Wall Street Journal asks United States to learn lessons from Ireland

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The WSJ lamented Ireland's recent economic decline

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The Wall Street Journal ran a blistering take down of Ireland's 12.5 corporate tax rate this week.

The paper lamented Ireland's recent economic decline that the article concluded by questioning one of the foundational tenants of conservative thinking, suggesting that tax cuts are not always economic stimulants.

The Journal wrote: "Ireland’s corporate tax rate is 12.5%, which makes it attractive to scads of American businesses looking to lessen the amount they owe to the IRS. Though the U.S. tax rate is 39% though many large corporations pay far less than that thanks to a plethora of loopholes.  Ireland has the second lowest overall tax rate in Europe at 26.5%, trailing only Luxemburg's rate of 21%."

For this reason Ireland's tax policy worked well in the short term, the Journal wrote.

"But when Ireland entered into its first recession in 2008 its GDP fell more than 3%. A year later, the economy shrank nearly 8% and it declined 1% in 2010. 

Now with unemployment topping 14% for the first time since 1994, emigration from Ireland is soaring, the Journal wrote.

"The economy sank the most in the fourth quarter of 2010, the third year in a row it has shrunk.  Modest growth is expected to return in 2011."

In November, the Irish government agreed to a strict four-year austerity plan in exchange for a $112 billion  bailout from the European Union and the IMF. But that bailout - and most of the nations problems - all come down to taxes, the Journal wrote.

"Dublin is under pressure from its European neighbors to raise its taxes if it wants further aid. German Finance Minister Wolfgang Schauble recently said the Irish Tax System was "untenable." It’s easy to understand why considering that the 2011 budget deficit will hit nearly 18 billion euros this year. Debt is expected to top 90% of GDP."

The lesson for America and the Republican Party, the Journal suggests, is not to get blinded by what it called anti-tax zealotry.

"Taxes are not necessarily bad. Wasteful government spending is never a good thing. The Irish government also didn’t think about the long-term consequences of adopting low tax rates. American governments make the same mistakes when they offer businesses huge tax deals that never come to fruition."

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