Time to tap into the pots of boomtime gold

 

IF YOU’VE been around for a while, you wait for certain phrases to drop like over-ripe apples from the abundant tree of political cliches. One I’ve been anticipating for a while is “pot of gold”. It is the favourite phrase of those who wish to persuade us that there is no point trying to get more tax from the rich, writes FINTAN O’TOOLE

So here is the Minister for Finance, Brian Lenihan, denouncing those who seek to “persuade decent working-class people that there was a great big pot of gold there and, if only the Government would do something about it, that would make their lot a great deal easier”. Oh sorry, no, that’s not Brian Lenihan, that’s Charles Haughey, a man who knew a thing or two about pots of gold at the end of Caribbean rainbows, in 1983.

How about the denunciation of those “putting forward ideological arguments and trying to create the impression that there is a huge pot of gold out there and that there is a fortune to be made from imposing higher taxes on the people earning in excess of £50,000 and £60,000. That is a myth”?

Sorry, that’s not Brian Lenihan either. It’s Albert Reynolds as minister for finance in 1990. And who’s this, sarcastically referring to the “magic pot of gold that is out there to be collected”, while complaining about the “ruthless methods employed by the Revenue Commissioners to collect taxation”?

Why, it’s Willie O’Dea in 1991.

Brian Lenihan’s revival of the pot of gold metaphor – “There is no pot of gold that can be raided from the wealthy that can solve our difficulties” – is almost sweet in its unknowing reversion to type. Those of us who were around the last time Fianna Fáil wrecked the economy remember the “no pot of gold” mantra in the mouths of Haughey, of Alan Dukes, of Charlie McCreevy.

In fact, there was a pot of gold – up to last year, Revenue had collected €2.5 billion from its special investigations into the dazzling array of scams for salting away the money we were continually assured did not exist.

While the public finances were pummelled back into shape by making drastic cuts in public services (including attacks from which the health service has never recovered), a very large swathe of the business and professional classes in Ireland was able to get away with contributing very little. For us to repeat the trick, we must first be persuaded nobody has any money anymore, that it has all just evaporated in the collapse of the economy.

There’s little doubt a lot of the wealth is now blowing in the wind. But the idea that all those who made fortunes during the boom years are now living in cardboard boxes and fighting over bottles of Buckfast is simply not credible.

We know that the top 1 per cent of the population made about €75 billion during the years of the Celtic Tiger. (In 1995, it had assets – excluding residential property – of just under €25 billion. By 2006, the asset base of the top 1 per cent was €100 billion.)

We also know that the top 1 per cent in 2007 held 20 per cent of the wealth, the top 2 per cent held 30 per cent and the top 5 per cent held 40 per cent.

And if we exclude the value of housing wealth, the form of asset that has declined most sharply in value, the concentration of wealth at the top is even greater: the top 1 per cent owns a vast 34 per cent.

A very significant amount of this wealth was accumulated by avoiding tax. In 2007 alone, a mere 439 individuals got tax breaks worth €288 million. Over the course of the boom years, there was a conscious and deliberate government policy of giving huge tax benefits to the very wealthy rather than, for example, spending the money on the health service, education or vital infrastructure like broadband. The inequitable tax system has been one of the key ways in which top earners became more wealthy.

Has all this money simply disappeared? Hardly. For every property speculator who was overpaying for land, there was a property owner who was being overpaid. If we assume the €100 billion that was in the pockets of the top 1 per cent has been halved or even cut by two-thirds, that still leaves 40,000 people with between €33 billion and €50 billion between them. And there is nothing to suggest that the skewed structure of wealth in Irish society, with 95 per cent of the population owning just 60 per cent of the wealth, has been fundamentally altered by the recession.

The Government had no problem manipulating the tax system to ensure a small number became extremely wealthy. How come it can’t contemplate using the same system to ensure that, in a time of national crisis, some of that wealth is used to protect the weakest?

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