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

79 comments Post a commentcomment

What do YOU think?

    • avatar
      Matej Zaggy Zagorc

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

    • avatar
      Arthur Gustin

      austerity isn’t a tax reform…

    • avatar
      Ricardo Pinhal

      It depends on the government in power, Arthur Gustin…

    • avatar
      Manos Foukarakis

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

  1. avatar
    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. avatar
    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%)

    • avatar
      Eldert De Freyn

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

  3. avatar
    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. avatar
    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. avatar
    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. avatar
    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. avatar
    Deniss K Victorovich

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

  8. avatar
    Yordan Vasilev

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

  9. avatar
    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. avatar
    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. avatar
    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. avatar
    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. avatar
    Paul X

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

  14. avatar
    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.

  15. avatar
    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. avatar
    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. avatar
    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. avatar

    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. avatar
    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?

  20. avatar
    Peter Ayolov

    Lower taxes, more money for corporations, they will give basic income with coupons to everyone. Jobs sucks. :)

  21. avatar
    Jovan Ivosevic

    Lol is America spinning it’s wheels for 40 years not enough to show you that? Companies don’t hire more people when they have more money. They hire more people when they have greater demand. There is greater demand when consumers have more disposable income. If you want to create jobs, create citizens with a high standard of living.

  22. avatar
    Rudi Spoljarec

    Certainly . Lower taxes let new enterpreneurs to enter business .And let old enterpreneurs to invest in new jobs .Let me compare enterpreneur and government . Because both are leaders of growth : When business leaders do low price , demand and consumption grow , turnover grows up too and result is : profit increases . The same happens when government leaders do low taxes . The result is again the same : more money for state and public needs. Simply.

  23. avatar
    Nick Komselis

    The answer is very simple. See what is the unemployment rate in Romania, Bulgaria, Ireland and Cyprus (tax rates 15 to 10%). Then compare it with the taxing Auschwitz the rest of Europe has turned in to. You can also understand why Americans voted for Trump, why there is brexit, why birthrates are so low and Europe will keep going to hell for the following decades etc…

  24. avatar
    Franz Moisi

    There is a tax optimum, but it is not 0!
    Taxes pay for education, public security, social securoty, infrastructure … companies profit from all these things directly or indirectly. The lacking of all these things is the main reason why poor countries struggle to develop. There is not enough tax many to provide these things.

    The main question is if tax money is spent efficiently, or if dissipates in a huge inefficiant government apparatus.

  25. avatar
    Carl Sebastian Steenekamp

    Yes it will not just give corporations more profit but workers will have more money to take him to take care of their families. The taxation systems of Sweden and Denmark is just laughable and unnecessary. Middle class paying more than half of their incomes in taxes for stuff they won’t probably use…

  26. avatar
    Stephen Lux Et Nox

    Yes our gov in Malta is the best. ”Budget 2018 – No taxes increased or introduced; government plans to build on its own success story” ref and ” Malta retains third lowest unemployment rate in EU” ref

  27. avatar
    Liudvikas Pusčius

    Yes of course it makes easier life and helps psychologically when people have to pay less. and it becomes easier for people to find the job

  28. avatar
    Franco Suarez

    Robotics, artificial intelligence, and taxes are making employment a thing of the past. But when we rationalize and accept the coercive violence of the government to extort the fruits of our labor, we have volunteered for slavery. In Europe, we must learn the difference between gratuities, gifts, wages, salary, honorarium and INCOME. We must find representation willing to put taxation where it belongs, on corporate profits and rents. For now, resisting, avoiding and evading is an act of survival a tyrannical state my not approve. But to whom does my life belong, to whom does my labor belong, to whom does my property belong, if we are truly free?

  29. avatar
    Paul Vincent

    Historically that has always been the case. ..however the technological changes about to sweep thru mosy industries will put a premium on skills. . Technical. Socialogical…consumer etc…

  30. avatar
    António Morais Rodrigues

    Not the trickle down ones…. it will give you slaves. And plenty of money to go around in immoral finantial schemes, and fat of shore accounts, these are no longer needed because people with lots of money payed crocked politicians, bribed them to stach even more money and give the people scraps, and more taxes. Bye midle class.

  31. avatar
    Sherrie Heckendorn

    No it doesn’t make anything better for the people but the richest few and large corporations laugh on the way to the bank at the gullible people

  32. avatar

    Not necessary. It is because bonus of the top layer can always put profit derived from tax cut to their own pocket but to create more jobs for the lower level. There might need to establish some laws say taxation within an enterprise can be separated. For example, some part of the expenses in form of bonus put into pockets of the top level should be counted as taxable profit. While tax exemption can be considered on expenditure for the creation of vacancies and increase of salary and staff welfare at the lower level. Policy can always change behaviour of the business.

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