Lower Taxes Means Greater Productivity

Allister Heath, writing for Scotland on Sunday, discusses the current tax trends in various countries and concludes that,

From Ukraine to Australia, from Germany to the US, governments across the world are cutting taxes in a remarkable revival of economic liberalism. With the glaring exception of Britain, where chancellor Gordon Brown is busily hiking taxes, marginal taxes are tumbling at a speed which would have made the most ardent supporter of 1980s-style Reaganomics proud.

The article emphasizes that most countries have lowered or are lowering their marginal tax rates to boost economic growth by improving incentives to work, invest and start new businesses, making leisure less attractive in relation to work and removing distortions in the economy.

Russia is used as an example,

. . . of a successful supply-side fiscal policy, in 2001, the first year following the introduction of the flat tax in Russia, revenues from personal income tax jumped 28% in real terms. Despite much lower tax rates, income tax receipts increased as a share of consolidated budget tax revenues to 12.7% from 12.1% in 2000. Income tax receipts surged again, increasing by 20.7% in real terms in 2002, taking their share of overall revenue to 15.3%. [Bold by ed.]

Encapsulated, lower taxes mean greater productivity and greater revenue collected by the government. And, the countries Mr. Heath cites are implementing the philosophy with success.