Ireland, until recently, has been an economic powerhouse. Its economic growth, fueled by a low corporate tax rate, became the envy of Europe.

However, another thing grew in Ireland as well. The size and spending of it government. Via True Economics.

Amidst this crisis, it is worth taking a look back at the road that we have traveled on our way to the current predicament. It is fashionable today to make claims that the past – the recent past in fact – has been a place of greater fiscal responsibility, the age of ‘sustainable’ public finances. But is the claim true? Have lost our way all of a sudden around 2005-2007, or have we always been traveling along the same route.

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In absolute levels terms, spending and tax receipts have clearly grown dramatically over the years. These are nominal figures, of course. But notice that total expenditure line almost invariably exceeds total receipts levels. The chart also shows pretty dramatic changes that took place since 2007.

As the economy in Ireland grew, so did size and expenditures of their government. Even after the economy went into a ‘recession’ in 2007, the government didn’t stop spending for three years.

Now Ireland’s government is broke and is looking for a bail out from the European Union. The price for the bailout? The other EU members demand Ireland raise their corporate tax rate.

But while Ireland’s woes are bad news for every eurozone nation, some officials and politicians on the Continent may be allowing themselves a moment of schadenfreude.

This is because a European bailout of Ireland would come at a price that could include a requirement that Ireland raises its corporation tax rate.

It is currently just 12.5% against 33% in France, 30% in Germany and Spain and 28% here – though Chancellor George Osborne has promised to trim Britain’s rate to 24% during this Parliament.

Big government European nations are going to effectively strangle Ireland’s economy with the demand for an increase of its corporate tax rate rather than spending cuts.

It is clear from the above chart that Ireland, like most governments, has a SPENDING problem, not a tax problem.

As a point of reference, the US corporate tax rate is one of the highest in the world:

OECD average. The U.S. rate is also higher than the average rate in the G-7 nations, and is much higher than the average rate in our full sample of 80 countries.

The high U.S. effective tax rate is the result of a high federal statutory rate of 35 percent plus state-level corporate income tax rates. In addition, state and local sales and asset-based taxes on capital add to the tax burden on new investment. The latter taxes add about 7 percentage points to the U.S. effective rate, but only about 2 percentage points to the effective rate in other countries.

When people in the United State complain that we outsource too much or that “we don’t make things here any more” consider that the United States has the highest effective tax rates in the G7. Plus any business in America has to overcome a phalanx of local, state and federal regulations just to operate.