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Medical Cards…Progressive Taxation…and talking about a rebooted Technical Group… October 22, 2008

Posted by WorldbyStorm in Irish Politics.
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Okay, so the Medical Cards issue has been ‘parked’ as it were for a while. The anger at the Pro-Cathedral was something to behold, I’m more convinced than ever that we’ve just seen the fourth rail in Irish politics come into operation. Mess with it at your peril future governments. Of course if they’re sugaring stuff there has to be a pill and who knows what shape future incarnations will take, and still… still… there is this inability to understand that taxation is an answer.

And here’s a fascinating snippet. In the Sunday Business Post Finola Kennedy, economist and former Board member of ACC said it like it is.

The scenario that faced Brian Lenihan when he set about preparing his budget was – to borrow a phrase which he himself employed in a different context – ‘‘not a pretty picture’’.

So she suggested that:

What could the minister have done? My formula would have combined a progressive income tax with targeted expenditure.

A progressive income tax which increases with the size of income and takes account of the numbers who depend on that income is accepted as a fair tax. It meets the requirements both of vertical equity (that is, equity between rich and poor),and horizontal equity (that is, equity between those on the same income, but with a different number of mouths to feed).

And further that:

A levy on gross income which disregards both the absolute size of income and the number depending on that income offends against both vertical and horizontal equity. As a result, it could become a trigger for social unrest.

So the benefits of a progressive tax rate are as follows:

If the door had been bolted on public sector pay and related pensions, then the way to proceed was via the reintroduction of a more progressive income tax. For example, a 50 per cent rate could be levied on those with income over €100,000, while allowing for the number of dependants. Furthermore, the ceiling on PRSI contributions could have been abolished.

Now for some of us this may seem blindingly obvious because we’re … well, leftist. But let’s remember that it’s not that long ago that truly progressive tax rates, albeit at punitive levels for ordinary workers, were the order of the day. Or as she notes:

Until 20 years ago, we had a progressive income tax system, combined with child tax allowances.

But one of the great successes of the political and economic consensus in recent decades has been to suggest that this was in principle somehow wrong. And so we have two tax rates as it were with no gradations. Which is curious, not least because it obviously benefits those on much higher incomes.

Wouldn’t it be great to have left parties that said it like it as, that in order to fund Medical Cards, or equivalent, and public schooling, and significant investment in enterprise, we require progressive equitable taxation?

But then this is the SBP which in its editorial said the following:

The mess over the medical cards aside, the budget showed some willingness to take the steps necessary to fix the public finances. But that can’t happen unless the public sector shares the pain being experienced by everyone else.

Making business and the private sector bear all the costs of the economic slowdown isn’t just unfair – it will slow any future recovery, which will be generated, after all, by the productive, wealth-creating sectors of the economy.

After ten years in which the public sector pay rises and pension benefits have outpaced those of their private sector colleagues, surely a little equality is not too much to ask for

Again, the old canard that the public sector is essentially parasitical is trotted out. I like the SBP, not least because it’s a serious paper, but in this instance it is seriously wrong. In a month where regulation and state oversight is demonstrated as absolutely necessary for financial markets it seems counterintuitive to hear once more that the public sector is not ‘wealth-creating’. Well, here, how about ‘wealth-enabling’ as a replacement term.

And in the meantime… what was I thinking of? Given the chance of new Technical Group everyone who might be involved would jump at the opportunity. After all think of all those lovely perks that flow from it from speaking rights to some extra financial provisions… and also, a Chief Whip! Not that looking after four SF TDs, Tony Gregory, Finian McGrath and A.N. Other would be that difficult a job. Not quite identikit, but enough to generate a genuine awkward squad in the Dáil. Even if one or two of the constituent elements might remain open to the blandishments of our ever generous government.

Should Joe Behan still not be convinced of this let’s see how he likes life as an Independent TD with close to zero access to a public profile in the Dáil chamber… perhaps we could start a clock on it.

Comments»

1. Crocodile - October 22, 2008

The anger at Westland Row may have immediately preceded the climbdown ( the St. Andrew’s Agreement?) but the real reason was the pressure exerted in constituency clinics.
One of the interesting spectacles in the wake of the budget is the testing of the strength of traditional lobby groups and power blocs. The bankers and builders seem to have got what they asked for but, after the reaction, surely not next time round. The pensioners have hit hard and proved they are not to be messed with.
Next up are the parents of schoolkids, who (the parents) have been calling the shots in education policy over the last few years. When their children start getting sent home in January because of the lack of cover in schools, they’ll besiege the TD clinics. A side issue is that of the Protestant secondary schools. When O’Malley introduced free secondary education in the sixties he accepted that the minority religions would need financial help to provide secondary education according to their own ethos. Their schools would be regarded as non fee-paying for purposes of grant-aid. This has been unilaterally changed in the budget, and I see Archbishop Neill, among others, is willing to play the Protestant card.
In the politics of who-shouts-loudest, it’s first blood to the old. There’ll be a queue to follow them.

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2. Seamus Breathnach - October 22, 2008

To have read Finola once is quite enough, thank you. It would be nice if either she or Ken Livingstone had anything new to say apart from the old biblical cliches…

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3. Seamus Breathnach - October 22, 2008

Correction:

To have read Finola once is quite enough, thank you. It would be nice if either she or Ken Whitaker (not Livingstone) had anything new to say apart from the old biblical cliches…

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4. CL - October 22, 2008

Contrary to the SBP many economists believe that recovery can only be generated by massive government expenditure. Economic history is on their side: enormous government spending during WWII finally defeated the Great Depression.

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