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Figure 14

Nordic Nations Have Lower Corporate Tax Rates

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

Denmark

Finland

Iceland

Norway

S weden

United States

Source: Organization for Economic Cooperation and Development.

formance, there is ample evidence that exces-

numerous excise duties. Moreover, the tax

sive government spending34 and high tax

burden on consumption in Nordic nations is

rates35 hinder economic growth. Moreover,

not as onerous as the rates suggest since

some goods and services benefit from prefer-

there do not appear to be other factors that

ential rates. Yet, as illustrated in Figure 15,

would be causing economic growth in America

even with these caveats, the tax burden on

and the Nordic nations to follow divergent

consumption is about three times higher in

paths.

Nordic nations than it is in the United States.

Nordic Nations:

If the "size

Does Big Government

A Laissez-Faire Past and

of government"

Explain the Gap between

a Hopeful Future

factor is

the United States and

As shown in Figure 16, the tax burden in

Nordic Nations?

removed from

Nordic nations and America was remarkably

the Economic

similar until 1960. Not coincidentally, it was

during this pre-1960 era that Nordic nations

Although rich by world standards, Nordic

Freedom of the

grew rapidly and became rich.

nations are not as prosperous as the United

World indicators,

Beginning in the mid-1960s, and accelerat-

States. Nordic nations also have bigger gov-

Nordic nations

ing through the 1970s and into the 1980s,

ernments than the United States. The obvious

however, the Nordic nations created large wel-

question to ask is whether these facts are relat-

score an average

fare states. Indeed, this is the key difference

ed. Is excessive government the reason Nordic

of 8.35, ranking

between America and the Nordic nations. The

nations are not as wealthy as America?

United States has a medium-sized welfare

While this paper does not seek to answer

above the 8.25

state and the Nordic nations have large welfare

whether this correlation necessarily means that

score for the

states. Otherwise, America and the Nordic

big government is causing the economy in

United States.

nations have many features in common. Both

Nordic nations to lag America's economic per-

15