Making work pay – all stick and no carrot

Sir, – If we ever needed proof that collecting taxes does not equate to providing efficient services, then the last two years of budgetary surpluses are the exemplars. So while it is possible to ask in an opinion poll whether taxpayers would prefer “a reduction in income tax or improved public services”, the flaw in such a binary question is that this is not a simple choice at all (News, June 17th). First, and foremost, services require workers. Currently, we cannot replace gardaí at a rate that exceeds resignations and retirements. We have a dire shortage of teachers in key subjects at second level and our student-staff ratio at third level is abysmal versus European comparisons. We have over 900 vacancies for consultants in our public hospitals, plus thousands of other healthcare worker vacancies. Our buses, instead of naming their destination, advertise jobs, and it is impossible to book a timely NCT. It took six months to publish Junior Certificate results last year because teachers were unwilling to mark the papers. Our childcare and social care sectors are in the midst of a serious recruitment and retention crisis.

I could go on, but the point is that if the Government needs to do one thing in the forthcoming budget it is to make work pay, so that those citizens who are underemployed will be incentivised to be more productive. This is, after all, the crux of centre-right politics. Stemming the current brain drain would be welcome, but we cannot accommodate mass immigration due to lack of housing. If our Ministers honestly think that, in the medium term, averting every bank holiday weekend healthcare crisis, or policing our dangerous streets, can be achieved by asking public servants to work overtime, then they are seriously deluded. Due to our so-called “highly progressive” tax system, many of these middle-income workers face a marginal tax rate of 62 per cent when PAYE, PRSI, USC and the additional superannuation contribution are combined. From their measly net income they then have to fund the costs of work –– be they transport costs, childcare, meals, etc. Is this really progressive?

In 2015, as an election promise, Fine Gael undertook to abolish USC by 2020. Several eminent economists at the time predicted that this could be achieved via economic growth. As taxpayers we met our end of the growth bargain, yet the “emergency” USC remains, presumably because the EU asked us to keep it, so as to broaden our tax base. Changes in the interim have mainly taken low-income workers out of the USC net, thereby defeating its tax broadening purpose.

Instead of mislabelling a modest €1 billion income tax package as a “giveaway’”, how about making some radical changes in Budget 2024 that truly incentivise work, so we can actually improve services? Raise the threshold for the higher rate of tax by €20,000, abolish the USC and make childcare costs fully tax deductible. If we cannot make such radical changes when we are €10 billion in surplus then when can we ever do it?