Tuesday, November 27, 2012

Myth: Constant Marginal Tax Rates in Europe

One of the myths (perpetuated here and here) about the labor market since 2007 is that marginal tax rates have been constant in Europe. Somebody needs to carefully measure marginal tax rates around the world (my book provides a framework for doing so -- see chapter 3), but with news stories like this (Portugal), this (UK), this (France), this (Japan, admittedly not Europe), and this (Ireland), I don't see how one could assume that European countries have had constant or declining rates. "Austerity" is by no means the same as cutting marginal tax rates.

International readers, if you have information or anecdotes about marginal tax rate changes, please leave a comment. Don't forget that so-called "tax cuts" do not cut marginal tax rates if only-low income people are eligible for the cut. For the same reason, government benefit cuts do not cut marginal tax rates if the cuts occur primarily by withholding benefits from people with high and middle incomes.

No comments: