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by BCM43 5168 days ago
But that won't work if some very small country lowers it's tax to 1%. The US can't compete with that.
2 comments

Why not? (Honest question.)

We have states that have no personal income tax. Not surprisingly, these states are doing fine because they raise revenue other ways.

Income tax only accounts for some of the taxes a state can take in. Property and sales tax are also forms states use to collect income, and they happen to be regressive in most cases.

If you look at the CFED chart [2], those nine states [1] with no income tax make up the top 9 slots where the bottom 20% pay many times more in taxes than the top 1% (as a percentage of income), from 3.8 times (Tennessee) to a whopping 6.7 times (Washington).

[1] http://www.irs.gov/efile/article/0,,id=130684,00.html

[2] http://scorecard.assetsandopportunity.org/2012/measure/tax-b...

...states [1] with no income tax make up the top 9 slots where the bottom 20% pay many times more in taxes than the top 1%...

By itself, this statistic is meaningless. A state with a progressive tax system but lower rates of inequality will score poorly on this metric than a state with higher inequality but an identical tax system.

I.e., you might be showing Tennessee has a regressive tax system, or you might be showing Tennessee has low inequality. Without more details we cannot determine this.

Note that welfare benefits can cancel out a lot of taxes and restore the progressive effect.
You can charge sales taxes. A company can't avoid those if they want to sell things to the country.