I recently stumbled upon an article that I wrote over two decades ago for a Canadian audience, and surprisingly, it remains relevant today. With only minor edits made, the essence of the piece still holds true.
The central argument of the article is the importance of maintaining a multitude of competing political jurisdictions in the world. The presence of numerous political entities vying for residents serves as a check on oppressive government behavior. This competition prevents any single jurisdiction from becoming overly burdensome on its citizens. For instance, in the United States, no state has dared to set a marginal income tax rate exceeding 15% due to the fear of losing high-earning individuals to lower-tax states. This competition also acts as a constraint on state governments, limiting the extent of welfare payments they can offer.
Despite the lack of visible political competition among Canadian provinces to keep tax rates low, the underlying reason lies in the federal government’s policy of equalization payments. This policy penalizes provinces that maintain low tax rates by reducing their share of equalization payments, while rewarding provinces with high tax rates by increasing their payments. As a result, tax competition is stifled among Canadian provinces, highlighting the significance of political competition in fostering economic growth and freedom.
The article also advocates for the breakup of larger political entities, such as the United States, into smaller jurisdictions to promote increased political competition and lower tax rates. By decentralizing power, there is a potential for greater economic freedom and growth, as well as a reduction in the size and influence of the military.
While independent political jurisdictions may impose restrictions on cross-border trade, the modern era of negotiated trade agreements mitigates this concern. In contrast to the time of the U.S. states’ merger in 1787, the risk of trade barriers among smaller jurisdictions is now less significant.
In conclusion, the article emphasizes the importance of maintaining diverse political jurisdictions to prevent government overreach and promote economic prosperity. By advocating for decentralization and increased competition, individuals can strive for a more vibrant and dynamic political landscape.
