Fintan O’Toole: A huge tax break for comfortable people

The Government has shown its true colours with its cynical inheritance tax stunt

 

Well, that didn’t take long, did it? The shiny new Government, fully committed to new politics and social justice, has highlighted its first big initiative: a huge tax break for comfortable people. It is a cynical giveaway that has not been subjected to any scrutiny as to whether it is a good or bad use of scarce resources.

The big initiative is the virtual abolition of inheritance tax on most houses. Children inheriting from their parents will now pay no tax at all on the first €500,000 of the value of an estate. In other words, a single adult child will be able to receive half a million euro tax-free.

There is only one purpose of this measure: to copperfasten the transfer of privilege from one generation to the next. It does not address any injustice or further any social or economic objective. It does not improve the “incentive to work” of which Fine Gael purports to be so fond, but it does improve the incentive to be born of parents who can leave you a nice inheritance. But it pleases middle-class swing voters, especially in Dublin, where property prices are high.

Sob stories

If you mention inheritance tax in print, as I have done in the past, you will be bombarded with sob stories about the current oppressive regime and about adult children being thrown out of the family home because they have to sell the house to pay the tax when their parent dies. Some of these stories are complete nonsense. If you’ve been living in your parents’ house for three years and you inherit that house, you pay zero tax on the inheritance anyway. Raising the threshold for the tax, as the Government is now doing, does nothing for you.

And if you are not living in your deceased parents’ house? At the moment, you can inherit €280,000 without paying a cent in tax. So let’s say the house is worth the new limit of €500,000. This leaves a taxable inheritance of €220,000. You pay 33 per cent inheritance tax on this, so your actual tax bill is €72,600.

Under the existing regime you’re still getting €427,400 tax-free. That is well over ten times the average annual salary of an Irish worker.

Is this really an injustice that cries out for immediate remedy? No, it’s a windfall that is, by definition, available only to those in society who are lucky enough to be able to inherit valuable property. If you think getting €427,400 tax-free is hardship, you should emigrate to Nashville as you have enough self-pity to power the whole country music industry.

But even if you think the removal of a very modest tax on unearned income is a good idea, why should it take priority over other ways of spending scarce public money? The Government’s plan will cost, according to the Fine Gael manifesto, €75 million a year. This is almost certainly an underestimate, especially as property prices rise. But let’s go with it and think of some things this money could have been spent on.

For €75 million a year, the Government could have quadrupled the number of free school meals, eliminating food poverty among children. It could have increased the respite care grant for carers by about €700, giving some comfort and support to 86,000 of the bravest and best people in Ireland. Or it could have employed 1,600 new teachers. Or it could have gone almost all of the way to making primary school genuinely free (including transport, books, uniforms and abolition of “voluntary contributions”). Or it could have employed 1,500 extra speech and language therapists to end the scandal of children having their education and development held back because they can’t access these services.

For €75 million the Government could have increased child benefit by another €5 a month, helping 1.2 million children. Or it could have increased the fuel allowance for 381,000 needy people by €7.50 a week. Or it could have employed 1,200 more nurses. Or 1,000 educational psychologists. Or it could have added €2 a week to the old age pension.

But instead of doing any of these things, it is going for a lazy, cynical, crowd-pleasing ploy. Why? Well, if you were lucky enough to be in Croke Park for the Dublin-Mayo semi-final last September, you know why. You will have seen a low-flying plane tailing a giant banner that read: “Cut the Inheritance Tax – Mary White. ”

Pork-barrel politics

White was the Fianna Fáil candidate in Dublin Rathdown. She organised a big meeting of the oppressed peasants and workers of south Dublin at the Mount Merrion community centre and collected signatures for a petition demanding that the threshold for inheritance tax be raised to €500,000. And Fine Gael, fearing a middle-class revolt, panicked and adopted the policy as its own.

Thus White, her clothes stolen, didn’t get elected in Dublin Rathdown. But Shane Ross did. He’s railed all his public life against pork-barrel politics and the parish pump. Here’s his chance to step up and show that he despises the pork barrel when it’s in Mount Merrion as much as when it’s in Mountmellick.

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