Europe’s economy is showing signs of life. With the exception of Britain (where growth has stalled), the EU is chugging along nicely. It’s a rare spot of good news capping off what has otherwise been a pretty miserable decade for the pan-European bloc. Unemployment is only about a percentage point higher than it was before the 2007 financial crisis (though joblessness is higher in the Eurozone economies than it is in the EU-28 as a whole).

Progress is being made, but there’s much more left to do. The French government, under President Emmanuel Macron, recently announced it would slash taxes by roughly 11 billion euros as part of an effort to boost job creation and bring down French unemployment. Will it do the trick?

Analysis of six decades of tax data in the United States suggests that tax cuts had little obvious impact on investment or growth. Evidently, macroeconomics is much more complicated than just “tax = bad”.

Framing things purely in terms of “tax” on the one hand and “jobs” on the other is also misleading. For instance, the United States is often portrayed as a low-tax economy, yet that doesn’t mean that the average American is necessarily better off financially than the average European. Health insurance costs in the US, for example, can be much higher than in Europe.

Likewise, Britain’s competitive corporate tax-rate hasn’t helped its productivity, which lags behind that of other major economies. As the British Chancellor, Philip Hammond, recently pointed out: It takes the average British worker five days to make what a German worker produces in four, meaning Brits are working longer hours for less pay than workers in other European countries.

Does lowering taxes create jobs? Or is the link between taxation and economic growth more complicated? Let us know your thoughts and comments in the form below and we’ll take them to policymakers and experts for their reactions!

IMAGE CREDITS: CC / Flickr – Images Money


54 comments Post a commentcomment

What do YOU think?

    • Matej Zaggy Zagorc

      Well of course it doesn’t work in Portugal. They don’t have an kangaroos !

    • Arthur Gustin

      austerity isn’t a tax reform…

    • Ricardo Pinhal

      It depends on the government in power, Arthur Gustin…

    • Manos Foukarakis

      It’s not…but it’s result is too many taxes

  1. Arthur Gustin

    Yes if you actually create a tax advantage for households and small, medium or bigger national enterprises AND with a reform on salary or emploiement conditions, but especially, create a more favorable environnement for independant workers !

    But as long as we don’t have a uniformised tax system in europe, we’re screwed there will always be a way for those with the means to avoid paying what they really needs, and the state will always pray on the citizens and the most vulnerable !

  2. Madis Järvekülg

    Highest tax countries: Hungary – 39.1%; Austria 43.4% and Denmark 50.8%
    Unemployment rate: Hungary – 4.3%, Austria 5.4% and Denmark 5.7%

    Lowest tax countries: Lithuania – 20.9%, Bulgaria 27.8%; Ireland 30.8%
    Unemployment rate: Lithuania – 7.3%; Bulgaria – 6%, Ireland – 6.4%

    Baltic states: Estonia (taxes 32.3% – unemployment rate – 5.4%); Latvia (taxes 30.4% – unemployment rate 8.5%); Lithuania (taxes 20.9% – unemployment rate 8.1%)

    • Eldert De Freyn

      Highest? Really? Belgium (54% – 8,4 %) France (48,1% – 10,9%) Italy (47,8%-12,7%) ;)

  3. João de Oliveira

    People do not eat bills or coins … therefore people with more money available will make some use of it, and any use, literally any use, makes the economy growing … too much of raises inflation, so lowering certain taxes and raising others should control the inflation while people gets more €.

  4. Chris Pavlides

    Of course it does. Please focus on flexible schemes ie 5 year 0% for new business – set by young or unemployed, scalable 15% – 25% for SMBs / Large and set special social return tax bonuses ie business should employ freshmen but also mid or older close to retirement labor. In practice most players squeeze labor from 25 up to 40-45 year old and then bye bye.

  5. EU Reform- Proactive

    “…….is the link between taxation and economic growth more complicated”? Yes for sure!

    Macron is gambling on a tiny hope that by handing over more money to (large) corporations & entrepreneurs- using economics’ “fiscal policy” by cutting taxes and effectively raising the probability of France’s long term debt to GDP ratio. Hopefully such a gamble will trigger wonders & create the famous or illusive trickle down effect. Every nations politicians (or EU) are trying different things & (can) only hope for the best! Productivity is a different matter altogether.

    The many complex factors involved in economics will blow the minds of most of us ordinary folks- but don’t worry- it also blows the heads off from policymakers, politicians and experts. (“Headless chickens”)

  6. Wolfgang Mizelli

    there is enough work to be done, nobody wants to pay for. most care/assistance work, stopping further enviromental damages, and btw employers create jobs, freelancers create jobs, people create jobs, not tax cutting.

