Saturday, November 21, 2009

Taxes Compared

The Economist publishes a useful comparison of the state’s take in the economy (see table above). This is not, however, a comprehensive measure of the size of states in the economy since states also own firms, issue debt to finance part of their spending, and use regulations to orient private activities.
With regard to taxes proper, France obviously is an outlier in the sample. Since taxes distort activities and determine losses of welfare (growing faster the higher the tax rates), reform indeed is required in order to increase efficiency and boost production and income. Have a look in particular at the level of the payroll tax.

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