15 October 2008

Pour the water over

Well, what can we say about the budget that hasn't already been said in the mind of all who saw it/heard it/read it? We knew that it was going to be austere, but at least there was the hope that it would be fair. Turns out Mr Obama is using all the available Hope this year, global prices have skyrocketed and its very, very hard for anyone else to source it.

Let's start with the big ticket item, the income levy, 1% on all gross earnings up to €100,100, and 2% on all earnings above that, then the regular 20%/41% tax rates are applied. It is true that there are a large number of allowances and tax credits that someone with a skilled accountant can avail of, so those in the higher tax bracket often find very creative ways of reducing their taxable income on paper. Introducing a flat income levy with no allowance, exemptions, if, ands or buts goes some way to tackling this, ensuring the wealthiest in society pay their fair share. However, levying a flat 1% on everyone under €100K, with no allowances for those on minimum wage or below the poverty line, is blatantly unfair.

In 2006 the upper tax rate was lowered from 42% to 41%. I thought, well that's nice, but to be honest it didn't really make that much difference to me. If the majority of your income is already in the upper tax bracket the difference that the extra 1% back each year will make to your life is not going to be significant. If the majority of your income is in the lower tax bracket, then 1% will clearly make a difference to you. A fairer way of raising revenue would have been to leave the 20% rate untouched, increase the 41% band up to 43% or 44%, and close many of the tax loopholes that are exploited by the wealthiest 1% in this country.

Look, I agree with tax. I passionately agree with the redistribution of wealth to create a fairer society, and I am happy to pay tax because I can afford to. I paid more tax in 2007 than my entire salary was in 2005, so I am the type of person that should be shouldering more of the burden in tougher times. Taxing those on minimum wage at the same level as me hits them disproportionately harder, and is simply not fair.

At the same time as the 1% levy was applied to those who can least afford it, the government left the Corporate Rate of tax unchanged. Never mind that it is already on of the lowest in the world, and companies like RyanAir and Jury's Doyle Hotels have historically managed to pay little if any tax on massive earnings, asking the weakest individual to shoulder the burden while at the same time asking nothing from the massive corporations who have gained the most form the Celtic Tiger is also grossly unfair. I know that the government is under massive pressure from other EU countries to raise the corporate tax rate to level the European playing field, and such a move in this budget would weaken their position in such negotiations, but if the government actually managed to collect tax from many of the largest companies, and closed the many loopholes in Corporate Tax law, the levy on individuals would surely be unnecessary.

I'm less concerned with the elimination of automatic medical cards for the over 70s - I am a firm believer in means tested benefits; if you can afford it, you should pay for it. The same measure should be applied to university fees, but I know that I am in the minority on this. The theory of means testing is always let down by the actual implementation, and I will wait to see what the income levels are the means tests are benchmarked against before passing judgement on this.

The increases on the 'old reliables' are very interesting, 50¢ on a packet of cigarettes and a bottle of wine, but no increase on beer or cider. This is because a) (as the Very Understanding Girlfriend pointed out) Ireland does not produce wine, so a decrease in consumption does not hurt Irish business and b) (as I more cynically suggested) people drink wine at home, not in pubs. Increased prices discourage home drinking and along with the recent reduction in opening hours for off-licences drives more people out of their homes and into pubs, and publicans are a strong and vocal component in Fianna Fáil's supporter base.

I am disappointed with the use of greenwashing to distract from some of the more cynical measures. Using environmental concerns to justify the €200 tax on car parking spaces is shameful, and the removal of Benefit In Kind Tax on a single company sponsored purchase of a bicycle in a five year period is pathetic, not to mention insulting to anyone who has already been cycling to work and gets absolutely nothing out of this budget in recompense. The exemption of electric vehicles from the motor tax increases is a good move, however I have yet to see if it applies to hybrids, or solely to pure electric vehicles, of which there are about two in the country, and nowhere to recharge them. Again, I'll wait until the Carbon Budget this afternoon before I make up my mind about the Green's performance in this budget.

The bottom line to this is that as with the Bush administration in the US, the government has taken a surplus and over the last few years systematically squandered it on benefiting the richest in society, and now the poorest in our society are being asked to shoulder the greatest burden as we desperately try to put right what has gone very, very wrong.

Today is the United Nation's first Global Handwashing Day, and somehow I find that oddly appropriate.

2 Comments:

At 12:23 pm, Blogger Aidan said...

On the means testing for over 70s medical card. It can cost €200 a month for insulin at the moment meaning a pensioner with diabetes who fails the means test is looking at an extra outlay of nearly one and half thousand euros a year for vital medication.

While see your point that "those who can pay, should pay" I think if that the budget demonstrates anything our government likes setting arbitrary limits, and my suspicion is the means test will be set at level that will punish those for whom a sum like 1,500 euro will mean they are faced with the tough decision of whether to buy vital medicine or y'know food, or fuel for the winter.

I know it remains to be seen if this is the case, but cynicism born from experience suggests that this is the likely outcome from means testing the medical card.

Combined with the stockmarket downturn hurting private pensions, the return of college fees, the medical card means testing is a nasty boot into the stomach, for the generation who suffered during the 80s, worked through the 90s boom, and now retiring are faced with the fact that they cannot reap what they sowed.

Mind you, they probably shouldn't have kept voting FF into office should they?

 
At 11:03 am, Blogger Snag Breac said...

on the alcohol issue... isn't it also because diageo lobbied the government in the week coming up to the budget...

 

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