Bold tax cuts in Sweden and Estonia show how to tackle austerity â and create growth and jobs By Fraser Nelson8:06PM GMT 06 Dec 2012 Take Estonia, a tiny country at the mercy of its much larger neighbours, which has ample reason to blame âglobal forcesâ. But throughout the crash, it defiantly kept its taxes low (at a 21 per cent flat rate) and took the tough decision to cut state spending by a tenth. It is now celebrating the fastest growth in Europe. The much-larger Sweden responded to the crash with a permanent tax cut for the low-paid. This encouraged so many people back to work that the extra revenue covered the cost of the policy. When the Swedes cut tax for the low-paid, they made it amount to an extra monthâs salary a year. When they cut corporation tax, from 26p to 22p, they did it in three months â not phased in over half a decade, as Britain is doing. Tax cuts need to be sharp, noticeable and immediate. Any tax cut worth its salt will contain an element of risk. The more we learn about Americaâs recovery, the more the Keynesian analysis (demand is the problem, spending is the solution) is being disproven. A recent University of Chicago analysis suggests that most American job losses are accounted for by the change in relationship between taxes and welfare. From Tampa to Tallinn, a new thesis is being etched out: high taxes are retarding the recovery. Austerity, when combined with high taxes, will not help. But if you rebalance things in favour of job creation and work, magical things can happen. http://www.telegraph.co.uk/finance/b...-Treasury.html But Obama is doing the complete opposite.