothing short of an economic revolution because they decided to give tax incentives to workers who work longer hours and/or start their own businesses. What a brilliant concept, even for a country that invented the 4 day workweek…rewarding hard work and letting the workers keep more of their money!
In Spain, even anti-American Socialist Prime Minister Zapatero is sounding Reaganesque. His re-election platform rests heavily on his pledge to cut corporate tax rates by ten percentage points and completely abolish both the wealth and death tax. Spain’s wealth tax is among the highest in the world, one that discourages savings and thrift.
For years European leaders decried falling global tax rates because they claimed it fostered “unhealthy tax competition”. That’s right folks…”unhealthy tax competition”. Nowadays, European leaders talk openly about embracing the economic ideas of Reagan and Thatcher, not Nixon and Carter. They understand, unlike American Democrats, that you can’t enjoy a prosperous, self-sustaining economy with high taxes. Perhaps the Europeans learned something when their neighbors to the East, the onetime Soviet satellite nations, who suffered through 50 years of declines in living standards because of suffocating tax policies, embraced capitalism and low taxes.
The surest signs that Reaganomics has become deep rooted in today’s global economy come from two countries on opposite ends of the world with remarkably different histories. Sweden, a Socialist paradise, has completely abolished its estate/death tax because its leaders realized that the tax is economically counterproductive. Even more striking is what has happened in Vietnam, where the leaders of the former Communist nation recently lowered the corporate tax rate from 35 to 25 percent. The reason…"to attract foreign investment”. The result...the economies of Vietnam and many other countries in South East Asia are booming. Three decades after the end of the Vietnam war and we can now clearly see who won. Free will. Opportunity. Capitalism.
As is the case with many of the countries reaping the fruits of low taxes, Russia's 14 percent flat tax has generated substantially more revenues to the government than their old system, which had progressive tax rates reaching above 50 percent. Ireland, with its 13 percent corporate tax rate, collects nearly 4 percent of GDP in corporate revenues. The U.S by contrast, with a 40 percent rate, averages less than 2.5 percent of its GDP in corporate receipts. This puts us well below the International average. Just as the Bush tax cuts on personal income have led to record setting revenues to the government, we would also collect more corporate revenue with a lower corporate tax rate. This phenomenon is called the Laffer curve, and we now find ourselves on the wrong side of it. That’s not funny.
For the last quarter century Reagaomics has created such a plethora of prosperity and wealth that the rest of the world has been left with little choice but to mimic us. Ironically, we are now trying to reverse the low tax, supply side trend. Take a moment to listen our liberal Congress and Senate and you will hear all you can bear about raising income taxes, corporate taxes, hedge fund taxes, dividend taxes, payroll taxes, energy taxes, taxes on taxes on taxes.
The mere threat of this assault on capital and wealth has already taken a marked toll on our economy and has been one of the principal reasons we are now facing a recession. Foreign investment is down sharply and the confidence of outside investors, the same confidence that fuels our economy, is shot. The public threats of Billary and Obama to DOUBLE our 15 percent capital gains tax has sent investment elsewhere. The left in our country snarl that the Bush tax cuts are a ploy to “make the rich, richer”. That these cuts “have given the poorest an even smaller slice of the pie.”
Well how do you like this pie...
A new UN report finds that between 1980 and what is projected out to 2015, the global poverty rate will have been cut in half. To put these numbers in perspective, more than a BILLION people will have emerged victorious from a destitute, miserable existence. This means that the global trend towards Reaganomics, especially in the developing world, has created nothing less than the greatest human triumph in history.
America’s 25 year head start of having among the lowest tax rates in the world has all but vanished. As we speak, the U.S has secured itself the distinction of having the worlds second highest corporate tax rate. Most worrisome is that the political left in our county, who now controls the Congress, Senate, and likely the next Presidency, has put fairness ahead of prosperity. While their platitudes to the poor and afflicted promise a bigger piece of the pie, they have failed to inform them that the pie itself will be much, much smaller. The supply side economic stool, which consists of sound money, tax cuts, and free trade, and upon which we sat triumphantly for 25 years, is being pulled out from under us. And we are falling.
March, 10, 2008
This blog entry is for my friend Bryce Johnson, who is a Communist.
In 1982 Ronald Reagan chopped the highest tax rate from 70 percent to 28 percent. Inflation fell from 13 percent to 3 percent. Incentives for investment, production, work, and risk-taking exploded. Reagan ushered in a period of economic growth and prosperity unparalleled by anything the world had ever seen. The rest of the world has watched with envy the American economic boom of the last 25 years. They are done watching. Reaganomics, the supply side economic model installed with great controversy 25 years ago, is now the global economic model of choice.
Consider:
Everywhere you look (except America), corporate and individual tax rates are falling. In many cases, wealth and death/estate taxes are disappearing altogether. Even Socialist leaders from different parts of the globe are embracing the economic reality that the key to wealth creation and competing in the International marketplace is to keep tax rates low.
