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Go On, Elect A FineGael/Labour Coalition — Just Don’t Expect Lower Taxes
Read more about: Blogging, Coalition, Crime, Economy, Education
University College Cork PhD Candidate and Griffith College law lecturer Fiona De Londras seems to have confused opinion with fact when she wrote recently in her first contribution to IrishElection.com that in Ireland ‘our taxes are high’.
It was a throwaway remark in a comment article supporting Justice Minister Michael McDowell for his robust views on law and order.
Fiona later clarified the point writing ‘I mean that most people, when they receive their pay slip, look at their tax paid and think ‘ouch’, in other words that experientially taxes are high, as opposed to them being high from a comparative perspective’.
P. O’Neill came to Fiona’s aid writing ‘I wouldn’t have backed off your tax point quite so fast. Frank is right that calculated at the national level, the tax-take in the republic is low when compared to other countries. But our rates of income tax are relatively high — this is the ouch factor’. Another commenter, Niall, wrote ‘(w)hat matters is whether people believe taxes are high or not, and the major factor in determining that is whether or not they can afford to pay for the things that they want’.
I myself come from the lower end of the income scale, and got my third level education as a mature student during a time of emigration in the UK. I have been more familiar with the problem of the very low income levels at which taxes and PRSI contributions started being deducted in the past, and the paradoxical situation of working full-time but not taking home enough to pay the rent on a substandard flat in a converted Victorian property. From my perspective the important facts are
1. We have a minimum wage which is set at a realistic level;
2. The starting point of income tax deduction means the full-time worker on minimum wage has enough earnings to live independently;
3. The benefits system is oriented to supporting not discouraging citizens’ flexible engagement and progression in the workforce, to achieve self-reliance.
During the 1980’s and early 1990’s, Ireland wasn’t producing the kinds of jobs that Irish people coming out of education felt like sticking around for. Research by the NESC published in 1991 found that educated emigrants and their children fared better overseas than they did at home. Today, the majority of Irish people as represented by the policies of the Fianna Fáil, Fine Gael and Labour, believe in the overall approach the present government has taken to make the Irish people independent in fact and not just in word.
All the public investment being made in education, health, infrastructure and good administration, and the distributions to our older and less able kin, are the sine qua non of the buoyant levels of real income increases experienced by us all over the past decade.
There are dangers, of course. At the moment the demographics mean the public finances have fewer pensioners to support than some other countries have. And there are constant warnings of property bubbles. An economy is built on confidence and the taking of calculated risks. That is as much the case with investment of public money and personal time in education as it is with the prices people pay for houses and shops. They do it because they believe it will pay them back by enhancing their future earning potential.
What riles taxpayers is not so much the visible deductions from their pay packages — you can’t have one without the other, really — as the perception of arrogance and incompetent management of the public finances. But the government is an easy target to lash out at for problems that are not its responsibility, and that is why it is important for commentators and academics to distinguish fact from opinion.
And you can’t run a BMW car on cut price central heating oil!
I’ve been writing up on my blog about Tax Freedom Day - the day when citizens get to stop working for the government and start working for themselves. Using the stat you gave yesterday for revenue as % of GNP, I estimated that Ireland’s Tax Freedom Day arrives mid-May. That is to say (ignoring indirect taxes and depreciation, and holidays taken at Easter, Christmas, etc), the average citizen spends the first four and a half months of the year working not for themselves but to make the State bigger. While our Tax Freedom Day may arrive earlier than some other countries, I think that says a lot more about the massive size of governments generally than any particular commitment of our own to reducing the tax burden.
Wulfbeorn,
Your view on the sine qua non point?
is fiona not in Griffith collage ? Nice piece I wonder what people would think if we got swedish 60% type taxes.
It’s Griffith and I’m a PhD candidate in UCC
Links to the Law Dept in GCD and in UCC could also be thrown in
*ahem*
Now to read the piece itself
Right - first of all if the bmw comment was a little dig *I* do not drive a bmw, what my significant other may or may not have or be buying is completely insignificant!
Secondly just because tax rates are not high compared to other countries or compared to the past does not mean that they are not high at all. I consider my taxes to be high. I don’t have a problem with high taxes. It doesn’t bother me hugely, but experientially taxation is high. VAT is also high and the range of things on which there is no VAT is not nearly large enough.
You ARE right in saying that people are annoyed at how their tax monies are spent - millions on ineffective payroll systems for example - and there appears to be little or no accountability when it comes to the mismanagement of taxation funds, however this is not the point. Taxes are high - they may not be as high as in other places and they may not be as high as they once were but they can still be justifiably said to be ‘high’, particularly if you earn what most would consider ‘alot’ (another value loaded word) of money!
[BTW it was hardly unqualified support of McDowell - in fact it was a critique of taking the ‘tough on crime’ stance as opposed to the ‘tough on the causes of crime’ stance - it was a critique of the electorate’s desires and politicans’ pandering as opposed to some kind of absolute love in with McD!!)
Simon, and Wulfbeorn,
You can borrow my Tardis if you want. Just go to 1980, 1981, 1982 when total government expenditure was 61.5%, 62.1% and 60.7% respectively of GNP.
It was characteristic of the stage we were at as a small open island economy that the core functions of the state took a far larger proportion of the wealth produced by the economy then, as well as high debt servicing costs and high borrowing.
The state machinery is still growing but accounts for only one sixth of all jobs in the economy —329,315 was the estimated number of public sector employees in 2005. My memory tells me the figure which I can’t put my hands on but once once had on paper, was about 300,000 in the early eighties, but that represented alarger proportion af a smaller and less productive developing economy. No room for complacency though either, but the factors which add to our productive capacity today are intangibles like education, peace, good government, a can-do attitude, non-punitive rates of tax on enterprise and initiative, and a healthy society.