Tax Policy

The always excellent Capital Commerce blog highlights an interesting article about why globalization may serve to exert downward pressure on tax rates around the world. In reading the story this part really jumped out at me:

"When you are at 63 percent tax, you don't look forward to the evaluation with the boss to get a raise," Sorensen said. "You look for more vacation or a training course in the tropics - something that you get the full benefit of."

You sometimes hear about how Europeans take more vacation time than Americans, which is frequently explained by the theory that people in Europe prefer to work less than Americans because they prefer to savor life rather than work themselves to death. However, as Mr. Sorensen notes, vacation is a form of compensation. If given the choice between receiving 40 cents on the dollar for your marginal work or taking untaxed compensation in the form of vacation, you opt for the latter.

This explanation makes much more sense to me than Americans being wage slaves while Europeans make time to sniff the roses on the road of life.