Once a Tax Haven, Now on Life Support
by Mark Wilson
The next time someone tells you that the United States should emulate Ireland’s low corporate tax rate to prevent U.S. businesses from leaving the country, you might want to mention the following:
- Ireland is now effectively insolvent;
- Corporations don’t go to Ireland for its low tax rate. They go there because Irish tax laws make it easier to shuttle profits to Bermuda to avoid paying taxes — both Irish and American.
This article from The New Republic adequately sums up conservatives’ misguided thoughts about Ireland. They blame lots of things: “the progressive tax structure, public sector overcompensation, and poor quality of the state,” and “government spending.”
Of all the things that get blamed, Ireland’s status as a tax haven is not mentioned. Not enough in taxes? No problem; just borrow! Imagine Indiana Jones is in a room lined with spikes. Now imagine the walls are being to close in. It’s kind of like that.
Free market evangelists at the Cato Institute — the people who want to slash corporate taxes even lower — would do well to take a long, hard look at Ireland. Like the Ancient Mariner, it should serve as a warning:
The Wedding-Guest sat on a stone:
He cannot chuse but hear;
And thus spake on that ancient man,
The bright-eyed Mariner.
Lowering corporate taxes — and decreasing the effective tax rates on the wealthy even more — is a recipe for the type of disaster that Ireland is facing now.