Budget Day! October 11, 2016Posted by WorldbyStorm in Uncategorized.
It is budget day. And what better way to mark it than a cry from the heart about our situation. But what sort of cry? As we know the ‘new’ politics is pretty rubbish. But Christ, is it any worse than the old politics? Example A. What commentator writes that ‘the political envy-mongers are ensuring that we punish success and crucify those who work?’.
Why it’s Eamon Delaney. I don’t know. I sometimes feel genuinely sympathy for him that he feels the need to trot out this sort of stuff on an irregular basis. It’s the language, the sense of a barely repressed tabloidese. At one point, for example he says…
The State is just taking and taking!
But his angst goes further, deeper. It is – in a way – an echo of the stuff Michael O’Leary, that sage of the age, treated the FG Ard Fheis to this weekend.
Facing into the 2017 budget, a crushing sense of disappointment grows that nothing substantial will be done by the Government for working families, the ‘squeezed middle’ and the middle income tax payer.
This is despite the fact that such people represent the bulk of support for the two main parties, Fine Gael and Fianna Fail. But it seems as if assorted quangos, conventional wisdoms and the pressure of Sinn Fein and the far left, has caused the two main traditional parties to desert those often silent supporters and desert the very people who are working hard to keep the country going.
If this seems a bit awry in terms of definitions of those ‘working hard’ one will note a similar sleight of hand further on.
The reality is that the austerity years have seen the growth of a growing tax burden on almost all workers but especially middle income earners and the so-called coping classes. Instead of actual reforming the overall income tax system afters its dangerous contraction during the Celtic Tiger years, the Government has ramped up their take through grossly unfair marginal levels, as well as lots of new charges and hikes such as the USC, and rises in Inheritance tax, VAT, CAT, CGT, and motor tax. They all add up.
I’ve got to wonder about the line about ‘grossly unfair marginal levels’ – progressive tax (in the technical sense of the term progressive) is progressive tax. And what of the particular emphasis – the ‘especially’ on middle income earners? For Delaney there can never be too much sympathy lavished upon that group.
Let us be clear : the bulk of austerity measures in Ireland since 2011 has actually fallen on tax payers and not come in the shape of cuts, as is usually stated. This great injustice should be addressed immediately and urgent respite given to our struggling families and middle income earners instead of the risky, populist increases in yet more spending by political parties in order to garner further votes.
Is that correct – is it even meaningful, that line about the ‘bulk of austerity measures…’ (though note tax giveaways aren’t populist, or risky, or… anything, they’re just the reward for the ‘hard working’). This from the Nevin Institute suggests that taking in the entirety of the crisis, from 2008 to 2014 – the period of fiscal adjustments directly on foot of the crisis, paints a different picture.
In total discretionary fiscal changes of around €29.8 billion were announced in various budgets between 2008 and 2014 (that is, from the budgetary measures announced in July 2008 to the budget of December 2013 in respect of the fiscal year 2014). Not all of these announcements were implemented subsequently. Caution is also noted in regards to announced revenue increases (as distinct from expenditure cuts) as some changes were reported twice (or double-counted) in some budgets and it is difficult to unpick these changes. The overall picture that emerges is that a total ‘effort’ of around 20% of GDP (or €30 billion) was signalled over the 7 year period with a spill-over of measures already announced but not implemented until 2015 or later years (e.g. changes to student charges in higher education announced in 2012 but implemented on a phased basis up to and including 2015). About two thirds of the fiscal lifting was done in the four budgets between October 2008 and December 2010 (there were two budgets in 2009) including the ‘efficiency measures’ announced in July 2008. The remaining €9.5 billion of adjustments were announced over three budgets in 2011, 2012 and 2013. The size of the Budget 2013 adjustment is disputed with a higher figure of €3.1 billion used in some communications and €2.5 in other communications. Table 1 shows a breakdown of the adjustments using the €2.5 billion estimate.
The total fiscal effort divides into a ratio of approximately 63:37 as between expenditure cuts and revenue increases. This ratio was broadly similar over the period as a whole with a slightly lower proportion for expenditure cuts (at 62%) during the period 2008-2010. The composition of adjustments was different as between 2008-2010, on the one hand, and 2011-2014 on the other. Over the latter period relatively greater reliance was placed on indirect taxes within the revenue adjustments. It should be noted that some of the fiscal measures have been reversed in Budget 2015 (announced in October 2014). Moreover, no new or additional fiscal consolidation is envisaged for 2015 at this point. Future growth trends and outcomes in regards to government deficits flows and debt levels may trigger additional fiscal adjustments under EU fiscal rules.
Note that in relation to taxation even if he were correct that the burden had fallen on taxpayers to a greater extent post 2011 – a very big if indeed – that would comprise mainly indirect taxes – the very ones that impact most on those on lowest incomes.
Yes, we need spending increases, on infrastructure and basic services. But our health system, for example, is already one of the best funded in the OECD, for example (as Susan Mitchell has well documented in this newspaper) but without an efficient outcome. So do we really need more money thrown at it?.
