NCPA - National Center for Policy Analysis

Tax Cuts Propelled Irish Miracle

June 26, 2001

Unlike politicians in other European countries, Ireland's leaders paid serious attention to Reaganomics and have slashed taxes over the years in a supply-side effort to revive the nation's economy. They succeeded.

Fifteen years ago, Ireland was the "sick man of Europe" -- with 15 percent unemployment and government spending that consumed more than 50 percent of output. Today, Ireland is known as the "Celtic Miracle."

  • The turnaround was accomplished in large measure by dropping corporate tax rates from 50 percent to 20 percent, reductions in personal tax rates from 65 percent to 42 percent, along with capital gains tax rates which fell from 60 percent to 20 percent.
  • Today, unemployment is down by nearly 10 percentage points and the economy is expanding at about 9 percent annually.
  • So successful has Ireland been that it now has to import workers -- a strange twist for a nation that traditionally has seem many of its people emigrate in search of jobs.

So how does the rest of Europe feel about this? Petulant.

  • High-tax nations such as France are upset that Ireland has lowered tax rates -- which they call a form of "unfair" competition.
  • European bureaucrats even sputter that low taxes are a form of "state aid."

A few months ago, the European Union voted to condemn Ireland's supply-side tax policy for causing "too much" growth. Irish voters have responded by rejecting the EU's plan to expand its membership, which would have required Irish taxpayers to subsidize industry in those countries.

Source: Daniel Mitchell (Heritage Foundation), "Vote that Spooked Europe?" Washington Times, June 26, 2001.


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