Irish left’s opposition to property tax unusual in EU

Even out-and-out socialist parties in Europe are in favour of property tax, says economist

Ireland’s property tax is ‘well designed’, says Dr Tom McDonnell of the Nevin Economic Research Institute. Photograph: Alan Betson/The Irish Times

Ireland’s property tax is ‘well designed’, says Dr Tom McDonnell of the Nevin Economic Research Institute. Photograph: Alan Betson/The Irish Times

 

The opposition to Minister for Finance Paschal Donohoe’s rebooting of the Local Property Tax, one that brought 100,000 extra homes into its net and increased bills for most wealthy homeowners, came within minutes.

Immediately, Sinn Féin repeated its opposition to the tax, as did People Before Profit. Both want the tax scrapped and replaced by a wealth tax targeting those with net assets of over €1 million.

There are grades of opposition to property taxes amongst those on the political left in the State. The Social Democrats are also not fans of its design, but do not oppose the principle.

However, the general opposition amongst them to taxation on homes is unusual in the European Union, where property taxes in some states, though not all, are a significant bill for homeowners.

“Most of the social democratic left parties would generally be in favour of property tax because it is a tax on wealth even though it is only a part of wealth,” says Dr Tom McDonnell of the Nevin Economic Research Institute.

“That would be pretty consistent across Europe. Most out-and-out socialist parties would tend to be in favour of property taxes as well. Ireland would be unusual in that regard,” says McDonnell, the institute’s co-director.

Alternative

The alternative to the Local Property Tax that has been proposed by Sinn Féin and by People Before Profit is a wealth tax, along with other types of taxes on the very wealthy.

In its October 2019 pre-budget submission, Sinn Féin said it would phase out the LPT and replace it with a wealth tax that would levy a 1 per cent tax on taxpayers’ net assets above a €1 million threshold.

However, Sinn Féin was careful to exclude working farms and job-generating assets. In an earlier (2012) document it proposed a 20 per cent exemption of the value of the family home.

By contrast, People Before Profit would go further in its actions against the State’s richest, since it proposes a 1.5 per cent wealth tax on those with net assets over the €1 million mark.

Says Dr McDonnell: “Now it is true that some parties [in Europe] call for a wealth tax rather than a property tax, but one that excludes the principal private residence.

“The problem with that is the residence is most of the wealth. You would actually end up generating very little money if you exempted that residence,” he told The Irish Times.

Saying he “100 per cent” favoured a property tax, he said: “It should be double what it is at the moment. It is less damaging for the economy broadly. You can use tools to ensure no hardship. It is a great way of funding local government.”

‘Progressive’

That view is strongly supported by a colleague, economist Dr Robert Sweeney of the left-leaning TASC think tank, who says this week’s changes will make it “more progressive” and broaden the tax base.

Criticising the highly centralised nature of government in Ireland, both Sweeney and McDonnell say that any moves to offer local government more control are to be welcomed.

Paul Murphy of People Before Profit dismisses the argument that the Irish left is out of kilter with other socialist parties in Europe. “[Commentators] are comparing us to parties that call themselves socialist in Europe but are in reality more like the Labour party in this country. They were traditionally social democratic but are now indistinguishable from other parties.

“We are for a property tax, but a property tax that does not hit people with mortgages, or who have very little income. We are for property taxes for the wealthy which would include people’s property but also other financial assets that they have,” he says.

Saying she is not opposed to property taxes, Catherine Murphy of the Social Democrats believes the LPT is a “three-card trick”, especially given the curbs it places on how councils can spend the money.

Elsewhere, local authorities have money for essential local services beyond roads and social housing, but in Ireland the bulk of their budget must go on the latter. For her, the problem is not the tax, but its design.

Again there are different opinions. “There are bad ways to design any tax and good ways to design any tax. The property tax we have in Ireland is a well-designed tax,” says McDonnell.

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