Taxes v services

Benjamin Franklin's observation - "in this world nothing can be said to be certain, except death and taxes" - still holds true…

Benjamin Franklin's observation - "in this world nothing can be said to be certain, except death and taxes" - still holds true. But during this election campaign the great majority of voters believe the Government has enough money to fund desirable public services from existing taxes if they are spent effectively, not that they should be increased. Most people are not prepared to pay more taxes.

This view is probably conditoned by Charlie McCreevy's experience where health spending was increased by 50 per cent only to find that services deteriorated drastically as a result.

The findings of the latest Irish Times/TNS mrbi opinion poll bear out a consensus across the political parties that the election should not be fought on the overall level of taxation, but on where specific taxes should be levied and which potential coalition would spend them most efficiently.

Compared to previous elections over the last 25 years these attitudes reflect a major shift of emphasis. The Government's tax take since the last election in 2002 has in fact increased from 34.2 to 37.4 per cent of gross national product because of economic buoyancy (especially in the construction sector), increased household income and fiscal drag. Voters are convinced there is real scope for increased efficiency, having witnessed wasteful expenditure in the health services and roads programme, for example. It can come through better administration, eliminating duplication and increasing productivity, all of which require more competent political management.

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Thus the focus of attention during the campaign has been on which combination of parties can best provide it. The various party programmes have focused on where taxes should be imposed rather than on increasing the overall burden: whether and how to cut stamp duty and income tax; whether to shift taxation from services to incomes or from higher to lower incomes; to adjust tax bands to inflation; or to levy a carbon tax.

These are all real issues. There is genuine disagreement about priorities. Economists point out that existing circumstances will change. If the construction industry loses buoyancy and stamp duty rates are cut, there will be fewer resources to fund political promises for better services. Ireland, in fact, has a lower tax burden than most other developed EU member states, and spends substantially less than most of them on education and health services. Demand for improvements in these services may require a higher tax burden but overall majorities in all parties are not required to pay that price.