In The Wall Street Journal, Stephen Moore and Steve Forbes discuss Ireland’s success after cutting taxes and abandoning the welfare state model. They write:
European Union officials and Treasury Secretary Janet Yellen are pushing for a global minimum corporate tax, and no wonder. High-tax countries are getting bled to death, while low-tax ones experience stunning growth.
Ireland, whose economy grew by 12.5% last year—faster than any other European nation—is one of the greatest tax-cutting success stories of modern times. The Journal recently reported that Ireland is “swimming in money.” It’s a vivid example of the Laffer Curve, which shows that lower tax rates can result in faster growth and higher revenue.
In the 1990s, Ireland had a dismal welfare-state economy. Between 1971 and 1991, its national debt as a share of gross domestic product rose from 40% to 95%, and its unemployment rate topped out just shy of 18% in 1987. But in 1995, Dublin implemented a controversial about-face economic plan. The country replaced its 40% corporate tax rate with a 12.5% rate, phased in over about a decade. Ireland became a magnet for new business and capital investment.
It worked. Even the most optimistic architects of this low flat rate couldn’t have imagined the economic recovery it would launch. The American Chamber of Commerce Ireland reports that the number of U.S. multinational companies operating in Ireland now stands at about 950, with 209,000 employees. Only five million people live in Ireland. This is the equivalent of a U.S. policy creating 10 million jobs.
Ireland is an industrialized country with one of the world’s largest budget surpluses, thanks to new tax revenue, especially from big tech and pharmaceutical companies domiciled in Dublin. The mystery is why other nations haven’t imitated the Irish. The left has ridiculed international tax competition as a “race to the bottom,” even as Ireland has raced straight to the top.
The Biden administration—which has proposed raising the U.S. corporate tax rate from 21% to between 25% and 30%, as well as higher tax rates on capital gains and dividends—doesn’t get this at all. These are self-defeating policies that the Irish rejected, to their great benefit.
Action Line: Money has no borders. It travels to where it’s most respected. Cheers.
P.S. Find where your money is most respected by perusing Your Survival Guy’s 2023 Super States. Then, click here to subscribe to my free monthly Survive & Thrive letter and be among the first to receive Super States updates.
E.J. Smith - Your Survival Guy
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