Shapiro: Higher Taxes Stymie Innovation

Posted April 22, 2010 at 1:36pm

Steven Hill’s plea for the United States to adopt European-style higher taxes in return for European-style social services (“Are Americans Getting Their Money’s Worth?” Guest Observer, April 15) would lead to disastrously harmful tax policies. But more importantly, it would destroy the very things that make us great as Americans.

First, the current American tax system favors investment and innovation. By comparison, many European countries penalize successful entrepreneurs by taxing more than 50 percent of personal income and imposing an onerous value-added tax. The predictable result is that in almost every area of innovation (the Internet, semiconductors, information technology, medical products and biotechnology), Europe severely trails the United States in the number of innovations. Can you even name five innovative European companies? In addition, our tax system fosters economic prosperity. From 1982 to 2007, the U.S. created 45 million new jobs, compared with fewer than 10 million in Europe, while the U.S. economy has grown more than one-third faster over the last two decades, according to the Bureau of Labor Statistics.

Second, American tax revenue funds different priorities than European tax revenue. We have the world’s best university system as well as the best services for large numbers of non-working poor. American military power stands alone as the world’s bulwark against terrorism, oppression and heavily armed rogue states. What does Europe have? Better public transportation.

Third, Mr. Hill’s view that Europeans get better health care is factually wrong. When facing life-threatening diseases, the world’s wealthy come to the U.S. because we offer the best health care. Europeans ration even basic medical services: They have fewer doctors proportionally and limit doctor education and training. American doctors have deeper, more hands-on and extensive training and they must compete with each other for reputation and patients. American doctors dominate the world’s medical journals and have produced more breakthroughs in almost every field of medicine. American health care should cost more — it is much better. Mr. Hill’s argument that America has inferior medical care because we have higher infant mortality, lower birth weight and lower life expectancy is misleading. These are not valid measures of health care; they result from American lifestyle choices. Americans eat more unhealthy food, exercise less and have a higher rate of teenage pregnancy. On measures where doctors matter, such as breast cancer survival rates, we are top in the world.

I admire Europe for its culture, food, history and our shared commitment to democracy and opposition to oppression. But the American secret sauce is innovation. If we adopt European-style taxation and big government policies, we will diminish America’s innovative edge and hurt our economy. We cannot afford to take on higher European-style taxes, provide European-style cradle-to-grave services and keep current American priorities. Our economy will collapse on itself.

Gary Shapiro is president and CEO of the Consumer Electronics Association.