Tuesday, August 14, 2007

The fall of Rome

We have written several times recently about a palpable shift in mood about taxation, notably in the United States. Now David Walker, the U.S. comptroller-general of the U.S., has warned in a FT interview that the country is on a "burning platform of unsustainable policies and practices with fiscal deficits, chronic healthcare underfunding, immigration and overseas military commitments threatening a crisis if action is not taken soon ." He has drawn parallels with the fall of the Roman empire.

His report lays out what he called “chilling long-term simulations”, that would require "dramatic" tax rises, slashed government services, and the large-scale dumping by foreign governments of holdings of US debt.
Mr. Walker, who runs the government accountability office, is a non-partisan figure, which makes the report all the more believable. “In my view, it’s time to learn from history and take steps to ensure the American Republic is the first to stand the test of time.”

This follows a recent push for higher taxation from another angle and from an even more unlikely source, whom we have reported on before. Whether they like it or not, Americans look like they will get higher taxes in the long term. Her are two ways to limit the damage: take tax competition seriously, both between U.S. states and between countries; and crack down on tax havens.

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