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!