Daniel J. Mitchell

With occasional exceptions such as Switzerland and Estonia, there’s rarely good news from Europe. At least with regards to fiscal policy.

But maybe there’s a bit of sense on the Iberian Peninsula. I reported a couple of years ago that Portugal was at least flirting with the notion of lower tax rates and spending restraint.

Now Spain may be undoing some class-warfare mistakes on tax policy.

The Wall Street Journal is reporting that the government plans to lower tax rates on both personal income and corporate income.

Spanish leaders who broke their no-new-taxes pledge after taking office 2½ years ago announced sweeping tax cuts on Friday, saying it was time to compensate a recession-battered populace for its sacrifices and boost a nascent recovery. Budget Minister Cristóbal Montoro, announcing the government’s main economic initiative of the year, said the planned reductions of income and corporate taxes will stimulate investment, creating jobs and making Spanish companies more competitive abroad. …Spain’s corporate tax rate would drop from 30% to 25% by 2016. People earning more than €300,000 ($408,000) a year would see their personal income-tax rate fall from 52%, one of the highest in Europe, to 45% in 2016. …The cuts announced Friday would by 2016 bring income-tax rates back to their pre-2012 levels for high-income earners and lower them slightly for low-income earners.

For what it’s worth, I don’t think the tax cuts will happen – or at least won’t be durable – unless Spain’s politicians also impose some long-run spending restraint.

Fortunately, there are some good examples they can follow.

Since we’re on the topic of international tax developments, let’s shift to another story.


Daniel J. Mitchell

Daniel J. Mitchell is a top expert on tax reform and supply-side tax policy at the Cato Institute.