Tuesday 19 June 2018

Why are people who work and are ambitious in life still being milked?

Picture posed
Picture posed

Karl Deeter

It would take a special type of fool to fall for anything you hear in the Budget as being "in your favour".

Here's a fact: the majority of tax that the State collects comes from two main sources - income tax (which the Department of Finance hopes will bring in €21.59bn in 2018) and VAT (with a 2018 estimate of over €14bn).

Both of these are taxes on regular people. Income tax takes from people who commit the act of earning a living and VAT passes through the majority of businesses in a near-costless manner to rest its burden on the shoulders of people who commit to the act of buying almost anything.

In Ireland, a third of all income tax collected comes from the top 3pc of earners. When we say "make the rich pay" - well, they surely do.

The bottom half of all tax cases pay just 4pc of the income tax collected and yet it is within this low-to-no-tax group that we focus a USC reduction, so that the imbalance persists?

Hard-pressed workers, the ones who dare to earn the 'average wage' of €35,000, will still end up on the higher rate of income tax each year.

The 'band' was increased by €750 but because of how income tax works, that's worth less than €3 a week to people who earn just 'average' incomes.

I'd say "put that in your pipe and smoke it" but the fact is that it wouldn't cover the increase in tobacco excise.

Why is the Government determined to incentivise low pay, with high levels of social-welfare transfers and low-to-zero taxation?

If we spent as much on encouraging success and helping to train people to higher-skilled jobs, we'd have more income tax and higher earnings. Would that really be such a bad thing?

Obviously, a civil society wants to reduce the pain of poverty, but given that many of those who are in the lowest decile of earnings spend twice what they earn, it stands to reason that we don't actually know what every group is or isn't doing or what their absolute standards of living are.

Mortgage-interest relief has been kept alive.

But given that prices fell for many of the years covered, why didn't we scrap it for people who bought from about 2009 onwards?

After all, the values of their properties are well above what they paid for them and for those people who bought in 2012 their homes did nothing but go up in value from day one.

The negative-equity generation has been replaced by the negative-common-sense hive-mind of those who occupy Dáil Éireann.

Jacking up stamp duty on commercial property is a grab. Now the companies that can't house their staff here will have the added joy of not being able to afford commercial rents as that cost inevitably passes through into leases.

Strangely, the Budget document shows that stamp-duty increases will bring in €376m in 'additional revenue', but next year's stamp-duty estimates in the Budget White Paper are only up by €98m, so clearly this is either coming in at the wrong time (horse bolted) or it will depress activity and lower turnover, which equals a lower tax take.

Either way, only in the maths class of governmental economics can you turn €376m into a sum 74pc lower and then cheer about it.

And in a surprise move to help cure housing shortages we got ... absolutely nothing. That was indeed a surprise.

Irish Independent

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