The Household Tax redux…

As we wait over the next 48 hours for the outcome of deadline for the Household Tax registration here’s a little something for those wavering in their intent not to pay, or for those who need more information. Check out the editorial in the Business Post this weekend on this issue. It argues that:

People should pay the household charge. The fundamental reason is that not doing so is breaking the law. Everyone has a right to protest against policies they do not like, but the way our society works is that we elect a government, one of whose fundamental roles is deciding how revenue should be raised. This government has ruled that there will be a €100 household charge.

That’s fine to a point, but there is the issue of a right to break laws (and indeed to face consequences if one does so). There’s also a more nebulous issue about the broad response to laws. If there isn’t a solid societal support, if a citizenry resile from them then it seems legitimate that a government should rethink them. The SBP is never shy itself to argue that one piece or another of legislation (see last week its thoughts on collective bargaining). Granted they don’t call for boycotts, but they do for lobbying and so on. There’s little question but that a section of the electorate is making its views known on the issue, and that it is passive not active, and that in the long term the government will claw back much of this is beside the point.

It continues:

To claim, as its opponents do, that the household charge represents a uniquely unjust and oppressive imposition on Irish citizens and taxpayers is preposterous, even by the standards of hyperbole that sometimes characterise our political debate.

I’m not sure if many people do argue that it’s uniquely oppressive, but it certainly is unjust. And the SBP admits as much:

It is not a perfect tax. However, we are in difficult times and the exchequer urgently needs extra revenue. Part of this inevitably involves higher taxes and, with income tax already pushed up sharply, this must involve a widening of the tax base, particularly to property.

And if that were the case, that we had a progressive property tax I wouldn’t have a poster in my front window for the campaign, nor have attended meetings etc, nor worked on various materials for the campaign. But this isn’t quite a property tax, it has no relationship to the nature of the property itself. And tellingly the forms distributed for it don’t seek to determine the value or nature of the properties either.

True, there is nothing in the household charge which obliges better-off people to pay more. Some will struggle to pay yet another bill. However, nobody could argue that the overall tax system here is not progressive, given the very sharp increases in income tax on middle and higher earners in recent years.

But that’s not the point. This is the tax we’re dealing with. It’s not progressive, yet it is imposed on assets (for some) that intrinsically contain significant values (and those who are least well able to afford it are the very ones who have seen wage freezes or cuts – approaches which impact upon them disproportionately worse as against those on medium to higher incomes – that’s the thing about regressive economic approaches). For a tranche €100 is literally next to nothing. Not even a blip on their finances. For others its an inconvenience of greater or lesser proportions. For others still its a significant sum that eats into already precarious finances.

The editorial then goes on an odd tangent.

This ensures that the better-off pay more while, in other areas of the tax system – notably indirect taxes – everyone pays the same. Motor tax, stamp duty and many other taxes and charges operate on this basis – none of these takes income into account.

There are strong arguments they should. Indirect taxes are notoriously unprogressive (in the technical and non technical senses). But that’s not the issue. Those are pre-existing and often long existing taxes (stamp duty by the by isn’t entirely flat being 1% up to €1m and 2% on the balance. One wonders if that’s the model for a future ‘progressive’ property tax).

But there’s a broader point. This government, which contains a self-avowedly social democratic element, has introduced a new tax on arguably the largest single expenditure for most people. It damned well should be progressive, otherwise it makes a mockery of any pretensions to progressiveness on the part of the government or any shift to progressive taxation in the economy. By starting in such an inept and unjust fashion it has called into question its bona fides in this area as a whole.

The government has made it clear that its intention is to introduce a full property tax to replace the household charge, which will involve a higher charge for more expensive homes. This will raise significant extra revenues over the next few years and is the most effective method of taxing wealth, ironically long a demand of many of those calling for a boycott.

But in the meantime people are left with a flat tax whose length of time being imposed is open to question (one year? Unlikely given that the working party on the property tax only came into being after Christmas and there’s no register to work from to impose a proper one next year. Two years? Three? Enda Kenny was particularly ambiguous on this issue in the last week or two). That’s abysmal. The SBP itself in the same issue notes how maladroit the Government has been in the introduction, and publicity and implementation of this tax. All those added to the basic inequity of it demonstrate a dismal attitude in relation to it.

Whatever the rights and wrongs of the charge, those calling for households not to pay are encouraging people to break the law. It is essential, therefore, in fairness to those who do pay, that those who do not are made to pay additional charges for late payment. If they continue to refuse, then further penalties must be applied.

This last argument is a strange one, the one about ‘fairness to those who do pay’. Even if this tax is turned over there are numerous mechanisms for those who have paid to be recompensed, perhaps as a discount for a future progressive property tax. One could as easily argue it is essential in fairness to those who have paid that this tax as currently constituted is stopped now in order that a proper, progressive property tax is introduced as soon as possible (I’m aware there’s dissent on this issue from some on the No side, but I find it difficult to believe there’s no means of crafting a genuinely progressive property tax as a part of taxation of all property and not just houses. Michael Taft has had some thoughts on this very matter).

As should always have been the intent.