Tuesday, 14 April 2009

Growing up about taxes

James Wickham: Maybe it’s time to grow up about taxes.

One feature of the Celtic Tiger years was the way in which Ireland’s role as a low tax economy became part of the national identity. This led to the absurd situation in which the Labour Party could claim that it supported the ‘right’ of Ireland to have a lower corporation tax rate than other EU member states. In other words, the Irish Labour Party defined itself in Europe as the Social Dumping Party.

There are several important consequences of this low tax mantra.

Most obviously, it contributed to the situation in which the major inheritance of the boom will be just a pile of rusting SUVs – of private goods that will deteriorate, not of public goods that will last. Historically Ireland missed out of the post World War II boom years (the ‘trente glorieuses’). These were marked by substantial social investment and the creation of the physical infrastructure of the European welfare states. By contrast, our boom involved relatively little public investment. Let’s be honest. Compared to ostensibly poorer European countries, our public infrastructure is pathetic. This is most obvious in public transport, but the same is broadly true in health, education, etc.

Because we have accepted that taxation is inherently bad, we have allowed a continual denigration of the notion of public service. On the one hand, we have denied that many people work as nurses, as teachers, as civil servants etc. partly because they actually want to do something more useful than just earning more money for private consumption. On the other hand, we have accepted that the public sector is inherently inefficient. Consequently, despite all the rhetoric of partnership, the public sector unions have never become the champions of an effective public service. All too often, opposition to changes that would produce a better service has come from the unions themselves. Take the current conflict in Dublin Bus. Despite the efforts of some rank-and-file busworkers, the conflict over the cutbacks has been posed entirely as about employment. The unions have not taken any stance about the deterioration of this crucial public service that the cuts will involve.

The rhetoric of low taxation is linked ideologically to that curiously ambiguous person, ‘the taxpayer’. In a market society virtually everyone does, of course, pay tax. However, a discussion of public policy based on ‘the taxpayer’ is rather different to one based on ‘the citizen’. For example, whereas all citizens are equal, taxpayers differ in terms of how much tax they pay. So presumably those who contribute more should have more say in how ‘their’ money is spent. And the belief that taxpayers give ‘their’ money to the state ignores that ‘their’ money could only have been acquired thanks to the state and the wider society. Even the super-rich use public goods and depend on some residual social solidarity for their very existence.

Finally, the low taxation mantra was a crucial part of the PD project to move Ireland closer to Boston than Berlin. One subterranean theme in the Lisbon referendum was that ‘we’ didn’t need those snotty Europeans any more. Whereas, after 1973, membership of ‘Europe’ made Ireland less and less an island behind an island, the boom years then made Ireland more and more firmly part of the Anglo-Saxon world. Maybe it’s time to move again?

Professor James Wickham teaches in the Department of Sociology, TCD


Anonymous said...

great post x

Anonymous said...

What we have to remember, however, is that until recently, the government was running budget surpluses - but it didn't lead to improved services. Why would things have been any different if we had been paying taxes at a higher rate? By the same measure, Singapore is a low-tax economy but has an immaculate infrastructure. And within Ireland, there can be significant differences when you deal with one state body compared to another - perhaps we need to examine the real sources of these efficiencies before we hand over more money to a government that hasn't shown a great deal of competency in using that moeny.