Examining SF’s economic policies?

Entertaining spat between Pearse Doherty and Michael Murray in the Business Post this last two weeks. It started when Murray writing about the prospects of an SF government painted this alarming (for some) scenario:

It’s November 2015. You are reflecting on your 65th birthday just over a year ago. You were 65 years of age and about to retire with a four bedroomed home in a Dublin suburb worth €500,000. You had built up a business, educated your children, and paid your property tax. You had a pension pot of €500,000 which was going to deliver you a pension of €25,000 per annum. On top, you had enough PRSI contributions to receive a state pension of €7,800 per annum at 67. So €32,800 in all.

And such minor ambitions:

But after a lifetime’s hard work you aspired to a retirement where you could go on a few nice golfing holidays each year, visit a few capital cities, have lunch at the club a couple of times a week, and play bridge followed by dinner each Wednesday.

I could write a whole post about that, I really could, and the issue of expectation and so on… actually, it sort of harks back to ‘Middle Ireland’ dealt with earlier in the week.

But…

Looking back to the autumn of 2014 you recall the Fine Gael – Labour coalition breaking up in a row over the budget. A general election followed. A new Dáil convened with Sinn Fйin returned as the biggest party – 56 seats, People Before Profit won 9, a more left leaning Labour Party won 12, and the Greens had 4. Gerry Adams – with help from five independents – pulled together a rainbow. The bond markets were in turmoil.

Okay. Wait right there a moment. Sinn Féin and PBP, a PBP with nine seats? And did my eyes deceive me or did I see an SF with 56 seats?
Now, as with Tom McGurk’s piece a week or two back that had Ind/Others on 40%, when they were nowhere near that figure, one could stop right there because this isn’t political projection, it’s fantasy stuff. Simply put there is no prospect at all of an SF-led left coalition at the next election unless there is an absolute melt-down of the political system, and even were there same… well, chances are we’d see a national coalition of FF/FG and the rump LP.

I’m pretty sure Michael Murray, who is usually a sensible, if conservative, commentator knows this.

Still he plays through the scenario with gusto. Here’s Budget day:

Doherty began with a macroeconomic review that bored you, outlined a small number of spending proposals including elimination of state subventions for private schools and, as far as you were concerned, the meat:
“Capital gains tax on all asset disposals (excluding the family home) from midnight tonight will rise from 30 to 40 per cent. Investment income will be taxed at the increased marginal rate of 48 per cent plus, as now, USC of 7 per cent plus PRSI of 4 per cent. And finally for those owning gross assets in excess of €1,000,000, an annual wealth tax of 1 per cent will be levied.”
The blood drained from your face.

This would necessitate in Murray’s scenario, the sale of the business. But then you’re hit with CGT, and suddenly a ‘reduced sale price’. Down goes investment income, and in comes the wealth tax…

Re-running your sums, yes you would retain the €32,800 gross from your two pensions – state and private. But the expected top up of €24,000 from the business sale for the little luxuries in life was already down by 27.5 per cent gross to €17,400 arising from the reduced sale price on the business.

There’s USC! There’s PRSI! And you’re suddenly left with €7,134 net!
Concluding with:

Deduct that from the Ђ7,134 of investment income and you are left with €1,334 per annum. This is now your annual return on a €900,000 bounty from the sale of a business – after 15 years hard work.

Time to leave the country and turn out the lights.

Not unreasonably Pearse Doherty this last weekend responded by noting that:

Michael outlined a fictional scenario of an individual whom he claimed would have seen their annual pension significantly reduced if Sinn Féin’s wealth tax became law.
If Michael had taken the time to read our actual proposal, he would have realised that his fictional individual would not have had any additional tax liability arising from our wealth tax. The individual’s pension would have not been affected.
However, the paper headlined the article on its front page with the line “How Sinn Féin will destroy your pension”. That a paper which prides itself in serious reporting would make such a groundless claim was not only unfair: it was downright unprofessional.

He also notes that somehow those European economies that impose a wealth tax ‘re more competitive that ours,with higher levels of employment, better-quality public services and more equal societies’. And it’s hard to disagree with him that in some quarters there’s a rush to defend ‘the interests of the very wealthy’ by painting SF (and other) proposals in a very particular light.

Murray doesn’t really do himself any favours in his response:

My article specifically referred to a future government being a coalition of left-wing parties, of which Sinn Fйin could expect to be the strongest and most influential.
So I suggested that future budgets would be based on Sinn Fйin policies and “toughened up” by People Before Profit. Whatever the exact composition or thresholds for a wealth tax, the effect and intention would be to tax wealth and assets accumulated over years of hard work by ordinary businesspeople and citizens. Any fictionalised example, by its nature, could be made to reflect that. After all, there’s not much point in having a wealth tax if it doesn’t tax wealth.

The problem is all this is imaginary stuff. SF in his scenario is both the ‘strongest’ and ‘most influential’ party but simultaneously policies would be ‘toughened up’ by PBP! As well posit an SF led coalition with the participation of UKIP. Or go the other direction and ‘soften’ the SF proposals because the LP with note more TDs than PBP would have greater influence than the latter party. It means as much or as little.

Of course a wealth tax will tax wealth, but using scenarios that are politically near enough absurd doesn’t advance the situation on one centimetre. If this is the ‘forensic examination’ of SF policy that we’ve been promised by the orthodoxy then that orthodoxy may well be in serious trouble.