Nicolas Sarkozy, the new President of France, has been flirting with tax cuts. Some of his ideas, such as lowering the corporate rate and reducing death taxes and/or wealth taxes, would be very beneficial for the French economy. Others, such as special tax breaks for overtime work, are gimmicky. But in all cases, as the EU Observer reports, European Finance Ministers are pouring cold water on the notion of less money for government. Cynics suspect that the Finance Ministers do not like tax competition and that they use any excuse to discourage tax cuts in other nations. But even if their concerns –that deficit reduction is the most important goal of fiscal policy – are genuine, it is ironic that they are rather vocal when discouraging tax cuts and remarkably silent when it is time to comment about proposed increases in the burden of government spending. This is hardly a European phenomenon. Many American politicians cry crocodile tears about deficits when tax policy is being debated, but routinely vote for bigger government:
EU finance ministers meeting in Luxembourg on Tuesday (5 June) urged France to stick to its EU deficit reduction targets amid concerns about the implications of president Nicolas Sarkozy’s tax-cutting plans. … Mr Juncker’s warning is in response to plans announced by Mr Sarkozy last month to give the country a “fiscal shock” by undertaking a series of tax-cutting measures likely to cost up to €20 billion. The proposed measures include almost entirely scrapping inheritance tax and cutting tax on overtime.