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Snippet Contents:

The Minister, Deputy Noonan, told us that Ireland already has one of the most progressive income tax systems in the developed world. In 2015, he said, the top 1% of income earners will contribute 21% of all income tax and universal social charge revenue collected. By contrast, we were told, the bottom 76% of income earners will pay 20% of the total. According to Michael Taft, however, this is a ridiculous statement when one takes into account his finding that Ireland has the highest rate of pre-tax, pre-transfer income inequality in the OECD. It is true that the top 1% of income earners will pay 21% of all income tax and USC collected in 2015. That is as it should be, given that this group has more than 20% of the wealth in Ireland. In fact, it is disgraceful that these top earners will pay so little.
The tax system is progressive only to a point, with increases in taxation flattening out after the €70,000 plus mark. Once one joins the top 10% of earners, the more one makes the less one pays as a percentage of household income. That does not amount to a progressive tax system. Rather, it is a system that rewards the rich and the super-rich. The carrots that were attached to the budget nicely illustrate this situation. Those in the top 10% - that is, those earning above the €70,000 mark - got 4.3 times more cash than the many workers who earn between €17,500 and €33,800. An extensive study by the Nevin Economic Research Institute, NERI, earlier this year found that as a percentage of household income, the poorest 10% pay taxes of 28% and the top 10% pay a rate of 29%. That is hardly progressive.
When it comes to the crunch, playing around with the income tax percentages, as this budget does, is something of a sideshow. The real issue is the massive cuts in investment and expenditure on social services. Mr. Taft gave a seminar on 22 October in response to the budget in which he pointed out that expenditure on public services in Ireland is 14% below the average for the EU 15. Compared with other small, open economies, we would have to increase Government consumption by €7 billion to reach the mark. When it comes to public investment, Ireland comes in at 20% below average and would need to increase spending by €800 million to €1.7 billion in order to match the EU average. All of this is compounded by the fact that total investment in the economy is 40% below the eurozone average.
Even our masters in the IMF have changed their tune a little of late. In a recent report, entitled Redistribution, Inequality and Growth, the IMF challenges the notion that policy makers must choose between tackling inequality and achieving faster growth. The argument now goes that reducing inequality leads to faster and more durable growth. Some weeks ago, the IMF went so far as to break with standard neoliberal doctrine by encouraging member governments to take advantage of historically low borrowing costs to boost spending on public investment. Most economists everywhere in the world - Stiglitz and Krugman among them - agree it is a no brainer. With money to be had for less than 2%, the idea of not borrowing directly to invest in infrastructure is crazy.
The Minister, however, pointed out that EU rules prevent him from borrowing serious amounts to invest in infrastructure and that including such investment on the books would mean we would not meet our EU targets. We should be challenging those rules because they do not make sense. The Taoiseach has said that one of the arguments for Irish Water is that the Government must create a commercial State entity which, more than likely, will be eventually privatised. Even while it is still owned by the State, a commercial State entity is able to borrow off the books, which the State cannot do. It would make sense for the State to avail of the low cost of money to invest in infrastructure now. We should challenge the European rules in order to be able to do that. Infrastructure investment would have an impact on people's lives in a way the so-called recovery has not. The figures look good, but the majority of people are not experiencing this apparent improvement as impacting on their lives. The type of serious programme of investment I am proposing would have a dramatic effect.