When will Ireland be honest about how the state pays for itself? – The Irish Times

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When will Ireland be an adult? When can he be honest about how the state pays for itself? Are we already there? Not if former and future taoiseach Leo Varadkar’s disgraceful response to the government-appointed Tax and Welfare Commission’s report is anything to see.

The first thing to say about this report is that it is one of the finest official documents produced in Ireland in decades. It is an exemplary public service: well written, clear, thoughtful, honest. Every citizen should read it.

The second thing to say about this is that the current government asked for it. He did it because everyone knows there are huge problems with the sustainability of our tax system.

Yet Fine Gael, which is part of this government, seems determined to reject the report before the public has a chance to tackle it. He does so in the most irresponsible way, with attacks that border on political vilification.

The report has 547 pages. It took me a week to go through it. I highly doubt that many people, even those in professional politics, read it before Varadkar went on the attack.

The report was released on September 14. Varadkar pulled out the traps on the day of publication, saying a number of the commission’s recommendations came “straight out of the Sinn Féin manifesto”.

It was an open insult to the members of the commission, who were appointed, let us recall, by Varadkar’s party colleague, Paschal Donohoe.

As far as I know, none of the commissioners have any connection with Sinn Féin. The chair, Niamh Moloney, is a law professor at the London School of Economics. Marie Bradley is a tax advisor. Philip Brennan is the former Assistant Secretary to the Revenue Commissioners. Sandra Clarke is a former president of the Irish Tax Institute. Fergal O’Brien is Ibec’s main lobbyist. Anne Vaughan is the former Deputy Secretary of the Department of Social Protection. Etc.

This is a very traditional group, drawn from academia, public service and civil society.

It seemed possible Varadkar had just pulled his mouth off with the Sinn Féin insult. If that was the case, he could have apologized to the members of the commission. He did not do it.

And then, in a letter to the Irish Times, a Fine Gael adviser, John Kennedy, claimed that the commission’s report placed “strong emphasis on ‘redistribution’ and in the case of the tax recommendation on capital acquisitions, this sentiment borders on an example of genuine Marxism”.

bigger state

What did the commission do to become the target of such hysterical baiting? He tried to think honestly about how a mature democracy in Ireland’s circumstances can raise the funds it needs to support its society and economy.

His big sin was to face the fact that Ireland needs a bigger state with more revenue. She did it because no honest and objective analysis could do otherwise.

The three main reasons for this are all obvious. The state must solve a generational housing crisis. It must support an aging population with a much better health and social care system. And it must adapt to climate chaos and lead a very rapid transition to a zero-carbon economy.

Two other considerations weigh very heavily on fiscal policy. The first is that Ireland has the second most unequal distribution of market (“earned”) income in the developed world. This means that the state must simply engage in this vile Marxist practice of redistributing income through tax and welfare systems. Otherwise, levels of inequality would be so great that they would lead to social collapse.

The other is that almost all the relaxation of the current tax system is provided by a small number of American multinational corporations. Corporate tax has soared to 19% of total tax revenue, and more than half comes from just 10 taxpayers. This is a level of dependency that no democracy can feel comfortable with and no fiscally responsible government can take for granted.

Add to that the very high levels of public debt that we inherited from the great banking and real estate crash of 2008 and no adult can consider our current fiscal regime to be sustainable or adequate.

The “crime” of what one might jokingly call the Bolshevik Shinners of the Commission is not to content themselves with exposing this problem. They actually want to fix it.

Taxing Wealth

Fixing this means taxing wealth as well as income. But that’s not what some of Fine Gael’s core voters want to hear. For them, the equivalent of the Satanic Verses report is the heretical phrase: “The share of taxes on property and wealth is low and should increase.

Hence the fatwa. The commission needs to be politicized and denigrated because it presents far too powerful and logical an argument for reforms to capital acquisitions and capital gains taxes, and for a site value tax.

Since 1987, the share of total wealth held by the top 10% earners in Ireland has risen sharply. In 2020, the 10th richest Irish household had a net worth of at least €788,400, while the 10th poorest had a net worth of less than €600.

This wealth is also increasingly concentrated in older households. Generation Rent holds a measly 2.8% of Irish household wealth.

But wealth taxes represent only about 6% of government revenue. This means in practice that younger and less wealthy people have to pay a higher proportion of taxes than they otherwise would.

And it seems pretty clear that Fine Gael wants that to continue. There is a large and disproportionately powerful part of Irish society that increasingly benefits from the state’s reluctance to tax wealth and property.

Varadkar’s insults to the commission were intended to forestall public debate over his carefully reasoned proposals to shift more of the heavy burden to wealth and property taxes. It is a question of positioning one’s party as a defender of the class of possessors.

Fair enough – if he was honest about it. The most basic requirements of honesty are twofold. First, recognize that it is about taking sides against the young and the disadvantaged. And second, to say where the additional income will come from if not, as the commission proposes, from increased taxes on wealth, assets and inherited property.

The new taoiseach did neither of those two things.

This is not the policy of a mature democracy. It’s not even conservatism. It is populism for the comfortable classes.

Adult politics is about making choices. To choose to reject all wealth tax increases is to choose to raise income taxes and to cross our fingers that nothing bad happens to any of the 10 American corporations that lay egg gold.

When we have a taoiseach who chooses to acknowledge this reality rather than scare us away from a hugely important document, our politics may be approaching adolescence.

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