...to economic prosperity. While doing some research for an upcoming business trip, I came across this article from yesterday's New York Times. There is a great deal of very sound advice to be taken from Ireland's approach for Europe, the US, and my own home state. Ireland's advice is very simple: Make high school and college education free; make your corporate taxes low, simple and transparent; actively seek out global companies; open your economy to competition; speak English; keep your fiscal house in order; and build a consensus around the whole package with labor and management - then hang in there, because there will be bumps in the road - and you, too, can become one of the richest countries in Europe. At a time that "taxing the rich" seems to be the popular solution to US financial mismanagement problems, here is sound refutation to that tired old theory.
I think your own bold font makes my point for me. Corporate taxes in the US are low... in fact, most corporations don't pay any taxes at all. However, practically eliminating taxes for the rich to force the government's continued borrowing from abroad is not exactly keeping one's house in fiscal order. U.S. NATIONAL DEBT CLOCK The Outstanding Public Debt as of 01 Jul 2005 at 10:10:10 PM GMT is:
My parents just (this past Sunday) returned from a vacation to Ireland. My mother said the growth there since her last visit to the ancestral homeland over 20 years ago has been phenominal. A real key, and Micheal Dell will tell you this himself, is that Ireland puts a very strong emphasis on providing a skilled, educated workforce. Like MattR said, we already have very low corporate taxes. But our fiscal house, as he also pointed out, is not in order. And our workforce is certainly not as well educated. I doubt you'll find many people here who disagree with the assertion that targeted corporate tax breaks can be incentives for companies to do business there. The argument is more that personal income taxes, especially for those who make obscene amounts of money (multi-millions a year), could stand to be a little higher. Married, dual income families in Ireland pay 20% on the first 56k Euros (3k Euro tax credit), and 42% on the rest - higher than in the states by 7%.
And the tax/permit/fee rate in California proves that when those rates go above those of surrounding areas, the companies, and jobs, and REVENUE leave. Ireland has proven that applies in Europe as well. Also, don't lose sight of the overall point of the thread; it is about doing ALL of those things, not just a couple. At a time when "outsourcing" is a hot button, Ireland doesn't seem to have that problem. There is a very important overall lesson here.
Do you mean this op-ed piece by columnist Thomas L. Friedman? Oddly enough, you mention "speak English" (where the hell did that come from?) when the number of Irishmen speaking Gaelic is probably the highest it's been in the country's history. BTW, does Ireland STILL have low corporate taxes? This paragraph doesn't make it clear.
To answer my own question, here's a Wikipedia page on general Taxation in the Republic of Ireland and another on Republic of Ireland corporation tax. Also keep in mind that Ireland has a Value Added Tax of 21% on the majority of goods.
You are not seeing the whole picture. The idea behind having low corporate taxes is that the residual income from a large corporation moving to your country, state, city, etc, is going to be exponentially (sp?) better than it was before said international corporation got there. Think about everything from construction jobs to build the facilities to property taxes to income taxes from all of the new (high paying) jobs that are created to sales tax revenue from all transactions that are taking place with the new highly paid employees of said international corporation that would never have been there in the first place if it had not been for the low corporate tax rates. If that system is what you call "practically eliminating taxes from the rich" then I will take that all day long. When you put up barriers to commerce i.e. higher corporate taxes, you are only killing yourself. I know that if I pay higher taxes, that extra bit of money is only going to one place (the black hole we call our government), never to be seen again. If I were allowed to keep that money, I could then spend it at the grocery store (and pay sales tax). My sale puts the grocery company over the top so that they can buy land to build a new store (and pay property tax). This project gives hundreds of workers jobs (which they get taxed for). I could go on forever about how this chain of events took oplace because of low taxes. The botom line is that any government gets a better return on tax revenues if taxes are lower for the people who have the ability to spend money. Instead of taking the money from the person or corporation at the front end via income tax, it is a much better idea to let the extra money out into the economy where it can generate taxes many times over via sales tax, property tax, income taxes from more people with new jobs.... It can be done if there is a long term outlook rather than a short term money grab.
You're right about one thing, corporations don't pay taxes. Taxes are part of doing business and are passed on to consumers.
The USA has, sans Japan and possibly Germany, the highest income corporate tax rates in the developed world. The talk about companies that pay low or no tax is quite overblown. Ireland has a 12.5% rate and a special 10% manufacturing rate that's being phased out. But it is a small country. You can't build a large scale economy primarily on the basis of attracting manufacturing and financing activities of multinationals solely on low taxes. Ireland is going to find itself competing more and more with Eastern Europe within the EU and, of course, with China
Ireland joined the European Community & was able to gain billions in grants from Brussels, which it used to retool its economy. Had the money been borrowed, there would have been Third World level debt payments. In a small country, the huge influx of funds raised the entire economy. The workers spent the new cash & the GNP has increased over 5% annually for a decade. Current per capita income is $32,000; since 1/2 of the population works, the average personal income exceeds $60,000. There is also a substantial black market which rivals the official economy. Scandals in banking & government abound as everyone tries to circumvent paying taxes. (Not unique; I've heard tax evasion described as the national pastime of several European countries & the US has its problems here also!) The question is whether Ireland can keep it going. Its economy is dependent on other countries. If that reduces, the gravy train may stop.
