Tuesday 19 February 2019

Judging by the taxes on the 'squeezed middle' you'd think nobody in power wants fairness - and you would be right

Cartoonist: Ken Lee
Cartoonist: Ken Lee

Shane Coleman

Wanted: a politician to champion middle Ireland. The 'squeezed middle', if you want to use that term; ordinary workers in cities, towns and villages who hit the top rate of tax at €34,000; who paid their water charges because it was the law of the land to do so; and who don't have a medical card or benefit from the other services (quite rightly) provided by the State.

Because, currently, no one is speaking for those people in political life. The lack of reaction from the political parties to last week's report from the Irish Tax Institute is evidence of this.

That report, in one fell swoop, decimated what has become the largely undisputed political narrative of recent years.

That narrative had us believe USC was the central problem in the Irish tax system and that it was necessary and desirable to remove as many people as possible from the tax net. But the Tax Institute study conclusively shows the key problems are, in fact, the ludicrously low rate at which workers hit the top rate of tax here, and the narrowness of the tax base.

Its findings are startling. Somebody on €25,000 pays 5.6 times the amount of tax as a worker on €18,000. A worker on €35,000 pays 11 times the tax of somebody on half that salary. And the multiple is 44 if you're earning €75,000, rather than €18,000.

Let's be clear: there is no appetite in this country for US-style taxes where, in particular, the rich can avoid them. Most people agree with the notion of a progressive tax system.

But what we have at the moment is blatantly unfair. It's right and proper those earning less should pay less in tax, but we've taken that to degrees that no other OECD country has.

During the madness of the Celtic Tiger years, 42pc of workers were entirely outside the tax net. When the public finances collapsed and the USC was introduced, that figure dropped to 12pc.

But in recent years, with political parties intent on repeating the catastrophic error of narrowing the tax base, it has risen back to 29pc - and it will be higher after the upcoming Budget.

Half the workforce now account for 96pc of the tax take. That's simply too big a burden on too few.

The direct result of that is somebody earning €75,000 in Ireland today pays more tax than their counterpart in Sweden and still has to endure vastly inferior public services.

The quality of our public services is more akin to the UK, where somebody on that salary pays a whopping €6,136 less in tax.

So who's representing those who earn €35,000-€75,000 - the squeezed middle? Not Micheál Martin and Fianna Fáil. Asked about the Institute of Taxation report last week, Martin stuck rigidly to the mantra about USC being the "focus", not the low income levels at which workers hit the top rate of tax.

Not Fine Gael either. All their emphasis is on USC too. Leo Varadkar was last week heralding Fine Gael's record of removing half a million workers from the USC net.

When it was put to him that this inevitably meant an increased burden for middle-income workers, he didn't demur but said his priority was the lower paid. It seems a laudable position at first glance. But the Institute of Taxation report demonstrates that the low paid already pay the lowest tax in the OECD.

It's the middle income earners that are getting screwed.

Yet nobody in politics seems remotely interested. Martin says we have to get the balance right between tax cuts and public services. He's right.

But nobody in Leinster House seems to realise that one of the key reasons why public services aren't up to scratch is there are too few people paying tax.

Brian Lenihan's logic behind introducing USC at low levels was, of course, to raise much-needed revenue.

But it was also based on the belief that every worker should pay some amount of tax; everybody should have an investment and a stake in the system - albeit at very low levels for lower incomes to ensure fairness.

To point this out in the current climate means being labelled right wing. But it's not.

It's actually a clarion call for the political centre.

Centrist politics have on balance served the country reasonably well for the past 90 years, but they seem to have been abandoned by both Fine Gael and Fianna Fáil.

The fact that even Varadkar - who the left liked to simplistically caricature as a neo-Thatcherite a few years back - is talking the way he now is, demonstrates that.

Ever since Paul Murphy's by-election win in 2014, politics has shifted dramatically leftwards. The far left is calling the tune and the former centrist/right of centre mainstream parties are dancing to it.

Calling that out isn't about stirring up 'them versus us' sentiments.

Most Irish people are inherently fair and want a just and decent society - a social democratic model even. They want the most vulnerable protected and supported.

But fairness swings both ways. It can't always be exclusively the same group of people picking up the tab.

Fairness also demands a hard-pressed worker doesn't pay the top rate of tax at €34,000; that whatever childcare package is in the Budget also benefits middle-income earners; and that those who paid their water tax are not sacrificed for political expediency.

For all the rhetoric on the subject, is anybody in Leinster House interested in delivering real fairness?

Shane Coleman presents Newstalk Breakfast, weekdays from 7am

Irish Independent

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