  7. Deniss K Victorovich

    Progressive tax demotivate earn/pay more money and promotes temporary contracts and going on social so more work per person

  8. Yordan Vasilev

    Yes! Lowering taxes leave more money in the business and this creates new jobs.

  9. Hugo Dias

    I don’t think so. I think that trust and confidence will create jobs. Trust in the business and confidence on the governament.

  10. Andrea Molia

    Question is: what will be cut along with the taxes? If taxes are lowered mostly for low wages, I am for it. If they are lowered for high earners at the expense of public services and social spending, I am against it

  11. Sherrie Heckendorn

    Trickle down fairytale hasn’t ever worked. Only tax cuts to work is when the poorest and middle class receive tax cuts while upping taxes on wealthiest and large corporations

  12. Hector Niehues-Jeuffroy

    The true question is: what programmes are cut in order to offset the reduction in taxes? If I cut a highly effective job placement service in order to lower income taxes by a few percentage points, this will likely have a net negative impact on employment. If however the money is essentially wasted on things that don’t increase employment or increase it elsewhere, then cutting taxes is likely to have a net positive impact on employment. It also matters whose taxes you cut: if you cut taxes on people with a high marginal propensity of consumption, i.e. the poor, the “freed-up” income will go straight into consumption and probably have a higher multiplier than most government activities (this is also part of one of the arguments why high inequality hurts growth, btw).

  13. Paul X

    If you are talking in the most direct manner then Corporation Tax, yes…personal Income Tax, no

  14. catherine benning

    Does lowering taxes create jobs?

    Has it created jobs since 2008, in real terms? Have we seen a marked improvement in our living standards and the common wealth of the ordinary people? No. Well why should lowering taxes again create jobs for the lower paid now?

    Brainwashing time again. Add some more propaganda. It is such fun.

    https://www.youtube.com/watch?v=TyCvNEHSiZ8

  15. Paul Vincent

    As a general rule of thumb…lowering tax rate increases tax take ( limits apply)….incentives entrepreneurialism….reduces government’s ability to interfere with markets.

  16. David Fernandes Coelho

    If you lower the tax for normal working people who have no chance of escaping tax payments because their bosses or the companies they work for deduct the taxes at the end of each month yes it will because they will have more Money to spend which in turn will mean more goods or services are needed. If you lower company tax it means that the share holders or owners will be getting richer but the economy will not be as profitable.

  17. Marco Musazzi

    We are in a globalized world. Unilateral tax cut just hurt everybody. The sooner politicians understand we need a global (or at least regional) agreement on that, the better for everybody.

  18. cyril

    The troll question, isn’t it?

    Clearly that depends. Mainly, what induce jobs is the demand, and what induce mobility in the jobs is innovation. Just lowering taxes is not enough. What is important is to encourage the demand and the investment in productive asset: primary and secondary industry as well as B2B and B2C service.
    What need our industry is visibility and stability and a demand. In this case, they can create job if there is enough demand.
    How to create demand? Two solutions: public investment or lowering taxes (looks like Keynesianism), or change the flow of money in our economy => new tax system to give money to people who will spent it (so poor and low middle class), regulated financial sector to encourage investment in physical and productive assets. Promote the creation of businesses, real businesses and not auto-entrepreneurs that is a way to externalized costs and kind of social dumping. Then helping them about treasury, one of principal reason of the small business failures.

    The economy is not natural, it is a norm practice defined through specific scheme, in other words it is not more than an established system.
    Change the question: what job is and what does create jobs? You’ll see that ask a so simply question about the taxes is not so relevant.

    But now, it seems some people tend to want to consume less, that means less demand, so less activity. So with a growth of productivity, through capitalization of knowledge and know-how as well as computing science and automation, that means less jobs. If the movement grow, lowering taxes will change nothing if we don’t rethink the system of activity and its relative tax and benefit system.

  19. catherine benning

    Raising Taxes on the wealthy creates jobs. And it does it by the resulting raising of wages, which translates into more purchasing, which then creates more jobs. And as long as the manufacturing of the purchased items takes place in Europe, or, in my case the UK, we should see a pronounced standard of living increase.

    Inflation is presently rampant, so, if the market wants to see future profit it better decide to raise wages and fast, otherwise the markets will dry up altogether.

    Sensible people will be wary of imported cheap items now sold for outlandish prices and ask why this is happening?

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