"President Bush's budget forecasts corporations will pay $168.7 billion in income taxes in 2004 compared with $765.4 billion paid by individuals." This sucks. How can people pay 4.5 times the taxes of corporations? While I question the article's statistics (percentages) a little bit, the hard numbers are difficult to ignore. We need better auditing of corporate books. While a corporation can & should deduct reasonable expenses such as materials, rent & salaries from revenue, a hard look needs to be taken at other kinds of expenses: 1. interest (is this legitimate debt to build a factory/purchase inventory, or expense created to write off bogus debt), 2. meals/entertainment (i.e. luxury boxes), travel/vehicles, benefits, etc. 3. import/export scams (funds diverted to offshore banks). etc.
Somehow either my link was deleted or I forgot to include it. Here is the article I saw from the 29th. They appear to be the same or similar. http://www.nytimes.com/2005/06/29/opinion/29friedman.html The paragraph containing the reference to "speak English," was pasted from the second to last paragraph in the article, and was a quote from an Irish official. On that matter, English is, for better or worse, the language of world finance. Another example of the admonition to speak English: A very good friend of mine is 1/2 Italian, has an upper management position with a large US mortgage company and travels to Italy to visit family every year. He has a cousin who works for the largest bank in Italy. The Italian bank "recommends" that all mid and upper management staff speak English in order to "hasten promotion." IOW, you want a promotion? Learn to speak English. Interesting.
The fact is corporations are legal entities that have not, do not, and never will bear the burden of taxation. People pay taxes. Corporations pass on their tax on in the form of higher prices to consumers, lower wages to workers, and/or lower returns to investors.
You raise some legitimate questions. First of all, corporations are the root of, though not the direct source, for most taxes that are paid to the government. However, it is the nature of the legal structure of corporations that they show a profit. Hence, the will use all legal means to reduce expenses, and, when they violate laws, as Lay, Kozlowski, et al, are finding out, there are consequences. As to some of your specifics; interest is covered in very specific ways, as is entertainment. Scams are covered in my first paragraph. However, lest we lose focus on the larger picture, the Ireland model goes far beyond the mere actions of corporations. Government must be accountable to operating in a positive cash flow basis. Once that happens there is money for education, which is the key to it all. Likewise, unions must recognize that they can't always get what they want just because they ask for it. They must be realistic. All of these things, and more, are a function of the points outlined in the article cited. Without each of them, the burden is greater, if not insurmountable, on the others.
An article is not the same thing as an editorial. And you did paste from the editorial, but those words were not a quote from an Irish official. They were Friedman's opinions. As to your example of your friend's counsin, English is the "lingua franca" of international finance.
If you say so but I don't see any practical difference Correct again. I mis-read the line. I don't, however, understand your point. It is VERY clear from the statement of the Deputy Prime Minister, ("We went on a borrowing, spending and taxing spree, and that nearly drove us under," said Deputy Prime Minister Mary Harney. "It was because we nearly went under that we got the courage to change.") as to the mistakes that had been made and what solved them. This seems consistent with Friedman's summation. The statement by the Dell and Intel reps quoted confirms the response of corporations who found Ireland to be attractive. Hence, they brought their company operations, and jobs, to Ireland. The reference to China's interest further confirms the correctness of Ireland's approach. Are your suggesting that Friedman is not qualified to make the statement he made? With 3 Pulitzers to go along with having been NYT Chief Economic Correspondent to WDC, plus degrees from Brandeis and Oxford, he appears to be a pretty bright guy with sufficient background to make the assessment he did. Or, is his assessment incorrect? Am I misunderstanding your point entirely?
Does Ireland have socialized healthcare? Cuz that could be a big part of why american companies find it a favorable business climate - they don't have to allocate for health-care plans and high mediacal bills...
Yes, Ireland has socialized health services along the lines of what exists in the UK. However, iirc, many people don't get as extensive a range of free services as they do in the UK and have to pay much larger contributions for both care and drugs. Also, like the UK, people can take out private health insurance, which is sometimes paid for by employers. However, this insurance doesn't usually cover primary care and drugs, so is far less costly than in the US.
Let me guess, you guys still have to wait for 2 fvcking months just to see a dermatologist, podiatrist or whatever as long it isn't an emergency, right?
ah, faith and begorra' - a bit o' whiskey and a guiness will tide you over 'till you see the doctor....
Ireland shows the way.... No it doesn't - it's the biggest charity case in Europe. 'Irish economic miracle' my arse. For every Euro they put into the EU, they get 5 back. I'm guessing most countries, regardless of whether they speak English or not would see some decent improvement given that amount of foreign investment. Ireland's a lovely place but to suggest they've done anything incredibly special to achieve their recent successes is off the mark.
That foreign companies are investing in Ireland sounds like a plus to me, yet you seem to think otherwise. Why?