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Be the tax shelter

Be the tax shelter

Last updated on: September 7, 2016 at 5:45 am by Gene Veith

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Be the tax shelter 2016-09-06T20:31:21-04:00 Gene Veith

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Ireland has a corporate tax rate of 12.5% The rate in other European states is twice that. The rate in the United States is the highest in the world at 39%.

Though their rate is already low, the Irish are willing to cut them still lower in individual arrangements to bring industries to their country. As a result, high-tech companies, including Apple, have opened countless operations in Ireland, and the Irish economy is booming.

The European Union believes Apple’s tax deal with Ireland is unfair. The supra-national bureaucracy is mandating that Apple pay back taxes to Ireland, money that Ireland denies that it owes.

The United States is supporting the EU against both Apple and Ireland, claiming that Apple is parking its profits in an off-shore tax shelter that is Ireland, and that our government is entitled to its 39% cut.

Kevin Williamson tells the tale and proposes a startling solution: Why doesn’t the United States cut its exorbitant tax rate so that companies no longer have the incentive to move elsewhere? Why don’t we cut them below that of the Irish to attract global companies to relocate here, thus bringing in all of that investment and employment? The United States, he says, should “be the tax shelter.”

Do you see anything wrong with that?

From Kevin D. Williamson, EU’s Apple Tax in Ireland: U.S. Should Be the Tax Shelter | National Review:

We could decry overseas tax shelters for the next decade or two, and change absolutely nothing, or we could — here’s a crazy idea — be the tax shelter. You know what Ireland, Norway, and Sweden all have in common? Within living memory, all were desperately poor. That’s why there are more Irish Americans than Irish nationals, more Norwegian Americans than Norwegians, and more Swedish Americans than Swedes. Hunger will make you get on a boat. Sweden grew wealthy under a form of laissez-faire capitalism strikingly different from the EU norm today, with lower taxes and a smaller public sector than its European counterparts. Norway did much the same thing, helped along by a great deal of oil (which can be both a blessing and a curse). Ireland eventually got sick of being poor and followed a similar program.

It would be interesting to see what would happen if that strategy were followed by a very rich nation — one that accounts for something like a quarter of the economic output of the entire human race. One need not give in to the fantasy of self-funding tax cuts to consider that there might be some significant growth effects and a great deal of new innovation if a whole lot of business that’s being done in Ireland and Singapore and Korea got done in California and New Jersey and Texas instead. The corporate tax code already is filled with so much crony-tastic favoritism that politically connected firms pay relatively low rates. Why not make it a good deal across-the-board and out-Irish the Irish with a 10 percent flat tax on corporate income? Corporate taxes in total only account for about 11 percent of federal revenue, so we wouldn’t even have to cut that much spending to make it revenue-neutral. There are other tax reforms that should be made, but cutting — or eliminating outright — the corporate income tax isn’t the worst proposal on the books, either.

Don’t fear the tax shelter. Be the tax shelter.

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