Madam, – I am a stay-at-home mother of six (children aged from two to 12 years). I was never very interested in politics as I was always too busy looking after the kids.
However, since the Government took €320 a month from our family budget six months ago I immediately had no choice but to start listening to the news and the radio to find out what was going on in our country. This is my first time to write a Letter to the Editor, but I feel the level of frustration is too great to sit back and say nothing.
My husband works in the public sector and prior to the introduction of the pension levy or “pay-cut” which cost us €320 a month and the other tax increases and levies that every working family was subjected to, we were already in receipt of the Family Income Supplement (FIS) and the medical card. So you can see we were not well-off at all! Now, of course, we are even worse off – and this is before the Government introduces predicted further pay-cuts of around 6 per cent, cuts in the children’s allowance of around 10 per cent and more taxes on fuel for cars and heating, in the budget.
Before people start saying “your husband is working and is lucky to have a job”, I know this is true. However, if you can’t meet your bills at the end of every month what is the point in working? There has been hugely negative publicity aimed toward the public service in recent months. But, instead of pitting the public sector against the private sector, why don’t we (as working families) start a campaign against the Government and their capitalist friends in the likes of Ibec? Fianna Fáil and the Greens have decided to continually target families on no-, low- and middle- incomes in this recession. It appears that in the budget, as well as cutting children’s allowance by as much as 10 per cent, they are taking 4 per cent from families on social welfare. That means hitting the kids. who are most vulnerable, by as much as 14 per cent.
The government is running our country like a business and not a republic. Families with no, low or middle incomes need to stand up for themselves. It’s time to try to work together against this Government and not fight the battle the Government want us to fight, ie, public versus private.
I suggest that anyone who feels the same should do one or all of the following: 1. Visit your local Fianna Fáil constituency office and tell them face-to-face how you feel. 2. Write to your local TDs, Senators and the Taoiseach’s office and let them know how you feel.
We do not have to let the Government tell us to pit public sector against private sector families. Let us be the ones who tell the Government that the real battle is between the families on no-, low- and middle-incomes and the Government.– Yours, etc,
Madam, – Pat McArdle (Opinion, December 4th) contends that income tax increases will cause more damage to the economy than cuts achieved by facing down unions or social welfare recipients. As he puts it “in economist speak, we are into negative Laffer curve territory”. He also cites the example of a PAYE earner on €40,000 who has “an astonishing” marginal tax rate of 51 per cent. These claims deserve closer scrutiny.
The 51 per cent marginal tax rate assumes 41 per cent income tax rate, 2 per cent income levy and 8 per cent PRSI (Class A) rate. This PRSI rate, which is not a tax, confers benefits that are not available to the majority of civil servants who are on Class B PRSI – 4 per cent. If one ignores the optical, dental and hearing aid and unemployment benefits, PRSI Class A workers pay 4 per cent more to secure a State pension of up to €22,703 a year.
For an annual occupational pension of €20,000 (and no State pension), a civil servant on an annual salary of €40,000 contributes the standard occupational pension rate of 6.5 per cent, and, since this year, the marginal rate of the pension levy is an additional 10 per cent. So, if you were to apply Mr McArdle’s own logic, the marginal tax rate for a PRSI Class B civil servant on €40,000 is 57 per cent (41 per cent income tax rate, 2 per cent income levy, 4 per cent PRSI and 10 per cent pension levy). Astonishing indeed.
Of course, talking of negative Laffer curves and high marginal tax rates in the same breadth is misleading. The effective income tax rate (tax as a percentage of earnings) is a better indicator. Economists appear to be in general agreement that the economic growth for years up to about 2002 was sustainable, so it follows that the effective income tax rates up until then were not damaging to the economy.
Without taking account of the recent income levy, the effective income tax rate for a single PAYE earner on €40,000 with standard tax credits has fallen by over 8 per cent since 2002. In cash terms this amounts to an annual income tax reduction of over €3,300, nearly 90 per cent of which is attributable to budgets since budget 2005. Interestingly, the effective income tax rate of a single PAYE earner on €100,000 fell by less than 4 per cent since 2002 and in actual cash terms the reduced annual tax burden is only €600 more than the PAYE earner on €40,000.
The effect of the 2009 income levy is to set the effective income tax rate back to 2002 levels for a €100,000 PAYE earner and to 2007 levels for a €40,000 PAYE earner. But the fall in the effective tax rates of both of these PAYE earners was even steeper in the years before 2002. In the four years, 1998 to 2002 the fall was 7 per cent and 12 per cent respectively. We know sustained economic growth was achieved for many years before 1998 despite a higher income tax burden than we are accustomed to.
The reduction in effective income tax rates has been shown to be unsustainable by the collapse in the asset-based taxes over the past few years. The problem for this State is that income tax as a share of total taxation is too low and this is a structural failure. It is not clear how it can be claimed, either for modest or high incomes, that the optimum income tax rate is below the current rate. It is certain that the tax base will be widened over the next few years, but the need to increase income tax will remain. There is also the unpalatable truth that increases in income tax cannot be confined to high-income earners. It may be argued that this is not the time to increase income tax but a more convincing case needs to be made that it should not be increased at all. – Yours, etc,
Madam, – The Poor Can’t Pay is a coalition of NGOs, community groups and trade unions. Today, we are asking the Government to live up to its commitment to protect the vulnerable.
For the past six months we have been campaigning against reductions in basic social welfare payments or the minimum wage. We are also calling for the annual Christmas payment to be reinstated. Families and individuals on low incomes are not responsible for the economic crisis and are not in a position to pay for it. Cutting these payments will not assist economic recovery and will drive the country’s poorest further into poverty. As a society we will be judged by how well we treat our most vulnerable citizens. The litmus test will be if the Government protects basic social welfare payments today. – Yours, etc,