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This has been the approach of the U.S., where some economists argue low taxation has meant high economic growth.
But the debate there is raging hard ahead of the Presidential election later this year. Tensions have been increased by attempts to raise tax rates for millionaires, who commonly pay less than 20 per cent. It has been highlighted repeatedly by billionaire Warren Buffett, an advocate of more effective taxing of the rich. Sebastian Mallaby argued in Friday's Financial Times that ‘no reasonable person can doubt’ that the U.S. must eventually raise taxes. 'The country is running an unsustainable budget deficit,’ he wrote. ‘Its tax take, measured as a share of gross domestic product, is the lowest in the OECD. The 1990s suggest the U.S. can raise revenues without damaging growth. Other countries have also managed similar feats. Sweden, for example, which collects 53 per cent of GDP in taxes, has grown faster over the past decade than the US, which collects 32 per cent, counting state and local government.’ He also points out that inequality, which is vast in the U.S., damages the economy: ‘Some inequality is good: it is a spur to enterprise and effort. But too much is clearly bad: it punctures meritocracy. 'As gaps in wealth and income have widened, it has become steadily harder for talented poor kids to compete against lavishly tutored rich kids armed with iPhones full of contacts. This is politically corrosive, morally unjust, and a shocking waste of human capital.’ American economist Diana Furchtgott-Roth in contrast suggested, writing here on This is Money, that the way to a fairer and more efficient way to fund the state is to scrap income tax and replace the lost revenue with a tax on goods and services - VAT; currently there is no national VAT in the U.S. only a marginal sales tax applied state by state. To give readers a feel for how countries tax their citizens, we have produced a rundown, put together by the Organisation of Economic Cooperation & Development (OECD).This table includes the likes of Sweden, which has been an economic success despite its high rate of tax. It has also been able to fund generous welfare provision. But could the Swedish economy have grown even faster if state spending hadn't crowded out private enterprise?The real debate on global taxation is just beginning to gather pace. Today, we'd like to hear your views on whether Britain's 35 per cent tax rate is too high and stifling economic dynanism or too low and endangering our long-term finances.Tell us what you think.Twitter: #taxtakeTHE TAX TAKE AS A PERCENTAGE OF GDPSource: OECD
COUNTRY20092010Mexico17.4%18.7%Chile18.4%20.9%United States24.1%24.1%Ireland27.8%28.0%Switzerland29.7%29.8%Greece30.0%30.9%Portugal30.6%31.3%UK34.3%35.0%Germany37.3%36.3%Norway42.9%42.8%France42.4%42.9%Sweden46.7%45.8%Denmark48.1%48.2%AVERAGE33.8%n/a