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The Corner

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When Irish Eyes Are Filing



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Steve Forbes says wake up and smell the 40 shades of green:

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.

This is very true. As a very small corporate magnate myself, I’ve just had the usual year-end discussion with the green-eyeshade guys where you discuss the company entirely in terms of tax implications rather than strategic business considerations.

I said it on Rush’s show yesterday but it bears repeating: To a certain type of simple-minded populist, the idea of soaking vast faceless corporations is appealing. But in the end a “corporation” cannot pay tax: The Globocorp corporate HQ looming in chrome and steel over the skyline does not have a pocket to dip into. Like all taxes, the actual cash has to be ponied up by flesh-and-blood human beings — the owners, workers, and employees of the corporation. The growing gap between US corporate rates and other developed nations is a massive disincentivization for real human beings to start and grow a business here. And for those already here it encourages the kind of short-term thinking that leads to Bailoutistan and American sclerosis.

UPDATE: A reader adds:

I have always looked at it another way:  Corporations don’t pay taxes — they collect taxes. 

The taxes that they pay are collected from the people to whom they sell their goods and services — people like you and me.  Corporate taxes are a way that the government hides what you and I are actually paying in taxes.



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