It is the same with education and social protection. The cry of ‘more resources’ unfortunately usually means ‘more pay and conditions’ in the public sector, and the featherbedding of existing work practises. It is efficiencies we need, not wastage – as well as fair taxation.
Note too that he elides supposed over-expenditure in health (a very very questionable proposition given that we do not have an NHS style system – but instead a partial patchwork system composed of public and private features, something he does not address at all) with education and social protection. Is he seriously suggesting that Ireland spends too much on education, or social welfare? Apparently he is.
On he goes repeating the line about tax increases and spending cuts:
The simple truth is that that the relative burden borne by tax increases and spending cuts is almost the exact inverse of the undertakings given to voters in 2011. Instead of these increases bearing about one third of the burden, they bore around two thirds of it.
And yet the first speculation on this budget was that pensioners would get an extra 5 euros, an increase not demanded and surely unwarranted. It was a Bertie-style giveaway and, indeed, it was Bertie-era TD Willie O’Dea who first flagged it!
Again, this is not means-tested and so it goes to pensioners in Killiney and Monkstown, many of whom would be happier to see the money go to help hard-pressed families.
Not demanded and surely unwarranted. Wow. As to means testing, surely he knows that pension are taxable? Is he unwilling to tax those who are benefitting, as he sees it, from such unnecessary largesse? He could. Revenue is the best most comprehensive mechanism for smoothing down these inequities. But who might balk at that particular approach – or rather a more rigorous version of that particular approach. Well it surely won’t be those on the lower incomes.
Then we’re into an outline of just how unfair the tax system is:
So the ‘new politics’ is essentially old politics where those that pay are stiffed, while those that receive are rewarded. And an equally populist FG is happy to go along with it.
After all, this is the party which proposed outright abolition of the USC, which was the only tax on many of the lower paid. Even with the reduction now being mooted, it shifts a further burden on to middle income workers. When this was put to Minister Leo Varadkar, he merely shrugged and said that his priority was the lower paid. Perhaps this is where the ever-populist Leo thinks the votes lie. It makes no sense – and is plainly unfair.
Is it unfair to have a priority on the lower paid? Elsewhere in the SBP there’s a series of articles on pensions. In them private pension providers suggest that to know how much you need to put into just such a pension you should divide your age in half. For me that would be 25 per cent of my income. That’s impossible. I’m not paid nearly well enough. There are other demands. And so on. And I don’t consider myself badly paid. Nothing stellar but I get by. For anyone on even slightly lower incomes I don’t see how this ‘advice’ is anything other than moonshine. And that’s a function of pay levels. But for those doing work on those levels – usually demanding, often unpleasant or difficult reading Delaney’s proscriptions must be a slap in the face. And there are further oddities:
A recent report from the Irish Tax Institute laid it all out clearly. Austerity budgets passed between 2009 and 2011 were primarily aimed at raising the exchequer’s take from personal tax and broadening the tax base.
Today, everything you earn after €33,800 is taxed at 40%. Imagine the impact this has on an individual’s impulse to grow and develop. A worker on €25,000 earns almost 1.4 times the salary of a person on €18,000 but pays 5.6 times the tax. The gaps get bigger as you go up the scale, with workers on €35,000 earning 1.9 times the salary of a person on €18,000 but paying 10.9 times the tax.
The findings are startling. Somebody on €25,000 pays 5.6 times the amount of tax as a worker on €18,000. A worker on €35,000 pays 11 times the tax of someone on half that salary. And the multiple is 44 if you’re earning €75,000, rather than €18,000. This is nothing short of punishing success.
The ‘impact on the individuals’s impulse to grow and develop’? I’m at a loss to understand what that even means – he clearly believes that it stifles…growth and development. More so than low wages? Perhaps if those wage levels were higher, perhaps if there was a broad societal provision of health, education and welfare by the state and state subsidiaries, perhaps that too might assist in the individual’s impulse to grow, to develop’. No?
He also appears to believe that higher income level = success. Nice. The corollary being that lower income level = … I need hardly go on.
He concludes with a frankly risible comparison:
And yet in the US, when tax rates were lowered, wealth-creators ended up creating more wealth, and giving a higher proportion to the taxman. But in Ireland, we crucify the wealthy and the hardest working.
In 2015, in Ireland, the top 1% of income earners paid 19% of all personal taxes while barely a year later this was 22%. At what level of contribution will our political envy-mongers finally concede that ‘the rich now pay their fair share of taxes’
Fine Gael once said you couldn’t tax your way out of recession. But this is exactly what they, and their FF partners, are doing. And it is on the back of job creators and workers that they are doing it. So please- let’s have some change.
Where to begin with the US? A completely different system, one with massive issues of dysfunction in terms of public provision – healthcare anyone? And yet here’s a simplistic, almost naive proscription. Cut taxes and we’ll ‘reward the wealthy and the hard working’. Again as if those on lower incomes aren’t hard working. If it wasn’t so thin it would actually be offensive.