Tuesday, 8 September 2009

Commission on Taxation Report Another Indicator of Political Crisis

Colm O'Doherty: It would be naive to think that a Commission on Taxation composed of political insiders and handcuffed to the taxation equivalent of the status quo – keeping the overall tax burden low - would reverse the regressive taxation policies which have played such a big part in destabilizing our economy. My limited perusal of Part 1 of the Commission on Taxation Report – Executive Summary and List of Recommendations - gives me no reason to doubt my own instincts on the direction taken by the commission. The taxation policies recommended here are based on the presumption that “lower tax rates on a broad base are better than higher rates on a narrow base" because "having a broad tax base allows tax revenue to be raised from a wider range of sources and enables rates of tax to be kept low”(Commission On Taxation, 2009;2).

Broadening out the tax base means taxing those on social welfare, taxing child benefit, a water tax, a property tax and a fossil fuel (carbon) tax. Broadly speaking, these recommendations strongly reinforce existing levels of income inequality. These are essentially “social taxes” – taxes on individuals' participation in society - and they bear as heavily on those with average or below average incomes as they do on the wealthy. Their re-distributive impact will be in line with existing arrangements, i.e transferring income from the least well off to the better off. Complying with its “light touch, hands of the wealthy" imperative, the Report prioritises economic rather than social integration. Social integration is a function of the labour market. As a social policy instrument the Report favours the free movement of capital (low corporation tax) and promotes the interests of the economic elite (no wealth taxes). It is at its core a market–making, not a market-correcting social policy.

In short, it is further evidence of a government in deep denial of the reality it has unleashed on the majority of its citizens. So where does the retreat of the state from the function – promoting the wellbeing of its citizens- on which it claims its legitimacy leave us? This Report further erodes the social foundations of social solidarity and adds to our ongoing political crisis.


Proposition Joe said...

"Broadening out the tax base means taxing those on social welfare"

Well, not necessarily.

There's a large tranch of workers with average or just below average incomes who pay virtually no income tax.

On the other end of the scale, there's a small number of ultra-high earners who also pay virtually no tax due to creative sheltering of their incomes.

Both sides could start paying some income tax without hitting those on social welfare and crossing any red-lines fairness-wise.

Even in the home of laissez-faire capitalism, the high-earning shelterers have been targeted for decades with the alternative minimum tax.

Though some pressure on welfare rates could occur if an increase in the tax burden on low to average earners was seen to further diminish the incentive to work.

Aside: is it compulsory on this site to enclose "burden" in quotation marks, as if any right-thinking person would consider tax a blessing?

Nat O`Connor said...

No compulsion to use quotes, but tax is not always a burden...

Check out this Canadian site that shows how tax/public services provides services more cheaply than the private sector:

Proposition Joe said...


I guess the question is cheaper for whom?

We have a twisted Victorian attitude in this country to the deserving poor, with the corollary that it is immoral for anyone on more than a very moderate income to benefit too much from state transfers.

Whether it be a free college education for their kids that they could "well afford" to pay for themselves, or untaxed child allowance that they clearly "don't need".

It becomes very difficult then to sell the benefits of high public spending to those who pay the bulk of the income tax, when the state is continually finding ways to charge them and only them for state-provided services, or alternatively forcing them into the arms of private service-providers via the low quality and availability of the public version.

Universality of benefits is of course the bulwark against this trend, but for some reason many find it morally objectionable that a kid from south county Dublin should get the same educational subsidy as an inner city kid. Despite their parents having paid a large wodger of tax, or maybe even because of that fact.

Nat O`Connor said...


Well, you'll see the Canadian study argues that 75-88 percent of Canadians would be better off with better public services rather than tax cuts.

And in Ireland, I'd argue that the quality of some public services are superior to private ones.

SlĂ­ Eile said...

Race to the bottom on tax? So, the CoT will not countenance any increases in Corporate Tax rates at 12.5% and so say almost the entire media and political commentariot. Heaven forbid that this matter be looked at in anything other than narrow, short-term, nation state terms. Recently, I saw a notice on a noticeboard in a public location. It read 'Chemistry Teacher needed. €1,500 per month tax-free. West Africa. Contact etc …' I am not kidding. That's what I read. Try and compete with that.