Tax Competition Spurs Globalization

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Dose globalization undermine the fiscal basis of the welfare state? Conventional wisdom believs so:open borders cause tax competition,which in turn laads to a race to the bottom in capital taxation.Most economists support globalization because it raises the incomes of people worldwide,creats new jobs at home and abroad and makes it harder for governments to sustain excessively high tax rates.As capital and labor become more mobile,international "tax competition" rises ,which policymakers must respond to in a thoughtful and productive way.Many governments have rsponded to increased labor and capital mobility by cutting tax rates.The writer suggestes that if the U.S. moves ahead with tax reform, other nations would probably act in teh same way. As tax systems around the world become more efficient ,economic output and incomes should rise.