The Stockholm curve

With the economy struggling, at least some people are urging a pro-growth tax cut. Too bad they live in Stockholm, says the Wall Street Journal.

Recently, the Swedish government announced business tax cuts, income tax cuts and payroll tax cuts to boost jobs. And to market their country to outside businesses, cutting the corporate tax rate is a great move, since the corporate tax is one of the taxes which large companies study when they plan to set up business somewhere:

The corporate tax reduction will bring the Swedish rate down to 26.3 per cent from 28 per cent, continuing its fall from a high of 57 per cent in 1987.

This means that Swedes will soon have a corporate tax rate one-third lower than the U.S. average of 39.5 per cent (the 35 per cent federal rate plus the state average).

Sweden remains a high-tax country overall, with individual rates well above 50 per cent plus pension and payroll obligations; however, Sweden is discovering that it must cut taxes to compete with Ireland, Eastern Europe and fast-growing Asia.

Nearly three years ago, Sweden eliminated its inheritance tax. The U.S. death tax rate is still 45 per cent.

The United States is taking notice. Sen. John McCain (R-Ariz.) cited Ireland's low rate in his September debate with Sen. Barack Obama (D-Ill.). But Obama continues to insist that U.S. business is under-taxed.

If Obama wins in November, maybe his first foreign trip should be to Stockholm. He could use the tax tutorial, says the Journal.

Source: Editorial, The Stockholm Curve, Wall Street Journal, September 29, 2008.

For text: http://wsj.com/article/SB122264826575484095.html

For more on Taxes: http://www.ncpa.org/sub/dpd/index.php?Article_Category=20

FMF Policy Bulletin/ 14 October 2008