SIPTU NEC calls for suspension of proposed Household Charge February 17, 2012
Posted by irishelectionliterature in Uncategorized.trackback
This is also being discussed in the What you Want To Say Open Thread, but I think its worthwhile having a separate thread for it.
SIPTU NEC calls for suspension of proposed Household Charge
Date Released: 17 February 2012
The National Executive Council (NEC) of SIPTU has called on the Government to suspend the proposed Household Charge on the basis that it is unfair and regressive.At its monthly meeting today (Friday, 17th February) the NEC unanimously supported a motion stating that; “The Household Charge as currently proposed by the Government is a flat tax which is unfair and regressive in that it subsidises wealthy people at the expense of middle and low income families. The NEC supports the principle of a fair and progressive property tax which is proportionate and which recognises that wealthy households can afford to pay more than those with modest earnings while those on lower incomes should be exempt.
We call on the Government to suspend the introduction of the Household Charge until it is replaced by a fair and progressive property tax. The way the tax is currently being implemented is playing into the hands of those wealthy and vested interests who oppose the very principle of a fair and progressive property tax system.
The Government estimates that payment of the charge by the 1.6m eligible households will yield €160m in 2012. By way of an interim alternative source of revenue until a progressive property tax regime can be put in place we are calling for a suspension of the legacy property tax reliefs.
We have previously called on the Government to introduce a solidarity levy on those earning over €100,000 which would also make up for lost revenues from the proposed Household Charge.
The immediate suspension of all unused section 23 tax reliefs and accelerated capital allowances has the potential to save the Exchequer close to €100m in tax foregone this year.
Restricting landlord mortgage interest relief for both residential and non-residential properties by 10% would bring in an estimated €75m, which together with the suspension of the unused tax reliefs would more than offset the loss of €160m in additional tax revenues from the Household Charge, saving the Exchequer up to €175m.”
This move must surely put some pressure on Labour to roll back on the issue. I may be wrong but does the SIPTU wish for “a progressive property tax regime can be put in place” differ from CAHWTs aims. CAHWT wanting a progressive tax on all property (as in things owned) as opposed to a household tax.
Either way the SIPTU statement is a welcome development.
Some numbers to bring a modicum of reason to this bizareness from SIPTU.
If the household charge was levied in the same proportion as income tax is currently paid by the different income cohorts, the resulting liability would be (to a first approximation):
minimum wage earner: €4 per annum
average private sector worker (~2x min wage): €40 p.a.
average public sector worker (~3x min wage): €106 p.a
higher professional (~6x min wage): €336 p.a.
union leader (~10x min wage): €657 p.a.
By European standards, that would represent an extraordinarily steep tax gradient in the sub-100k range (i.e. a 6x wage multiplier attracts an 84x hike in tax liability).
Also noticeable is an abrupt levelling off over 100k – the union leader pays approximately the same proportionally as the principal officer or lawyer on just over half their package.
Two things need to be fixed in order to bring any sort of stability and sustainability to the tax yield:
1. The progressivity needs to be maintained into the higher reaches (as opposed to plateauing effective tax rates)
2. The drop-off in tax liability from 3-4 times minimum wage down needs to be less precipitous.
Point #1 maintains the sense of fairness, but will do little for overall yield as the numbers earning that sort of money are so small (only 1% of the workforce earns more than a typical union leader).
But point #2 is where the real action will be at in terms of increasing yields to the level they need to be at (and should have never been allowed to drop away from during the boom).
Of course, the leadership in SIPTU knows this, and also know they were among the prime architects of the hollowing-out of our income tax base during the boom years, where one of the partnership mantras was to absolve ever-increasing numbers of workers of anything beyond a token income tax liability.
The essential point of the non-progressive levies and charges being introduced (USC, household charge etc.) is just a round-about way of making that tax gradient a little less steep. The same could be acheived by reducing tax credits, rolling back the PAYE bands and/or introducing new 10% and 32% rates. And that would probably be a more honest way of doing it, but would generate a fire-storm of righteous indignation. The anger of the pensioners who were asked nicely to stop evading tax at the start of the year, would be a mere storm-in-a-teacup in comparison.
I’m not sure I entirely accept the analysis you present there.
Firstly, you’re effectively attempting to hypothecate the household charge in an entirely artificial fashion. If the charge were assimilated into general taxation then it would function in precisely the same way as other services provided through the state from education, health etc.
Secondly, I’m very very dubious about your supposed private/public sector averages, and indeed your use of same. Median incomes would be more revealing, at the least.
Thirdly your stats on union leaders seem to be outright wrong, and only put in for effect. The variation in wages for union leaders is broad, €45k for OPATSI, €60k for UNITE, Jack O’Connor is on €112k. Depressingly TUI and INTO leaders wages are about €153-8k. Which are you pegging it against, or have you found some notional average, or median?
I notice you don’t mention company directors etc who would in the main be on significantly higher wages than those of union leaders [who by the way have the bonus of being directly elected by their memberships - even if I think the average wages to them are too high]. And by the by IBEC’s Danny McCoy refuses to give out information on his wage.
Fourthly, you’ll go some way with the argument that the unions were supine in the face of changes in taxation, but you’re as well aware as me that the push for that came from the economically liberal and right of centre, most obviously in the shape of the Progressive Democrats working in tandem with Fianna Fáil.
I’ve many many problems with the unions as currently structured, but it’s a bit much to place the blame for what was a push from the right in terms of taxation etc entirely on their shoulders. They have to take blame for being complicit in this, but that they sought it? That’s an untenable argument.
Finally, the point is that as a flat tax, putting all else aside, this and other charges are intrinsically regressive.
“…one of the partnership mantras was to absolve ever-increasing numbers of workers of anything beyond a token income tax liability”.
This is true but the motivation and effect was not quite the ‘gift to the workers’ that is often claimed. It is also an aspect of the minor, but only subordinate, responsibility which the trade union leadership and social partnership actually does have for the current crisis.
Social partnership developed along the line into a conscious process of reducing taxes on wages in exchange for moderation of wage rises. Higher rises could have been secured from employers in the conditions of boom but take home pay increases were delivered through tax reductions and the partnership deals sold to the rank and file accordingly.
Opponents of social partnership on the left pointed out at the time that this erosion of even a normal tax base was not sustainable, but the trade union bureaucracy was at least as overcome by the hubris of the boom as the bosses were.
When stamp duty vanished abruptly income tax had been eroded but also higher basic wage rates had been forgone in the boom. Now the hole in the tax base, a hole not only in workers’ taxation (and despite the public deficit – as distinct from the bank debts – being a matter of too little tax not too much spending) is made up through cuts in public spending and indirect taxation.