EU Tax Rates, Block To Bailouts?

It is likely a safe assumption that the support of government spending in nations with high tax rates is lower than support in countries where tax rates are low. A new study from UHYand international accounting operation show that tax rates vary considerably among the many of the world’s largest nations based on GDP. The authors of the report commented that “With the exception of Israel, the countries which tax high earners the most are EU members.”

UHY does not say that high taxes levied on individuals are regressive and that point has been argued vigorously among economists since the recession began. It may not be a coincidence Spain, Germany, Ireland, the UK and France have high tax rates. These rates may be a reason that EU voters generally protest bailout programs for weak member nations like Greece. These citizens might fairly assume that the costs of bailouts will hurt government balance sheets. This, in turn, may be solved through higher tax rates meant to balance the books of nations like Germany and France.

It is too late to use tax policy to encourage support among German voters to gain acceptance of the nation’s participation in another round of Greek financing. The tax rates do show that the EU tension may be driven by a wide variation in the rate individuals pay from country to country. The EU can hardly act as a block when it has a common currency but a wide variation in the level at which workers are taxed. It is yet one more example of the fact the reason for financial disunity among Europe’s nations is because there is not common ground among the way that earners are treated.

Douglas A. McIntyre