Tax Reform and Ireland
Posted on February 5, 2015
I had lunch yesterday with several friends who work closely with the government of Ireland, and the subject turned to the coming elections over there.
Like in the UK, you never quite know when the Election Day will be called, as setting that date is one of the benefits of being in the Majority.
In any event, the smart money has it that the ruling party, Fine Gael, will call the election sometime in 2016, but not too close to the 100 year anniversary of the Easter Rising.
Like all the governments, Fine Gael is most likely to spend more money to stimulate economic growth the closer it gets to the actual election.
Ireland has gone through economic Hell since the financial crisis hit the world in the last decade, but it has emerged on the other side of the abyss in a stronger economic position that just about any other Member of the European Union.
That’s because it took its fair measure of economic austerity, in conjunction with favorable corporate tax rates that has attracted a bunch of corporations to its shores, many of which are American.
The Irish corporate tax rate is now 12.5%.
That compares to the average American corporate tax that approaches 38%.
You really can’t blame American companies from relocating to Ireland. That spread equals billions of dollars, money that could be spent on research and development, higher wages, and more jobs, but instead is spent on more government.
Most Americans believe that 23% is about what the average corporation rate should be.
Now some companies pay less than that in taxes, but they have to go through an exhaustive and exhausting process to exploiting every little tax loophole they can find.
It would be far better use of their time if American companies could just pay a simple, low, rate that was competitive with the rest of the world.
We now have the highest corporate tax rate in the free world. That’s not the kind of First Place prize you really want to have.
Oh, another thing.
When I was talking to my Irish friends, they told me that the one thing every political party in Ireland agrees upon (and there are a bunch of political parties in Ireland), it’s that they want to keep the Irish corporate tax rate right where it is, at 12.5 percent.
Congress should pass and the President should sign, corporate tax reform.
It would spark growth, lift wages and create jobs.
And it would help us compete against the Irish.