Tuesday, May 6, 2008

A Beautiful Day

Boston over the Charles
Spring arrives in Boston (cf. winter)

In yesterday's Financial Times, Larry Summers on tax competition and cooperation:

First, the US should take the lead in promoting global cooperation in the international tax arena. There has been a race to the bottom in the taxation of corporate income. Closely related is the problem of tax havens that seek to lure wealthy citizens with promises that they can avoid paying taxes altogether on large parts of their fortunes. It might be inevitable that globalization leads to some increases in inequality; it is not necessary that it also compromise the possibility of progressive taxation.

Agreeing or disagreeing with Secretary Summers' point is largely a question of the role of government as much as it is one of international economics. I generally view tax competition as a healthy restraint on the tax burden and thus a bridle on the size of the state. Here, Larry is taking the view that without cooperation, you will have nanny states without nannies and thus nothing to transfer.