Does Cutting the Corporate Tax Really Stimulate the Economy?

One of the many fake attacks by a panicked Democratic party on the new tax reform bill is that the corporate tax cut will do nothing to stimulate the economy. However, employees have already reaped huge benefits from the package as major corporations are rewarding them with raises and bonuses. Both Wells Fargo and Fifth Third Banks have increased their minimum wage to fifteen dollars an hour.

Three other companies with about 450,000 employees have announced they are giving them each a bonus of $1,000. That’s a total of $450,000,000. But will it work over the long haul?

Let’s ask Ireland. Until 1995, Ireland’s corporate tax was 40%. Between 1960 and 1995 (36 years) their GDP grew by a measly 7.2%. In 1995, they began lowering their corporate rate to 12.5%.

Since Ireland decreased their corporate taxes to 12.5% in 2003, their economy has grown by a whopping 23%. Major corporations such as  Intel (INTC), Boston Scientific (BSX), Dell, Pfizer (PFE), Google (GOOG), Hewlett Packard (HPE), Facebook (FB) and Johnson and Johnson (JNJ) have moved their national headquarters there. Apple is building a data collection station there at a cost of nearly one billion dollars.

From Seeking Alpha

Big tech companies are already investing much of their time and money on funding new operations in Ireland. Apple (AAPL) announced in 2015 that it would begin building a data centre in Athenry, Galway in 2015 that would cost $979 million and create over 300 new jobs. This decision by Apple makes it the largest data collection hub in Europe. Ireland is now receiving billions of dollars, manufacturing hundreds of thousands of jobs, and increasingly becoming the tech hub of Europe. All these benefits are extraordinary and Ireland’s economy is improving at an astonishing rate because of this. 

There is only one downside to Ireland’s low corporate taxes. The advantage they now command could go away if other countries lower their rates to match. True, but these companies that moved there will not move away just because another country matches their tax rate.

They have already committed billions in the country so that even a lower rate of say 11% would not make companies relocate. But since America has such a large consumer base, with the lower corporate rate, this country could be inviting for numerous foreign manufacturing jobs.

President Trump…making America great one day at a time.