Tax Analysts Blog

It’s About Time the U.S. Did a Few Things Like Europe

Posted on May 23, 2016

When U.S. politicians like Bernie Sanders propose to expand Americans’ access to healthcare and higher education, they are met with the reflexive criticism that the U.S. should not aspire to be like Europe, citing (among other things) the high taxes that Europeans pay for these services. While Americans may disagree about whether the Danes and the Dutch are getting their money’s worth, they cannot disagree about the level of civility that many European elected officials display as they go about doing the people’s business, and the level of engagement of the citizens they represent.

In some respects American elected officials should strive to emulate their European counterparts. And American citizens should strive to emulate the citizens of Europe who educate themselves about tax issues and understand that preferential international tax regimes and sweetheart tax deals impose unacceptable costs on ordinary citizens.

I recently attended a small press gathering with the chair and rapporteur of the TAXE II Committee, established by the European Parliament in response to the LuxLeaks scandal. And they shared valuable lessons about their work that Americans could learn from.

The chair, Alain Lamassoure, is a conservative from France. The rapporteur, Jeppe Kofod, is a socialist from Denmark. Yet in listening to their presentation about the committee’s recommendations to combat global tax abuse and coordinate tax administration, it was nearly impossible to tell who was the conservative and who was the liberal. Perhaps as important, they described how elected leaders acted in response to pressure from a public outraged over disclosure of the sweetheart tax rulings Luxembourg routinely granted to large multinationals. Finally, they explained how the committee completed its work and proposed concrete reforms for the European Parliament to enact, all within the six-month term of its mandate.

I suggest that the United States could benefit by emulating Europe in three key respects:

  • American citizens should develop more than just a rudimentary awareness of how tax issues affect them, and engage actively with their leaders. When the LuxLeaks scandal exposed how many companies managed to pay little or no tax in Europe, Europeans demanded and got action from their elected officials. Yet when American companies routinely invert overseas, costing the U.S. Treasury billions of dollars every year, Americans yawn.
  • Elected Democrats and Republicans have to stop playing “gotcha” politics, and start talking with each other to solve problems that the country faces. The European Parliament has 751 representatives from 28 member states. They represent divergent ethnic and national interests, and span a political spectrum broader than the liberal-conservative divide that has paralyzed the 535-member U.S. Congress. If a French conservative and a Danish socialist can work together to benefit all of Europe, there is no reason why a Democrat from New York can’t work with a Republican from Georgia to benefit the United States.
  • American elected officials must take action, and not just talk. The TAXE Committee and its successor, TAXE II, will have each completed their work within the six months of their charters. They produced specific legislative recommendations that the Parliament and other organs of the EU are scheduled to act on. Congress considers it a major achievement to revise the tax code every 30 years.

In short, the U.S. can learn from Europe without becoming Europe. If not now, when?

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