Punt III: Less tax means lesser services

Posted in Articles by saraburke on November 11, 2010

The majority of Irish people say they don’t want to pay more tax. But what if those taxes guaranteed quality public services? Se here for my column in October’s Punt magazine It’s a no brainer. If we pay American amounts of taxes, we will have American-style public services. If we pay European amounts of taxes, we will have European-style public services. We can’t and won’t have good quality public services unless we pay for them.

A central pillar of the PD/Fianna Fáil economic policy – that got us into the fine mess we are now in – was to drive down the tax base. Taxes fund public services. Decent levels of taxation fund decent quality public services. Driving down the tax base was the government’s purposeful policy for the late 1990s and 2000s which meant when things went belly up, there was – and is – simply not enough left to fund public services.

Between 1995 and 2008, people on low income got out of the income-tax net; people on middle incomes paid less income tax; but most significantly, the Fianna Fáil/PD policy resulted in richer people paying considerably less tax and the richest paying no tax at all.

This is evident in Revenue Commissioner figures, which show that up to 2008, many of the top 400 earners paid no tax, 189 who earned more than €500,000 paid less than 20% tax, 234 earners who earned between €250,000 and €500,000 paid zero to 5% tax, while 34 paid less than 10%.

It is also evident in international (OECD) figures, which show Ireland has the second-lowest income-tax take and the third-lowest level of public spending out of 33 countries. During this time, government also decisively transferred taxes from income taxes to out-of-pocket taxes, such as VAT and excise on alcohol. Out-of-pocket taxes are regressive, hitting those with the least wealth, who must pay the same level (of VAT or alcohol excise duty) but have less in their pockets to pay it.

Not only that, Ireland has a disproportionately high use of tax breaks such as property development, private health insurance or medical expenses, which excessively benefit the highest earners. Tax breaks also mean there is less tax revenue coming in, which in turn means there is less to spend on quality public services.

In most European countries, the concept of “public” is a good thing – people talk about “the public good”. In most European countries, public services are respected and revered. Not in Ireland. Here, there is a perception that “public is bad” and “private is good”. This is most evident in education and healthcare whereby people who can afford to, opt for private education and private health insurance.

The vast majority of Irish people say in opinion polls that they don’t want to pay more tax. But what if we were guaranteed quality public transport, decent childcare for all, excellent non-fee-paying schools and free healthcare: would we then be willing to pay more taxes?  I suspect so.

The problem is we don’t have high-quality public services (because we don’t pay enough for them and we don’t demand them). But what if those quality public services were guaranteed? What if the well and the healthy – knowing that poor health is something we must all face at some stage of our lives – were willing to pay for the unwell or unhealthy?



One Response

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  1. Steve Rawson said, on November 16, 2010 at 11:02 pm

    Of course, Irish voters have perpetrated a charity ‘jump the queue’ culture. They do not trust politicians to use our money wisely so they vote for keeping money in their own pockets and figure they can use enough pressure or influence to jump the queue.

    Those that think this way will now say ‘why pay higher taxes?’ when we know they are only going to go toward bailing out avaricious bankers, incompetent regulators, intellectuallly – challenged senior civil servants, union bosses and senior politicians, among others.

    I agree with the aspirations and will continue to do all I can to help change this culture. However right now people know we are still swimming in a cesspool of croneyism, gross mistrust and constant spin.

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