President Bush's tax cuts over the last four years were strongly opposed by liberals, and even many moderates saw them as controversial, at least. So it is interesting to discover, according to a new report from the Organization for Economic Cooperation and Development, that governments of the left in Europe have been doing pretty much the same thing as President Bush has done here.
First of all, there have been a number of major tax cuts in Europe that have lowered taxes as a share of the gross domestic product by 1 percent, from 39.9 percent in 2000 to 38.9 percent in 2002. Among the 15 members of the European Union, the reduction has been a little greater, from 41.8 percent in 2000 to 40.6 percent in 2002.
Such a tax cut may not seem terribly significant, but one must realize that taxes have been climbing very sharply in Europe for decades, and this is the first sustained reduction since records started being kept in 1965. At that time, the 15 EU countries took only 27.9 percent of GDP. By 1975, that figure had risen to 33.2 percent, and by 1985 it was up to 38.8 percent.
Interestingly, European tax cuts have included meaningful cuts in individual income tax rates for the rich -- the most controversial element of Bush's program. According to the OECD, 17 of 30 countries cut tax rates on the rich between 2000 and 2003 -- some by much more than here. The rich are defined as those with 10 times the average worker's income.
Among those countries with the largest rate reductions are the Netherlands, which reduced its marginal tax rate on the wealthy from 60 percent to 52 percent; Luxembourg, where the rate fell from 47.15 percent to 38.95 percent; and Belgium, which dropped its rate from 60.5 percent to 53.5 percent. Germany's rate fell from 53.8 percent to 51.17 percent, and in France it went from 61.25 percent to 56.09 percent. The U.S. rate went down from 46.51 percent to 41.42 percent by the OECD's reckoning, which includes state and local taxes.
Looking at corporate tax rates, we see even larger reductions in taxes on the rich. Again we see that 17 of 30 OECD countries cut corporate tax rates between 2000 and 2003 -- but this time not including the United States, where the rate was unchanged at 39.4 percent (including state and local governments).
The most dramatic reductions occurred in Germany, Iceland and Ireland. In Germany, the rate was cut from 52 percent to 42.2 percent, a reduction of 23 percent. In Iceland, the rate fell from 30 percent to 18 percent -- a reduction of 40 percent. And in Ireland, the corporate rate was lowered from 24 percent to 12.5 percent -- a 48 percent reduction.
Bruce Bartlett is a former senior fellow with the National Center for Policy Analysis of Dallas, Texas. Bartlett is a prolific author, having published over 900 articles in national publications, and prominent magazines and published four books, including Reaganomics: Supply-Side Economics in Action.
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