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November 08, 2004

The unhealthy fantasy life of conservatives

Taxation as a noose around the neck of the American people is one of the cornerstones of conservative ideology. "Tax relief" is presented as a necessity to relieve the burden on the shoulders of the country's economy. Edward C Prescott presents it thusly:

And that brings us back to our framing question about the labor supplies of the U.S. and Europe: The bottom line is that a thorough analysis of historical data in the U.S. and Europe indicates that, given similar incentives, people make similar choices about labor and leisure. Free European workers from their tax bondage and you will see an increase in gross domestic product (oh, and you might see a pretty significant increase in gross national happiness, too). The same holds true for Americans.

Yet as Kevin noted yesterday, taxation isn't necessarily congruent to the ability of a country's economy to be competitive. In fact it can be just the opposite.

Prescott uses his piece to promote the notion that Europeans are vastly overtaxed and therefore the European labor market doesn't work as much. The theory is that Europeans (especially the French...can't let a day go by without getting a dig in against the French, yannow) won't work as much because they can't keep as much of their money...too much of it goes to taxes.

Yet five of the top 10 most competitive economies are in Europe. France is 27, which is relatively high.

Taxation as a burden is a fallacy. Taxation is part of the priviledge of living in a great nation. And when it's used toward effective government (such as Sweden and Finland) it's even more evident the "burden fallacy" erodes America's attempts toward effective government.

Posted by Carla at November 8, 2004 11:58 AM