During a campaign year there is always lots of talk about cutting taxes. Candidates have different ideas about whether to make the Bush tax cuts permanent or whether to use the potential tax revenues for additional government spending. More recently there has been a push to provide a retroactive tax break for homebuilders while other groups have pushed for tax breaks for their specific business.
If we really want to help businesses survive and succeed, we need to look at the corporate tax rate. Economists point to the Irish model as a concrete illustration of the impact of lowering the corporate tax rate.
In the mid-1980s, Ireland was an economic backwater with an average income level 30 percent below that of the rest of the European Union. Today, Irish incomes are 40 percent above the EU average.
Part of the reason was government spending; the rest was a reduction of the corporate tax rate. Irish government spending fell from more than half of GDP to about one-third of GDP. This was a significant change, but the most important change was the reduction of the corporate tax rate.
Ireland established a corporate tax rate for manufacturing of just ten percent. This was extended to high-technology, financial services, and other industries. Later, Ireland established a 12.5 percent tax rate on all corporations. This is one of the lowest in the world, and one-third of the U.S. corporate tax rate that is nearly the highest in the world.
Ireland has been able to attract huge inflows of foreign investment and has a flourishing high-tech industry. This wasn’t because of the luck of the Irish. It was due to a wise decision to lower the corporate tax rate. Perhaps we can learn a lesson from the Emerald miracle. I’m Kerby Anderson, and that’s my point of view.
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In addition to tax cuts, large scale corporations benefit from a wide range of government regulations, or lack thereof. Because of a free flow of capital crossing sovereign economic boundaries, transnational corporations can shift profits, operating costs, and investment capital to and from any of their operations throughout the world. This allows them to hold sovereign nations hostage by threatening to pack up and leave if they don't get their way. Small local businesses don't have this advantage, and it makes it hard for them to survive the competition. Yet, it is thriving small businesses that have more potential to provide local employment at fair wages. Instead of the free trade policies, a careful implementation of tariffs is needed to regulate imports that could be produced locally. This is "protectionism" aimed at safeguarding local culture, jobs, and other resources against the power of transnational corporations. George Cancilla Click here to reply to this post
Corporate Taxes
Posted On: 04/30/08 08:52:47 AM
Age 61, MO
The reduction of corporate tax rates in the U.S. would not necessarily result in the company's passing that on to their employees in the form of higher wages. Nor would it necessarily result in the savings being turned back into more plant and equipment to increase the size of the business and consequently hire more employees. The very large transnational corporations seek more than tax deregulation, but seek environmental deregulation, subsidies, and cheap labor environments. I say let them keep their taxes, but make them invest their profits in country only. George Cancilla Click here to reply to this post
