Nemesis for decades of cosy consensus on tax
We were warned repeatedly that the property bubble would burst but preferred to dwell in low-tax illusion
‘SURE THEY’RE all the same,” goes the bitter refrain. The funny thing is, I’ve checked and it’s true. A comparison of each party’s 2007 manifestos reveals remarkably similar policies, especially on taxation – the bedrock of the economy. Sinn Féin’s are the best written and the Green Party’s have some peculiar extras, but by and large they are the same.
The fundamental political ideal on which all parties base their taxation policy is that income tax is an abomination from which all righteous citizens should be liberated. Conveniently most parties also agree on who should be the target of the Revenue Commissioners’ zeal.
There are the tax exiles who should be required to hand over a first born along with their passports. The production of food renders one impure and therefore farmers are deemed taxable.
Polluters are a target, too – though in a corporate rather than personal capacity. Finally there are the resident “super-rich” who should be taxed not only on their income, but their houses, art, jewels and audacity in daring to earn what Mary Lou McDonald has called “disgraceful” levels of income. Corporations may also be taxed but happily yet again there is unanimity – the 12.5 per cent rate should stay, no matter how much that bugs the Germans.
Everyone else is a hard-working, hard-pressed, middle-income couple with a big mortgage and bigger creche bill who must be saved from the injustice of paying tax on their income.
Of course, there are few specifics. I have no idea what “middle-income” means. Most Irish people claim to be middle class, so presumably they labour under the illusion of earning “middle incomes” too.
I do know that almost 40 per cent of the 2.4 million income earners in the State are entirely exempt from income tax and that every party thinks this number should be increased.
When asked who should pay tax so that there’s enough money to fund the most generous social welfare payments in the EU, we are back to – you’ve guessed it – the tax exiles. Of course, that’s hardly surprising. Tax exiles don’t vote and the 900,000 exempted earners do.
If you woke up tomorrow morning in a Kafkaesque nightmare as the leader of an Irish political party you’d probably sign up to the political consensus too.
Of course this system has rendered the State disastrously dependent on cyclical taxation – VRT, VAT and stamp duty – a recipe that ensured our fiscal souffle did not so much collapse as implode.
Yes, at the other end of the scale generous tax reliefs enabled the business classes to reduce their tax liabilities, but figures from the Department of Finance are indisputable – the top 20 per cent of income earners pay 77 per cent of all income tax. So facts are facts and the fact is that hundreds of thousands of earners and voters believe they have done well out of a system which taxed consumption rather than income. Fianna Fáil drove the policy and the others gasped in their efforts to keep up. Why? Because clearly that’s what the majority of people wanted. If the other parties didn’t offer a policy alternative it was because not enough people wanted one.
There is no other explanation. Well, there is. It’s that people were stupid and wilfully ignored the consequences of their actions. But surely no one will argue that the people are stupid because Ireland’s electorate is famous for its sophistication.
Nor can anyone argue that the people were in some way misled. Night after night and day after day journalists from McWilliams to Lee and economists from Ahearne to Kelly warned of the consequences and were simply ignored.
So we must accept this fact. Irish voters are pretty much a right-wing bunch who want the government to leave as much money in their own pockets so that they can spend that money in a manner of their choosing. We’re republicans alright, but the American kind and with great benefits. It’s called having your bread buttered on both sides.
That’s why Joe Higgins, the only actual socialist, lost his seat in 2007. That’s why the Sinn Féin surge never materialised. And that’s why people didn’t vote Labour. Because no matter how much our lily-livered left attempted to dress up their “Me too” policies, the bouncy castle-renting suburbanites knew they’d been having an income-tax-free party for 10 years and hoped Fianna Fáil would keep the party going.
So now what? It’s payback time. The middle income earners are furious because they’ve been encouraged in the delusion that were it not for a chap called Madoff, a company called Lehman Brothers and a golf-playing rugger bugger called Seánie, Ireland would remain a land of fiscal harmony and shopping trips to New York.
It’s time then to take aside the only demographic in town and tell them some truths. The CFDs, the subprime lending, the shunting of millions and billions between banks, all of these things are terrible and have made a bad situation worse. But we have two crises – a monetary meltdown and a fiscal collapse. They are intertwined and yet independent. Without a banking crisis we’d still have a fiscal disaster.
The mother of all property bubbles just burst. It was always going to burst and we were warned repeatedly what would happen when it did. The Order of the Soft Landing did not have a monopoly. No one can say that they weren’t told. If they didn’t listen, they have only themselves to blame.