In this season of taxation, it is refreshing to consider strategies for lowering taxes and making governments more efficient. London’s Institute of Economic Affairs recently published a fascinating monograph by Richard Teather, The Benefits of Tax Competition. It’s available for download here.
Teather examines from various angles the issue of tax competition among nations—that is, the practice of national governments’ lowering taxes for the purpose of attracting foreign companies and fostering and retaining domestic ones. He reviews the relevant existing research, analyzes the evidence, and concludes that the objections don’t hold water and that tax competition is, all in all, a good thing.
It is worth noting that the same principle applies intranationally. I recently heard a speech by a candidate for governor of Ohio who has made the state’s oppressive tax structure the centerpiece of his campaign. He tells of a humorous conversation with an Indiana state official who posits as the main cause of that state’s economic vibrancy, “Ohio’s dumb policies.” In other words, talented young people, entrepreneurs, and existing businesses are all fleeing Ohio for environments more conducive to prosperity–like Indiana.
If you’d like to see how your state’s taxes compare with others around the country, check out this informative map provided by the Tax Foundation.
