- - Thursday, February 22, 2018

ANALYSIS/OPINION:

Until very recently, United States corporations were saddled with the highest tax rates in the world. Although the concept of economic growth spurred by tax cuts was previously successful in the U.S. under President John F. Kennedy in the 1960s and President Ronald Reagan in the 1980s, progressives in both parties seeking to find their own best ways to spend other people’s money steadily took both corporate and personal tax rates higher at different times.

The Trump-promoted Tax Cut and Jobs Act signed into law in December 2017 is anticipated to bring a large measure of relief and potential for growth to businesses that have struggled to remain profitable domestically. This follows the disastrous results of the Obama economy that saw 7 million manufacturing jobs become outsourced globally.

With the ongoing debt and humanitarian crisis afflicting Puerto Rico post-Hurricane Maria, one could speculate that although it has not been promoted effectively, the very favorable corporate tax rate (4 percent) offered on the island will be the vehicle driving the next Puerto Rican renaissance.

I had the opportunity to ask two high ranking Irish politicians (Minister of State Patrick O’Donovan T.D. of the Department of Finance and the Department of Public Expenditure and Reform and Paddy Burke, spokesperson for the Finance and Public Expenditure and Reform in the Irish Seanad) for their thoughts on possible economic implications of The Tax Cuts and Jobs Act for an Irish economy that boasts an attractive corporate tax rate itself, (12.5 percent) and why despite sharing some logistical similarities, Ireland has been so much more successful at attracting foreign investment than the United States’ territory of Puerto Rico.

Q: What effect, if any, will the Trump tax plan (specifically the corporate tax relief and newly lowered American corporate tax rate: 21 percent) have on the Irish economy?

Patrick O’Donovan TD: “Changes in the U.S. tax system could have an impact on Ireland given the large volume of U.S. investment in Ireland. Companies and governments around the world are now fully analyzing what are very complex changes. Some of the details of the changes remains to be fleshed out. It is clear, however, that Ireland’s access to the European market is, and will remain, a key factor in attracting foreign direct investment from the U.S. and elsewhere.

“Global business, from the U.S. or elsewhere, will always want to have operations in the EU, and Ireland will remain very competitive and attractive as an EU location to invest in and do business from. Ireland remains committed to long-term stability and to the 12.5 percent corporation tax rate which will allow Ireland to continue to be competitive while also offering long-term certainty to international business.”

Q: When comparing the situation in the United States territory of Puerto Rico, where Act 20 of 2012 allows incoming businesses a corporate tax rate of 4 percent (among other advantages) versus Ireland’s very attractive, but substantially higher rate of over 12 percent, what do you feel has been the key to attracting businesses to the Emerald Isle?

Paddy Burke: “While a competitive taxation rate is an important element in attracting business to Ireland it forms part of a policy-mix which makes Ireland an attractive place to do business and to work. Other important elements include: access to the EU market, quality of life for workers, a highly skilled and educated workforce, competitive business environment and good quality infrastructure. When taken together these elements ensure that Ireland is to the forefront when it comes to attracting international business.”

The new American corporate tax rate should certainly help businesses domestically as well as attract some foreign new investment into the U.S. Looking back, however, the original Trump campaign proposal (15 percent) had the potential to affect the positive economic changes we’ve already started to see on a much larger scale.

Puerto Rico, with all its systematic corruption that has prevented the improvement of its rickety energy infrastructure, needs an even more comprehensive “swamp draining” than is currently needed in Washington, D.C.

There are ripple effects to every major piece of economic legislation globally. Some are larger than others. While many U.S. companies have already begun to invest into labor and higher wages, the unfortunate case of Puerto Rico continues with no established path to disentanglement.

Julio Rivera is the editorial director for ReactionaryTimes.com, a small business consultant and a featured columnist at Newsmax.com.

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