As the world prepares to “become Irish for a day” on March 17th, lets take a moment to acknowledge an under-appreciated characteristic of the Emerald Isle — its low corporate tax rate.
Ireland has the lowest corporate income tax rate in the industrialized world, a mere 12.5 percent. In contrast, the United States has the highest corporate tax rate in the industrialized world at over 39 percent. The results of this experiment have been extremely predictable — American businesses are moving their headquarters to where the beer is better and the taxes are lower.
President Obama blasted American companies for moving to Ireland, claiming “corporate inversions” are the “most insidious tax loopholes out there.” Obama even used his treasury department as a weapon against companies trying to relocate to there. Perhaps President Obama wanted American industries suffering from high taxes to feel like they were in the Hotel California — they can check out any time they like, but they can never leave.
There is nothing “insidious” about Ireland’s low corporate tax rates, nor the fact that businesses globally wish to relocate there because of them. Capital goes where it’s treated best. What seems more malicious is fact that the U.S. has stood still while the rest of the world has been lowering their corporate tax rates over the past decade. Our inability to make our tax code more competitive is showing businesses the door, and we are losing American jobs because of it.
The economic data furthers the “insidiousness” of our high corporate tax rate. As MarketWatch noted, “Ireland’s economy was the fastest-growing in the European Union for the third straight year during 2016.” Additionally, its “unemployment rate fell to 6.7% in January from 8.5% a year earlier, an indication that much of the pickup in output recorded by the GDP figures was real.”
Ireland’s 5.2 percent GDP expansion more than doubled the average economic growth rate of the European Union. In the previous year, 2015, Ireland’s GDP even grew faster than China and India — two of the world’s most rapidly developing countries.
So this St. Patrick’s Day, when celebrating Ireland’s rich culture, let’s also work to emulate the policies that (as Arthur Laffer put it) made its capital “always Dublin.” While some have called Ireland’s soaring growth an “economic miracle,” it wasn’t the luck of the Irish that led to its prosperity — it was its low corporate tax rates.
Photo via Wikimedia Commons, CC BY-SA 3.0