Justin Fox, Columnist

The Cost of the Republicans' Tax Delusion

Sweden could teach the U.S. a lesson in effective tax-cutting. Unfortunately, the GOP's leaders are bad at math.

December 12, 2017 at 7:03 PM UTC

Justin Fox is a Bloomberg Opinion columnist covering business, economics and other topics involving charts. A former editorial director of the Harvard Business Review, he is author of “The Myth of the Rational Market.”

It doesn't add up, does it?
Photographer: Bill Clark/CQ-Roll Call Group/Getty Images

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Last June, the center-left government in Sweden proposed cutting the country's top corporate tax rate, already a below-the-international-average 22 percent, to 20 percent. The rate cut would be offset by a set of limitations on the deductibility of interest, so overall the Swedish government -- currently running a fiscal surplus of more than 1 percent of gross domestic product -- did not expect any revenue loss from the changes.

The proposal has been slowly working its way through the Swedish system since then. After a comment period that ended in September, the government began composing legislation that is due out the first half of next year and expected to take effect on July 1. The interest-deductibility changes, aimed at making "aggressive tax planning" harder and reducing corporate debt,1513090452013 are the centerpiece of the plan, so the reduction in the corporate rate may become bigger or smaller once the interest provisions are finalized.