Sunday 21 December 2014

Divide now between the taxpayers and those they pay for

FG's target voter has clearly become the hard-pressed, middle-income worker, writes Group Political Editor Fionnan Sheahan

Group Political Editor Fionnan Sheahan

Published 03/11/2013 | 02:00

REDUCE TAX BURDEN: Fine Gale's Brian Hayes

THROUGHOUT the crisis, fissures have opened up – or been deliberately created – between different groups in society.

Public sector versus private sector was the original incarnation of the divide, as the then government sought to swiftly reduce the public sector pay bill.

While jobs in the private sector fell like dominoes, public sector workers found there was little sympathy for objections to the introduction of the pension levy.

Over the course of the downturn, a schism in the public sector between established staff versus new recruits developed, where the established generation signed off on reduced pay, terms and condition for their successors.

Divisions also emerged between urban and rural, old and young and those who bought at the height of the boom and those who had their mortgages paid off.

At the anticipated tail end of the downturn, the new frontline is the taxpayer versus the service user.

Budget 2014 marked a distinct effort to draw a line between those paying for public services and those availing of those public services.

Fine Gael deliberately pitched its crackdown on dole for young people and medical cards to the taxpayers who are footing the bill.

On the night of the Budget, Finance Minister Michael Noonan referred to the colossal spending of €20bn on social welfare and €14bn in health.

"Well, if you're talking about social welfare, it's 40pc of everything we spend. And as we move expenditure down to match what we collect in tax, all that 40pc of everything that we spend has to be paid for by other people's taxes, so it's not possible to bring in a budget which adjusts what we spend without having some cuts in welfare. The same applies in health."

It wasn't a throw-away comment.

Noonan went on to refer to unemployed young people moving out of home and claiming rent supplement as "a very big hit on the taxpayer" and the additional medical cards in the system as "very costly".

"We have to get public expenditure down. Other taxpayers are paying for every item that we are talking about. There is no medical card being issued that some other taxpayer isn't paying hard for through their work."

The next morning, Taoiseach Enda Kenny was playing the same card as he defended those cuts, saying "people are paying".

"The point is that taxpayers are paying doctors for medical cards in respect of the GMS list. That is quite normal and as it should be, but the lists should be accurate," he said.

Although the Labour Party declared victory from the Budget, through the reduction in the tax hikes and spending cuts and the addition of the under-fives' medical cards, Fine Gael also notched up several significant scores.

Noonan managed to retain income tax bands, rates and credits, retain the lower VAT rate in the hospitality sector and the proposed hike in employers PRSI never even made it to the table.

The home renovation scheme tax break was a teaser for those with some money set aside who want to do up their house.

There are large tracts of society who will feel they are untouched by the Budget, provided they are not dependent on the social welfare and public health system.

However, the Revenue Commissioners' property tax letter this week will dampen down much of the positive consumer sentiment built up by the Budget ahead of the Christmas shopping period.

Of course, while your take-home pay remained intact, once you get home your pocket is being hit by the full-rate property tax.

And many families will also face higher health insurance bills, as a result of Noonan's cut in tax relief, which he disingenuously claimed would only affect gold-plated premiums.

Nonetheless, Fine Gael is clearly identifying the hard-pressed, middle-income taxpayer as its target voter for the next general election.

Income tax was taken off the table in Budget 2014 after Fine Gael ran possible tax cuts up the flagpole, with Richard Bruton leading the charge.

It was never going to happen this time around, but it ensured there was no repeat of the previous year's talk of a 'wealth tax' being introduced.

Beyond the bailout, the focus will be on value for money for taxpayers and reducing the tax wedge.

Assuming the rate of job creation continues on the current trend, with levels of unemployment reducing, the preoccupation of those with jobs will shift from fear of losing their job to what they are taking home.

Across-the-board pay deals aren't quite on the horizon just yet, but the slice the State is taking out of the pay packet certainly is a concern.

The political classes aren't slow to pick up on these insights into the mind of the middle Ireland voter.

Leo Varadkar spoke this weekend at the Small Firms Association annual lunch about the point at which the higher rate of income tax kicks in being far too low and needing to be looked at in the next Budget.

Bruton continues to point out higher taxes work against job creation and attracting investment.

Brian Hayes says the amount of tax being paid by the PAYE and self-employed taxpayer has to come down.

"We have got to reduce the tax burden over the next four to five years and continue to do so. We have got to do more with less and continue to do so," he told the Sunday Independent.

Not only will the rise in employment levels increase the numbers contributing to the tax base, but the amount being taken from each income earner will be reduced.

Those who genuinely need the support of public services will still get them but those paying the taxes also need to see a lowering of their burden.

Sunday Independent

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