Jeff Sachs Wrong… Again

Great post from Aparna Mathur of AEI. Click here to read it. But here it is anyway:

"Jeff Sachs is in denial once again. In a podcast for BBC News, he bashes Ireland for its low corporate tax policy that, according to him, created a “bubble in the short-term” but did not really build the “long-term platform for prosperity.” In fact, Ireland enjoyed sustained economic growth for a period of 20 years after their corporate tax rates began marching lower in 1988. Gross domestic product grew at more than 6 percent per annum over this period, making it the second-richest country in the European Union, with a per-capita GDP higher than that of Germany, France, and Britain. The “bubble” has only recently burst, because like every other country around the world, including the United States, the financial crisis has hit Ireland hard. To link that to Ireland’s corporate tax policy, which has clearly proven to be a success, is simply ridiculous.

Sachs says that the United States has no money for community programs, for healthcare for the poor, and is not creating high-paying jobs for the average person, all because of the corporate tax race to the bottom. Wrong, wrong, and wrong. In fact, the problem is that the United States has not cut corporate taxes since 1993, much less engaged in any race to the bottom. As I had mentioned in an earlier blog, low corporate taxes around the OECD have been associated with increased, not lower, revenues. The United States gets little revenues from corporate taxes because it has one of the highest, most uncompetitive corporate tax rates in the OECD. As research has shown, high corporate taxes not only lead to lower investment and therefore lower revenues, but also lower worker wages. Thus the United States is a clear case study of why Sachs is wrong—high taxes lead to low revenues and poor wages."