Whenever we talk about tax cuts and growth-oriented tax programs in Europe, many tell us that “it is not possible” and that the European Union does not allow it.
The naysayers assert a falsehood. Attractive, growth-oriented tax systems are not only possible in the EU, but those countries that implement them have higher economic growth, less unemployment, and first-class welfare states. To deceive us, they want us to ignore Ireland, the Netherlands, and Luxembourg, as well as most of the technology and job-creation leaders.
Lower taxes and greater liberalization than the rest of the eurozone mean higher growth, better wealth, and superior social welfare. The economic miracle of Ireland does not derive from statism. Its secret is to make budgetary stability, investment attractiveness, private initiative, and disposable income for citizens the pillars of economic policy. Ireland has a corporate tax of 12.5 percent and a 6.25 percent rate on income from patents and intellectual property, a key factor that attracts technology companies.
Yet Ireland’s minimum wage is almost double that of Spain, Portugal, and other eurozone countries; the average pension is higher; and its health and education systems are of the highest quality. The nation of fewer than 5 million inhabitants has nine universities among the best in the world, according to the 2018 Best Global Universities ranking. Ireland’s debt-to-GDP ratio is 73 percent, unemployment is 5.1 percent (youth unemployment at 11.4 percent), and the public deficit is just 0.7 percent of GDP.
Coping With Crisis
Only a few years ago, Ireland was close to the edge financially, and its 10-year bond yield rose to 14 percent. Ireland was considered one of the countries with a high risk of default, along with Spain, Portugal, Greece, and Italy. Since then, low taxes, budget restraint, and reforms aimed at attracting capital have made Ireland the fastest-growing European economy, with an unemployment rate less than half that of Spain, for example.
Deficits have been slashed; debt is under control; the economy is expected to grow by 5.1 percent in 2018 and to reach full employment in 2019.
The EU does not need to harmonize fiscal systems, but if it did, it would best implement the systems that promote growth and jobs, not the ones that promote stagnation.
A confiscatory tax system and a hypertrophied public sector have only created debt and stagnation in the eurozone countries that have implemented them. France is a key example.
