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Finance Bill 2014: Second Stage (Resumed) (Continued)

Thursday, 6 November 2014

Dáil Éireann Debate
Vol. 857 No. 1

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(Speaker Continuing)

[Deputy Mick Wallace: Information on Mick Wallace Zoom on Mick Wallace]  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.

Deputy Clare Daly: Information on Clare Daly Zoom on Clare Daly Budget 2015 may be characterised as a continuation of policies which have seen the Government operating like Robin Hood in reverse. The Minister continues to rob from the poor and from ordinary people to further enrich those at the top of Irish society. What could have been an opportunity to level the playing field and begin to eat into some of the rising inequality we have seen in recent years - an inequality that accelerated during this Government's term of office - was wasted. Instead the decision was taken to enrich those at the top to the detriment of everybody else. Not only is this bad for citizens on social welfare and the growing group made up of the working poor, it is also criminally irresponsible in terms of the cost to our society into the future.

  I agree with the analysis of the budget put forward by John Douglas of Mandate. It is, he said, a highly regressive budget which redistributes wealth from the lowest-paid to the highest-paid earners. An employee earning €70,000 will be better off, thanks to this Government, to the tune of €750 per year. A low-paid worker on €15,000, meanwhile, has been compensated by only €105. It should be noted that these figures do not take account of the introduction of water charges. Social Justice Ireland has pointed out that this is the fourth regressive budget in a row and one which further widens the gap between rich and poor by some €500 per year. Between 2008 and 2015, SJI observes, budget changes in tax and social welfare have impacted mostly on two groups. These are welfare dependent households, which have lost more than 12% of their income, and, second, the working poor, who have lost 13% of their income. This budget failed to prioritise those groups and will instead worsen their situation.

  Correspondence I received from two constituents is reflective of what people in these circumstances are experiencing. One of these constituents is a woman, aged 47 and with two children, who spends more than 50% of her income on rent. She wrote:

I have been working full time in Ireland since entering the country. I feel like I am walking against walls. After paying rent, electric and the bus to work, I have €500 for three people. I cannot get rent supplement because I work 40 hours. I cannot get one-parent supplement because I earn too much, even though it is only €450 per week. We were not able to heat our house for the last three years and I will not be heating it this year. I have to pay everything when it comes to school.

Next year this person will have to pay water charges on top of everything else, all out of a monthly net income of €500 between three people. She goes on to say:

Now I have to sub-rent two rooms in order to have the money for... simple things like school or shoes for my children. I do not want to do this. I would like my family home to be my family home.

  Another woman wrote:

I cannot afford to give any more. I cannot afford to be scared any more. I would really love the Government to come and live off our earnings. We have no loans but we just cannot manage ... I am fed up with managing. Both of us go out to work. We should be able to see something good from our wages.

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