Taxing times in the fight against inequality

IT is true that there are many sensible proposals in the Progressive Democrats document An End to Tax and Spend. It is true that there are inequities and irrationalities in the tax system. It is true that there is no sustainable argument against the privatisation of large areas of the public sector. It is true that the apparently in inexorable rise in the cost of public sector pay is iniquitous. And there is much else that is commendable, in the document.

But there is throughout the plan a deeply troubling undertone, which captures a growing trend of public opinion, which could lead to a society far more inequitable and cruel than now pertains.

That undertone is captured in a single word in Mary Harney's introduction to the plan "confiscates". It is used in the context of taxation and the implication is that the Progressive Democrats understand taxation as confiscation. This perception of taxation has not been expressed previously by Mary Harney, as far as I am aware, but has been used regularly by her finance spokesman, Michael McDowell. It is a perception shared by many even outside the Progressive Democrats and is often expressed otherwise by reference to the "tax man".

Albert Reynolds, while Taoiseach, spoke memorably about the tax man at the White House during a St Patrick's Day celebration in 1994, when telling stories about his former incarnation as a businessman. The remark was perhaps a little insensitive in that location just then as Bill and, Hillary Clinton were, and are, apparently having trouble with the US "tax man" in relation to Whitewater.

The idea is essentially that we own everything we "earn" and are obliged by the State to hand over a large chunk of what we own to the "tax man", often to fund a bloated public service but also for all kinds of welfare projects. There is an implication that if people want to be charitable by helping the poor then they should do so of their own accord but that the State should not oblige everyone to do that just as the State should not require everyone to adhere to a particular religious or ethical view. This is the thrust of the New Right, which regards taxation as theft.

BUT where does the idea come from that there is something akin to a moral entitlement to what we earn? What we earn is determined by a particular pattern of distribution that currently applies. This distribution system is an amalgam of factors inheritance, gender bias and, to some degree, the market system. None of these has any moral force.

To a large extent wealth is the product of inheritance, not of effort, or moral worth, or intelligence, or contribution to society, just the luck of the biological draw. Also, to a large extent, wealth and income are determined by gender another arbitrary factor. If one is a woman the chances of wealth and high income are far reduced. Again, nothing to do with effort, moral worth, intelligence or contribution to society.

As for the market system, the first observation to be made is that this applies only selectively. The market system has nothing to do with what workers in Asia earn because the rich countries rig the market system against them. But even where the market system applies, why should it be regarded as the determining factor in the distribution of resources?

Markets, if operating properly, should promote the efficient deployment of skills as well as of other commodities, but why should the demands of efficiency alone determine the prospects of so many people? There is no moral force to efficiency. So where does the moral entitlement come from to what one earns through the arbitrary methods of resource allocation we currently apply? Where does the entitlement of "captains of industry" to multi million salaries derive, at a time when hundreds of thousands of people live below acceptable levels of subsistence?

THE reality is that there is no entitlement to what we earn and thus no confiscation by the State in re distributive taxation policies. But our public culture is increasingly hostile to this idea. The notion of entitlement from this entirely arbitrary distribution system has caught hold and is driving politics in a direction against equality and fairness. And this is what is at the heart of the PD plan.

It is true that a strictly egalitarian distribution of wealth and income would probably have a depressing effect on wealth creation generally. Given human psychology, there probably has to be some reward for effort, although we know that non monetary rewards are at least as important in promoting effort. But why should there be reward for intelligence, for instance, or rather for what is currently regarded as intelligence, which is often arbitrarily measured?

Why should there be such spectacular rewards for education, especially when almost always education is publicly funded? Perhaps there should be some recognition of income foregone through participation in education but when such education is hugely costly to society (as in the case of medicine, for instance), why should those who so benefited use such publicly funded benefits to extract disproportionate incomes from society thereafter (as in the case of doctors)?

It is true that we cannot ignore market forces, if only because we operate in international markets which we cannot control, and thus some recognition has to be had for pay levels elsewhere. But how many people do we lose through relatively high tax levels and what loss are these anyway?

Nowhere in the PD document is there any reference to the deep inequality in Irish society and of a need to eradicate it. True, the document seeks to address the issue of job creation and unemployment is a major factor in deprivation. But surely now there should be some skepticism about the State's ability to create or assist in creating an adequate number of jobs to significantly reduce unemployment levels? More particularly, the strategy adopted by the Progressive Democrats aims to create jobs at pay levels which would do little to lessen inequality.

The sad reality is that most of the other political parties implicitly accept the PD analysis, if not the rhetoric. There is now no party here, including Democratic Left, which believes that the political issue is the eradication of inequality. Next week's Budget will be no different from the usual policy mish mash, which will do little or nothing to lessen inequality, however vigorously and embarrassingly Ruairi Quinn may punch the air on his way to make the Budget speech.