Tax hikes ‘self-defeating’, says European Central Bank research paper

Raising taxes is “self-defeating” when a country tries to bring down the ratio between its public debt and economic output, according to a research paper published by the European Central Bank (ECB) yesterday and based on the eurozone’s recent history.

The ECB, along with the European Commission and the IMF, has imposed austerity measures, including both tax hikes and spending cuts, on overly-indebted eurozone countries such as Greece and Portugal in return for loans.

The paper found that higher taxes fail to bring down the ratio between a country’s debt and its GDP.