I'm a Belgian working in Belgium. So my only option is to pay Belgian Taxes. But with my incorporation I can optimize a little bit. But in the end I pay a lot of taxes ;)

But If I would go to work in Germany or any other Shengen country I could optimize better.

Now for an American you first need to get a work permit: http://www.associatedcontent.com/article/234826/how_to_move_...

Then your options are open: all tax free places are possible to start your company. You can google for these places.

If you're just doing contracting on your own, incorporating in mainland Europe is basically insane, as you'll spend a ton of your time chasing after bureaucratic stuff, and paying a lot for the privilege. And in any case, what's the point...