Tom O'Connor spoke at yesterday's launch of the Community Platform's proposals for progressive tax reform, 4 Steps 2 Recovery. Below is his response to the proposals.
• The government’s fiscal plan has failed. The exchequer figures in August misled the public: there was an Exchequer balance in Aug of €12 billion, actually almost 1 billion more than Aug 2009 if we subtract Anglo and NPRF from the 09 figures. These don’t occur in 2010. Comparing like with like, the Exchequer deficit has widened by almost €1 billion
• The EB at the end of 2010 - and there is no Anglo or NPRF spending - will be €22 billion. The corresponding figure (without Anglo and NPRF) for last year was €18 billion. We are €4 billion worse off after the cuts.
• So, after €4 billion in cuts, €3 billion in current and €1 billion in capital for this year and all the hardship, we will finish up €4 billion worse off than last year.
• Cuts don’t work
• We are spending over €3 billion in social welfare spending due mainly to increased unemployment due to the deflation of the economy. We will finish this year with taxes €2 billion less than the end of 2009.
• Taxes at the end of this year will be €17 billion less than they were at the end of 2007
• The government is deflating the economy. It has driven up unemployment to 466,000. Correspondingly, it has driven down taxes and driven up the deficit as a result. It’s shaving of €3-4 billion a year is causing immense hardship and spiralling the economy downwards, while being eaten up by lower taxes and increased social welfare payments of €3 billion this year.
• The proposals by the Community Platform will help the economy to recover in 2011
• The €3 billion in tax increases will prevent further cuts in current and capital spending, which will help job creation and will stem job losses.
• It will prevent workers earning under €20,000 from entering the tax net, which would create a surge in to the black economy. If this is allowed to happen, then poverty and unemployment traps will be created whereby it would become more expensive to go to work. Taxing the very low paid will ultimately trap them on the dole, increase unemployment and increase the cost to the state of welfare payments. These proposals would prevent this happening.
• In addition, it would be thoroughly inequitable to have these low paid workers enter the tax net, given that we know 3,800 people earning over €100,000 are getting away with paying no taxes (Irish Times Sept 2010)
• The scale of tax avoidance in this country has been a big factor in not allowing Irish governments to build up cash reserves in the good times to allow it to cushion the effect of the current recession: From 1999-2005, the government squandered €11 billion of taxpayers’ money on tax breaks to the rich and wealth (Goodbody’s and Indecon 2006)
• The fact that up to €11 billion of these tax expenditures are still in the system (Commission on Taxation) means that the government is engaging in cutbacks in current and capital spending which have been deflating the economy, dramatically curtailing the tax take and creating huge levels of unemployment.
• These proposals will start a process that will halt unemployment escalation.
• Also, these proposals will address the inequities in the tax system: It will start four year programme of taking €5 billion a year back of the 11 billion in tax breaks, giving the government €1.5 billion extra revenue a year. This will go some way to preventing the cuts that have driven up unemployment and the exchequer deficit.
• It will introduce a tax on property (over €1 million value of property, €100k in income) and wealth as there is in France, Norway and Switzerland. This will have the twin benefits of restoring equity in to the system, while at the same time preventing cutbacks. This will, in turn, help the economy to recover.
• The extension of PRSI and income levies to all income, regardless of source will have the same affect. The abolition of the PRSI ceiling has been something that has been suggested for many years.
• The compliant taxpayers in this country have abhorred the ability of the super rich to avoid tax. The extension to levy tax on citizenship will gather in hundreds if not thousands of extra millions in tax revenue. It will also inspire hope in normal compliant earners that at last everybody will pay their fair share.
• Ruairi Quinn suggested at the launch of the report that non-resident Irish citizens would be expected to obtain a tax clearance certificate before getting an Irish passport. The Community Platform accepted this suggestion.
• The tax increases will only hit a relatively small number of income and wealth holders. As such, these tax increases will not have a negative effect on the economy. In fact, they will allow the preservation of jobs funded by the state in badly needed areas such as community care, disability care, education, primary care and other vital areas. In addition, it will allow capital spending not to be cut by at least €1 billion, which will allow infrastructure projects to go ahead which will increase employment.
• An end to spending cuts this year on the back of these proposals will be a huge psychological and economic benefit to hard pressed Irish people. It will increase consumer confidence and likely increase spending. It will start to renew the economy, and people will breed a sigh of relief that fairness has at last started to shine through. It will prevent savage cuts to programmes for disabled people, children and will prevent any further cuts in welfare payments. It will allow the most marginalised to retain what dignity they have left.
• I strongly recommend these proposals.
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