Part I of this series celebrated economic progress in Argentina, but noted that many more reforms are needed.
Part II explained the need to liberalize labor markets. This new video, Part III in the series, points out that Argentina needs better tax policy.
The video cites a couple of very depressing statistics.
First, a recent OECD report notes that the aggregate tax burden in Argentina is the fourth highest in Latin America and the Caribbean in 2023.
And second highest (behind only the basket case of Brazil) when looking just at Latin America.
In either case, that’s bad news for Argentina.
Especially when you consider that people are not getting good value.
Which brings us to the second grim statistic.
As I noted earlier this year, Argentina is the world’s third-worst country in the 1841 Foundation’s Tax Hell Index. Which means a country that has a heavy fiscal burden combined with very poor scores for governance (bad rule of law, for instance).
The good news is that President Milei has been very successful in reducing the burden of government spending. This should give him some leeway to lower tax rates and (as shown in the video) eliminate a wide range of nuisance taxes.
Hopefully that will soon happen, especially if Milei’s libertarian-oriented party gains seats in the mid-term elections later this year (I’m cautiously optimistic).
I’ll close with an analogy to show what’s happened in Argentina. Imagine going to a doctor and finding out you have all sorts of health problems because you weigh 400 lbs.
You decide you need to get serious (the diet-and-exercise equivalent of electing Milei) and you weigh 300 lbs. at your next appointment.
The doctor is very impressed and happy with your progress, but he reminds you that you still need to lose at least another 100 lbs.
The bottom line is that Milei has an incredible goal of turning his country into a free-market Mecca. And he deserves immense praise for what’s already been accomplished, but so much more still needs to be done.
Remember, it took the Peronists about 80 years to drive Argentina into a ditch. Even in a best-case scenario, it will take a few years to undo all their mistakes.
P.S. Never forget that 100-plus leftist economists warned that Milei would produce disaster if he became president. Have a group of people ever been so wildly wrong?
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Author: Dan Mitchell
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