Sunday 20 October 2019

Getting real

I would like to make some points in relation to the proposed property tax being introduced.

My first point is that we are a socialist country and we have a progressive income tax system, which takes a larger percentage of income from higher earners than from lower earners.

Every time an expense such as the household charge arises, the airwaves become filled with people discussing how unfair it is for high earners to pay the same price as low earners.

If we feel the income tax rates are not progressive enough then we need to elect more radically socialist parties to power.

Even if higher earners pay the same price for a household charge they still have to earn more money to pay it as their overall income tax rates are higher.

We can't keep rehashing the 'how progressive' debate after the tax rates are set in the Budget and we can't ignore them when discussing household charges as if this charge existed on its own and nobody paid income tax.

A very undesirable side effect of all this debate is that people who are high earners start to feel under siege and will start hiding their socially unacceptable high incomes by not buying expensive things.

We had this in spades in the 1970s when even multi-millionaires wouldn't dream of buying a Mercedes for fear people would think them rich.

Undoubtedly, the pendulum swung too far the other way during the boom when people with no money but plenty of neck took to buying helicopters and Bentleys with borrowed money.

What the economy needs and what low earners need is for higher-earning people to spend their money.

We don't need crazy borrowing such as we had during the boom but we need people to buy new cars and houses if they can afford it.

When rich people stop buying expensive things, the main loser is the Finance Minister.

My final point is that the economy is full of feedback. Effectively, the Government has become the Irish bank. The main problem this bank/Government faces is the rapidly falling property market. This impacts the balance sheet through losses for the bank and the economy through people not buying.

This Government/bank is very slow to lend money.

Salaries are falling and tax rates are rising so there are many factors acting to push down Irish property prices.

The Government needs to consider whether a penal tax for high earners who own expensive houses will really benefit the economy and the government coffers. If it knocks a third off all luxury house prices, how much extra loss will that impose on the Government/bank? And what losses would there be for NAMA?

Sentiment is the main driver of buying decisions for those who have the money to buy and if people are made to feel a fool for buying an expensive house then they simply won't buy one and we all suffer from that decision.

Michael Noonan should be old enough to think beyond soundbites and simplistic 'fairness' arguments and consider the wider impact of scaring his prey into hiding and blowing up his own bank with a fatal blow to a very sick Irish property market.

GG Dalton
Address with Editor

Irish Independent

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