10/20/2007

Competition within Europe

Since the creation of the European Union, citizens of this partnership have been allowed to work and live in any country that is a part of the Union. Recently though, countries in the European Union have had to start competing for citizens by lowering their individual countries’ tax rates. This has been a great thing for those countries that have been able to lower their rates enough to compete for citizens. For those countries that are not capable of lowering taxes, this has been a nightmare. I wonder though, are the tax savings that one receives from a country the largest determining factor in what country one chooses to live in, or are there other factors, like freedom, that could change this?

4 comments:

Logan said...

There are plenty of people that would never move to another country just because the taxes are lower. For example, I don't care if they pay me to move to France, I would never go.

Alaska actually does something similar. I have a friend who's family moved here from Alaska, and he told me that the state paid each family member a standard amount for each year that they lived there. Imagine a state that pays you to live there...yet there are not mighty throngs of people chomping at the bit to move to Alaska.

This article actually surprises me because moving between countries in the European Union would mean language, culture, and other adaptations that you (and your family) would have to deal with, just to save some tax money? The reason this is so strange is that Europeans are extremely proud of their heritage. I don't see masses of them giving that up for a lower tax, although there will always be some in the margin.

Dr. Tufte said...

Logan: I don't believe you can get the payments from Alaska if you move up there. You have to be grandfathered in somehow.

I think people can and do base serious actions on taxes. I think a lot of this is a focal point effect: people are really concerned about taxes, so they overreact to small changes.

William said...

Dr. Tufte,
I agree with you and think that taxes play an important factor in choosing where to live. Although as Sophie mentioned, there could potentially be other factors that are more important than taxes. But all things being held equal having a lower tax will attract more people.

Dr. Tufte said...

Agreed - I just think we're pretty elastic with respect to taxes.