News Carol Hunt

Thursday 2 October 2014

Give us increased tax credits and childcare breaks

The alarming widening gap between rich and poor in this country is a matter of Government choice

Published 16/02/2014 | 02:30

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Carol Hunt with her son Oscar in Centra supermarket

IT'S hardly surprising that the news went practically unnoticed. What with all the shenanigans down at GSOC HQ keeping us well entertained last week, we can hardly be blamed for failing to take much notice of a dreary statistical report published by the Nevin Economic Research Institute (NERI). But, in the big scheme of things, we may do well to sit up and take notice, because it affects all of us – rich, poor, gay, straight, garda and private citizen. The news that the fallout from our 2008 banking crash and consequent austerity drive has resulted in about half of all Irish households struggling to survive on less than €35,000 a year after paying income tax, PRSI and universal social charge is pretty dire.

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Or is it? An annual €35,000 wage averages out at about €673 per week. That doesn't sound too bad, does it? Be judicious when grocery shopping in the competing supermarkets or buying clothes in the big stores and sure, €673 a week to live on is quite a nice little sum, isn't it? I know quite a few households, mine included, who would be delighted to have that amount of cash to play with every week.

Except this figure isn't money we have left over to spend on fixing the washing machine, or replacing a clapped-out car. Because out of this sum has to come the cash for the rent or mortgage, property tax, energy bills, doctor and dentist bills and all the other costs of living, as opposed to merely existing.

When you add all that in, €673 is not a lot. (And nearly a third of households have to get by on less than €500 a month.) Particularly when one considers the fact that energy costs have increased by 25 per cent, the forthcoming water taxes, the continual upward spiral of health and education costs and the general rise in the cost of living. And of course there's the still oft-neglected fact that hundreds of thousands of families are drowned in negative equity with no hope of getting above water in this lifetime. They are worse than poor; they are saddled with debts they can never repay.

According to NERI researcher Michael Collins, the squeezed middle – or the "coping classes", as we are often called (though "the well and truly screwed class" might be more apt) – survive on a lot lower income than many people think. He said, "Policy-makers often underestimate how many households earn less than €50,000." Or, to put it another way, politicians and higher level civil servants haven't a clue what it's like living in the "Other Ireland"; the one with no built-in pensions, bonuses, increments or expense accounts.

But it's not all bad news. Some people are doing very well out of the austerity crisis. Very well indeed. Last month's Oxfam report on global wealth inequality showed that, in Ireland, the richest 10 per cent increased their share of the national income from 27 per cent in 1977 to 36 per cent in 2009. The top one per cent saw their share of national spoils rise from 5.5 per cent to 10.5 per cent. The rise in income of our own Celtic Tiger "one per cent" was the highest in Europe between 1995 and 2009 – and continues to increase exponentially.

And, as noted by TD Stephen Donnelly last month, recent reports (Bank of Ireland and Credit Suisse) show that between 2006 and 2011 the wealthiest 5 per cent of Irish families increased their share of national wealth from 20 per cent to 28 per cent, and counting ...

How's that for making lemonade out of lemons – or wealth out of other people's misery? The powers that be may argue, as Istvan Szekely– director of economic and financial affairs at the European Commission – did last November, that the wealthy in Ireland have borne the brunt of the Troika-led austerity measures. And when you look at it crudely, this is correct. The rich, having more to give, have given more. But relatively speaking – which is what really matters in any civilised society with aspirations to decency and fairness – poor to middle Ireland has paid far, far more than the wealthy in the past six years.

And consequently we saw that the gap between rich and poor in this country increased by 25 per cent in 2010 (Equality Budgeting Ireland). This didn't happen by accident. This is Government financial policy. The recent Fine Gael/Labour budgets were unjustly "regressive" – meaning that they hit those least able to pay disproportionately hard. The policy seems to be: "look after the rich and the poor will take care of themselves".

However, to get us all into a good mood coming up to the Euro and local elections, and to ensure we vote the right way, all the talk is of possible tax cuts – in particular the lifting of the income threshold where the higher rate of tax kicks in. Enda Kenny has said that "examining a potential income tax cut was a priority for the Government". This sounds great, doesn't it? Who doesn't love a tax cut?

Enda's Finance Minister, the bould Michael Noonan, said last week that the biggest problem facing the tax system was the low level of pay at which people entered the higher tax rate. "If I had the money that is where I would go," he said.

Except of course that, once again, it's all smoke and mirrors; messing around with the deck-chairs and ticking boxes. It's true that Irish workers enter the higher tax band much earlier than other European countries but, because so many people are surviving on low incomes here, only three out of 10 households would actually benefit from such a move (NERI research). And

the cost of such a measure would have to be offset with spending cuts which invariably hit the less well-off disproportionally.

An increase in tax credits would be a much more equitable way of reducing the inequality gap – because proportionately the benefit would be far greater for those on lesser incomes.

In addition, the "coping classes" and the poor tend to spend most if not all of their disposable income just to survive – an increase in their spending power would boost the local economy, so it's a win/win situation. Also, tax deductible childcare would go a long way to easing the burden on many couples, as would free GP care for all those households under the €35,000 annual disposable income.

Rich, poor, working, unemployed or retired – we all should be greatly concerned with the widening inequality gap. Evidence shows the devastating impact of rising inequality on a society. It's not a natural consequence of the economic order. It's a choice. A choice we need to tell our Government to stop making.

Twitter @carolmhunt

Sunday Independent

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