Poverty Purveyors Plus
Byline: Richard W. Rahn, SPECIAL TO THE WASHINGTON TIMES
SANTO DOMINGO, Dominican Republic - This beautiful island nation has had more than its fair share of corrupt and incompetent rulers who have kept too many of its people in poverty. But now, as the Dominican economy begins to strengthen and the noises for constructive change seem to be getting louder, the country (and other similar poor nations) may have more to fear from some in the U.S. Congress, European Union bureaucrats, and officials of international organizations, such as the Organization for Economic Cooperation and Development, than from their own leaders.
Ireland, Iceland, Bermuda, Cayman and Singapore are all islands where most of the people have become affluent in recent decades. Yet many island nations - such as Jamaica, Cuba and the Dominican Republic - with many more natural resources are poor. What the wealthy islands have in common is not climate or races of people but the rule of law, minimal corruption, and internationally competitive regulatory, tax, and trade policies. The poor islands all suffer from too much corruption and government regulation and too little economic freedom.
One would think the political classes in the rich nations would laud the policies that brought prosperity and freedom to the wealthy islands (and other nations) and attack the policies of the poor nations. But alas, that is not happening.
It is difficult for a poor island or poor country to grow and prosper if it cannot attract foreign capital and have access to foreign markets. Yet, the small, reasonably affluent nations are attacked by many EU leaders, the OECD and some in the U.S. Congress because they have low tax rates, particularly on labor and capital. Their opponents argue they are engaged in unfair tax competition.
This battle has gone on for much of the last decade, but it has recently heated up again with the EU taking direct aim at Switzerland because some of the local Swiss jurisdictions provide favorable tax treatment to companies that move there. Several members of the U.S. Senate, notably Democratic Sens. Carl Levin of Michigan and Byron Dorgan of North Dakota, have introduced bills to penalize low-tax jurisdictions whose governments are engaged in the "crime" of trying to improve their citizens' lot by making their countries attractive to foreign capital. (Of course, the good senators could constructively take care of the "problem" of tax competition by replacing the obscenely complex and destructive U.S. income tax system with a simple consumption tax, such as the Fair Tax, which would have the added benefit of increasing U. …