On the welfare state

[Skybird]

German magazine "Der Spiegel" currently is publishing a series of excerpts from a book about the global war for ressources and prosperity. From this book this interesting essay:

http://www.spiegel.de/international/...443330,00.html

Many European countries have long funded their social welfare systems through paycheck withholdings. It's a method which stems from the days when the Western economies were still competing with equals. After World War II, there was plenty of work to go around and plenty of workers to satisfy the demand. Full employment was virtually the norm in the days when Europe's social welfare systems were being established. Under those conditions, it seemed abundantly obvious that the best approach to building a system that could support the retirees, war widows and small numbers of the unemployed that existed in the late 1960s was to divert a small percentage from the economy. The welfare state was as national as the labor market. Until the mid-1970s, even capital was plentiful.

(...)

It would be easy to destroy the advantage enjoyed by Asian manufacturers and at least place them on equal footing with domestic producers. A welfare state that funds itself primarily by taxing consumer goods rather than the production of those goods would treat domestic and foreign producers equally, and in fact would do so with mathematical precision. The value-added tax would make an automobile from Korea just as expensive as one made by Volkswagen or Opel. The buyers of all products would essentially be paying the welfare state, and not just the workers who produce German, French or Italian products. The only way a foreign company could avoid such a taxation system would be by opting not to sell its products. But why would it do such a thing? Foreign companies would suffer no disadvantage if the value-added tax were increased. They would only be losing their previous advantage.

(...)

Naturally, European taxation of corporations cannot be a uniform tax. The conditions under which companies operate are too varied across Europe. It would have to be a minimum tax, or what the Americans call a "floor tax." Nevertheless, a floor tax system would differ from the current tax competition among states in one very important respect: While allowing states to assess higher taxes, it would bar them from setting their corporate tax rates below the minimum level. Downward competition would be eliminated.

[Skybird]

A still being updated list of excerpts from that book is here:

http://www.spiegel.de/international/...k-6997,00.html

Worthwhile readings.