Europe, who has long disparaged the supply side model, has seen itself forced to accept its virtues after 20 years of double digit unemployment and painfully slow growth. Germany, who less than 10 years ago prided itself on a 52 percent corporate income tax rate, has slashed its rates time and again. Today, Germany’s rates sit below 20 percent, and Germany has become a mini-Mecca for International investment. Poland’s new government has made public that its number one priority is instituting a flat tax of 15 percent. Singapore and Ireland recently approved legislation to cut tax rates to 13 percent. Countries like Bulgaria, Albania and Kuwait are quickly reaping the rewards for instituting 10 percent flat income tax rates. New converts are being added by the month.
What about our friends from France? They are experiencing nothing short of an economic revolution because they decided to give tax incentives to workers who work longer hours and/or start their own businesses. What a brilliant concept, even for a country that invented the 4 day workweek…rewarding hard work and letting the workers keep more of their money!
In Spain, even anti-American Socialist Prime Minister Zapatero is sounding Reaganesque. His re-election platform rests heavily on his pledge to cut corporate tax rates by ten percentage points and completely abolish both the wealth and death tax. Spain’s wealth tax is among the highest in the world, one that discourages savings and thrift.
For years European leaders decried falling global tax rates because they claimed it fostered “unhealthy tax competition”. That’s right folks…”unhealthy tax competition”. Nowadays, European leaders talk openly about embracing the economic ideas of Reagan and Thatcher, not Nixon and Carter. They understand, unlike American Democrats, that you can’t enjoy a prosperous, self-sustaining economy with high taxes. Perhaps the Europeans learned something when their neighbors to the East, the onetime Soviet satellite nations, who suffered through 50 years of declines in living standards because of suffocating tax policies, embraced capitalism and low taxes.
The surest signs that Reaganomics has become deep rooted in today’s global economy come from two countries on opposite ends of the world with remarkably different histories. Sweden, a Socialist paradise, has completely abolished its estate/death tax because its leaders realized that the tax is economically counterproductive. Even more striking is what has happened in Vietnam, where the leaders of the former Communist nation recently lowered the corporate tax rate from 35 to 25 percent. The reason…"to attract foreign investment”. The result...the economies of Vietnam and many other countries in South East Asia are booming. Three decades after the end of the Vietnam war and we can now clearly see who won. Free will. Opportunity. Capitalism.
As is the case with many of the countries reaping the fruits of low taxes, Russia's 14 percent flat tax has generated substantially more revenues to the government than their old system, which had progressive tax rates reaching above 50 percent. Ireland, with its 13 percent corporate tax rate, collects nearly 4 percent of GDP in corporate revenues. The U.S by contrast, with a 40 percent rate, averages less than 2.5 percent of its GDP in corporate receipts. This puts us well below the International average. Just as the Bush tax cuts on personal income have led to record setting revenues to the government, we would also collect more corporate revenue with a lower corporate tax rate. This phenomenon is called the Laffer curve, and we now find ourselves on the wrong side of it. That’s not funny.
For the last quarter century Reagaomics has created such a plethora of prosperity and wealth that the rest of the world has been left with little choice but to mimic us. Ironically, we are now trying to reverse the low tax, supply side trend. Take a moment to listen our liberal Congress and Senate and you will hear all you can bear about raising income taxes, corporate taxes, hedge fund taxes, dividend taxes, payroll taxes, energy taxes, taxes on taxes on taxes.
The mere threat of this assault on capital and wealth has already taken a marked toll on our economy and has been one of the principal reasons we are now facing a recession. Foreign investment is down sharply and the confidence of outside investors, the same confidence that fuels our economy, is shot. The public threats of Billary and Obama to DOUBLE our 15 percent capital gains tax has sent investment elsewhere. The left in our country snarl that the Bush tax cuts are a ploy to “make the rich, richer”. That these cuts “have given the poorest an even smaller slice of the pie.”
Well how do you like this pie...
A new UN report finds that between 1980 and what is projected out to 2015, the global poverty rate will have been cut in half. To put these numbers in perspective, more than a BILLION people will have emerged victorious from a destitute, miserable existence. This means that the global trend towards Reaganomics, especially in the developing world, has created nothing less than the greatest human triumph in history.
America’s 25 year head start of having among the lowest tax rates in the world has all but vanished. As we speak, the U.S has secured itself the distinction of having the worlds second highest corporate tax rate. Most worrisome is that the political left in our county, who now controls the Congress, Senate, and likely the next Presidency, has put fairness ahead of prosperity. While their platitudes to the poor and afflicted promise a bigger piece of the pie, they have failed to inform them that the pie itself will be much, much smaller. The supply side economic stool, which consists of sound money, tax cuts, and free trade, and upon which we sat triumphantly for 25 years, is being pulled out from under us. And we are falling.
posted by Sowby23 at 6:10 PM
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