Monday, September 29, 2008

How About a Swedish Tax Cut for Illinois?

WSJ: The Swedish government is planning to cut taxes - business taxes, and personal income and payroll taxes - to boost jobs. Now why would they do such an illiberal thing? The Swedish government is a nanny among nannies, a positive model for progressive social engineering ("with individual rates well above 50% plus pension and payroll obligations"). The problem:

"The corporate tax is one of the taxes which large companies really study when they plan to set up business somewhere," says Jan Björklund, leader of the country's Liberal Party, in promoting the tax cut plan. The corporate tax reduction will bring the Swedish rate down to 26.3% from 28%, continuing its fall from a high of 57% in 1987. This means that Swedes will soon have a corporate tax rate one-third lower than the U.S. average of 39.5% (the 35% federal rate plus the state average). (WSJ - 'The Stockholm Curve')
So businesses really do think about these costs when they decide where to operate. Obvious, no? But Sweden has also discovered another disadvantage to "progressive" economic policy: it doesn't progress.
Maria Rannka, president of the Swedish think tank Timbro, has reported that entrepreneurship had become such an alien concept that more than half of Sweden's 50 largest companies were founded before World War I and only two after 1970 -- the period when taxes and social welfare programs proliferated.
Now I'm no economic advisor, but someone may want to tell Obama - (and Blagojevich, and Stroger, and Daley, et al.) that punishing businesses and working individuals may not be the best plan for preventing their exodus - whether to foreign shores, or other states, or other cities. . .

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