Irish Corporate Taxes: Bring It On

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"Irish Corporate Taxes: Bring It On"

John McCain offered an unusually specific argument at the debate on Friday in favor of his plan for a reduction in the corporate income tax rate, specifically citing Ireland as an example of a low tax jurisdiction we should emulate:



The trouble, as is fairly well-known, is that the US corporate income tax is so loophole ridden that you can’t just look at the nominal rates. Its true that the Irish corporate tax rate of 12.5 percent (not 11 as McCain said) is lower than the rate in the United States. But as Igor Volsky observes at the Wonk Room, Ireland actually collects substantially more revenue from its corporate income tax: “In the United States, corporate revenues as a percentage of GDP was about 2.2 percent; Ireland raised close to 4 percent.”

In short, Ireland really could be a model for successful reform in the United States; reform that would be aimed at growing the tax base by closing loopholes and, in exchange, lowering the rate. That would, if calibrated correctly, both boost economic growth and efficiency somewhat and also increase tax revenues. But a simple across-the-board rate cut would accomplish nothing of the sort. What’s needed is real coherent reform along the lines of what was undertaken in the mid-1980s.

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