Saturday, March 18, 2006

A theory to disregard about zero corporation tax.

I was toying with putting this in the top 6 things I would like to see the government do. But I didn’t. I first got the idea for this from wulbreon(retired). So here is my idea based on zero knowledge of economics for a cut in if not elimination of corporation tax.

The US economy is in trouble with its massive deficit many analysts are predicting a major devaluation of the dollar. With China signalling that it is thinking of changing it reserve currency away from the Dollar. It is not looking good for the green back. The consequences to Ireland would be dire. Ireland’s economy is built on American companies. With a deprecation of the dollar the profits these companies are making here would decline meaning that many of these companies would repatriate much of their profits and jobs back home. It is possible that this could result in unemployment jumping to around 7-10% and wages falling. This coupled with personal debt is not that creamy.

My thinking is that if Ireland’s tax policy made it irresistible for companies to set up base here. Then they might well stay and it might encourage other companies to invest in Ireland. This would create a shortage of workers. Thus creating a high demand for workers increased wages and even a halting of a race to the bottom.

10% of the work force moved jobs in 2005 so if companies need to attract and keep workers in this high demand country they will need to offer benefits such as free health insurance for them and there families. This would help cut the amount of money that the government would need to put into the health service. And would in fact be a kind of stealth corporation tax anyway. It would also give patients more control over their health care. By having to deal with less people out of the public health budget the people in jobs that don’t have health care and the unemployed could in fact get better health care as they would have more money per head spent on them.

While my logic is probably poor, flawed, missing factors like immigrants and down right evil I think this idea merits discussion.

So I open the floor to you. What do you think?

4 comments:

wulfbeorn said...

Retired, yes, but still lurking!!

Nice article, by the way.

Frank said...

In the Woody Allen film Everyone Says I Love You, the teenage son Lukas Haas is a passionat advocate of Flat Tax. Eventually doctors diagnose that he has a brain tumour and after treatment he recovers to grow into a good tax and spend New York liberal!

The point about any tax is the reasoning. There's no room for envy taxes these days. Taxation shouldn't be counterproductive, and grant-giving shouldn't distort decisions either.

marie b. said...

I think your logic is less flawed than that employed by the governments of both Ireland and the U.S.

phdbird said...

10% of the work force moved jobs in 2005 so if companies need to attract and keep workers in this high demand country they will need to offer benefits such as free health insurance for them and there families. This would help cut the amount of money that the government would need to put into the health service.

Interesting idea. You're right about human factors aswell though. It'd have to be heavily controlled by the government to make sure companies dont have a million-and-one loopholes in their policies. Plus could we trust the government not to cut health spending as a result. I'd love to believe that as a result there would be more money per person for the health of the less well off but that's not likely.