Ireland Gets It

Steve Forbes

If the incoming Obama Administration is serious about squeezing more money from businesses, it should follow the example of Ireland and slash corporate tax rates. The U.S. has one of the highest profits levies in the developed world: 35% at the federal level, with another average of 5% from state and local taxes. Only Japan has worse. In contrast, Ireland's rate is a mere 12.5%. Imagine the howls from congressional Democrats if Barack Obama were to suggest enacting such a low corporate tax rate in the U.S.

But the accompanying table tells an eye-opening tale: Ireland's corporate tax take as a portion of its economy is higher than that of the U.S. High rates breed pressure for ever more complicated exemptions and ever more ingenious ways to avoid Uncle Sam's tax bite. But an Irish-like rate leaves companies to focus brainpower on growing their businesses instead of on jousting with tax collectors. A general flat tax, such as Yours Truly has been advocating for decades, would give just such a benefit to both individuals and businesses. Alas, misbegotten populist ideology still trumps fairness and common sense.

The Obama White House is pushing a massive stimulus plan that will do little to reinvigorate the recessed economy. Governement spending does not create prosperity. If it did, the Soviet Union would have won the Cold War. Low tax rates positively change incentives: Entrepreneurs, venture capitalists and investors are induced to take more risks; business become more expansion-minded; and individuals positively adjust their own behavior, knowing that htey can keep more of what they earn and that success will not be punished.

Corporate Tax as % of GDP:

Year 2003:
U.S. - 1.2%
Ireland - 3.7%

Year 2004:
U.S. - 1.6 %
Ireland - 3.6%

Year 2005:
U.S. - 2.3 %
Ireland - 3.4%

Year 2006:
U.S. - 2.7%
Ireland - 3.8%

Year 2007:
U.S. - 2.7%
Ireland - 3.4%

Sources: Congressional Budget Office; Ireland Office of the Revenue Commissioners; Ireland Department of Finance

Steve Forbes is President/CEO of Forbes and Editor-in-Chief of Forbes magazine
Copyright 2008. All Rights Reserved.

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