Germany - Supply Side Laboratory

Here is a beautifully crafted supply-side experiment courtesy of the Germans. Brian Wesbury explains how the Germans pulled economic activity from 2007 to 2006 and is pushing economic activity from 2007 to 2008, engineering a little supply-side pothole for their economy in 2007. Here is the basic logic:

"German tax rates were scheduled to move higher on Jan. 1, 2007, many companies and individuals simply shifted income and spending forward into lower-tax 2006. Those who did so were able to avoid a 3 percent hike in the VAT tax, to 19 percent, as well as a 3 percent hike in the top marginal income- tax rate to 45 percent."

and

"In 2008, the German government plans to reduce corporate-tax rates from roughly 40 percent to 30 percent. This will create a strong incentive for corporations of all sizes to push income and profits from 2007 into 2008."

So check back in early 2009 to get the complete lab results.