Tag Archive for 'tax'

“I Didn’t Cause This”

“I didn’t cause this problem and I refuse to pay for it”

I’ve heard this a lot recently. The whole mess was caused by evil bankers, speculators and Fianna Failers, and you’ll be damned if you’re going to be the one to clean it up. Fair enough, whether you’re in the public sector, the private sector, unemployed, a student, a pensioner, or pretty much anyone other than Bertie Ahern or Patrick Neary, you’re probably not directly responsible for the massive property bubble which crippled our government’s finances when it burst.

Of course, being a clued in individual who saw this coming a mile off, I’m sure you knew where the money for your big public service pay increases was coming from for the past decade. And for those middle-earners in the private sector, I’m sure you were well aware of where else the government was taking in revenue to be able to afford to lower your income tax bill to the lowest in the developed world. Those who weren’t so well off were of course keeping full track of how welfare payments could be increased at above the rate of inflation year after year during all this.

As a student, I’m sure you knew where the government got the money to pay your tuition fees and those of all your friends. You elderly folks in the back were also right on top of how the government could make such big increases to the state pension without increasing the retirement age. And, not to forget, that all of you in any of those groups or none are well aware of how spending could be increased massively on policing, health and local services without you having to contribute to it.

At the height of the bubble, the construction and finance sectors were contributing tens of billions of euros, directly and indirectly, to the public purse. They were paying for my degree, they were paying for your pension, and they were paying for another guy’s tax break. They were paying for all these things we’ve been taking for granted over the past decade, and they aren’t any more.

So no, you probably didn’t cause the bubble that’s landed us where we are, but you did benefit from it. So did I, and so did everyone else in Ireland. We were all quite happy to take this money that was pouring in from our glorified national ponzi scheme and pretend it would last for ever. Well, of course it didn’t; the money simply isn’t there anymore, and every one of us is going to have to accept the simple reality that we can no longer pay for things with money we don’t have.

Why Obama Should (Threaten To) Veto His Own Climate Change Bill

Obama 2008While most of you reading this will already know how much of a policy nerd I am, if you needed any further proof it would be my reason for supporting Barack Obama in the 2008 US Presidential election against John McCain. While I wasn’t decisively swayed one way or another by the broad policy positions on foreign affairs, economics, etc., I decided to take a closer look at the specifics of their environmental policies (which were very similar on the surface). They both proposed a cap-and-trade system of reducing emissions, but Obama promised that 100% of the emissions credits would be auctioned off, whereas McCain had in mind a system where some of the credits would be auctioned, and others allocated by Congress. As similar as they were on the surface, Obama was proposing a cap-and-trade system that works, and McCain was proposing one that doesn’t, so I shifted my support to Obama.

Fast forward to 2010, though, and the climate change bill that’s moving from Congress to the Senate is far removed from Obama’s system, with a whopping 85% of credits being allocated by Congress and only 15% to be auctioned. This doesn’t just defeat the purpose of a cap-and-trade system, but is actually worse than no bill at all. By giving congressmen the power to allocate hundreds of billions of dollars worth of credits, the bill would create a volume of pork that even the most cynical of Washington-watchers would never have thought possible. The system would be a goldmine for lobbyists, and the credits would end up mainly in the hands of the most highly polluting industries, leaving lower-polluting companies to buy them via auction, and ironically shouldering the higher costs.

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The Ethics and Economics of Inheritance Tax

In the run up to the budget, with Ireland digging itself into more than €400,000,000 of extra debt every week, it’s unsurprising that there’s a lot of disagreement on how to bridge the gap between tax revenue and government spending. Some favour huge tax hikes, some want massive spending cuts, some are looking for both, and there are even a few who don’t want to have to deal with either, and hope that the whole thing will just sort itself out somehow. While I would more usually align myself on the side of spending cuts, there are a few avenues open for the government to increase tax revenue without pushing the economy further into recession, and I believe these should be fully exploited. In particular, there’s one form of tax of which there has been barely a whisper of discussion on of late, and that’s inheritance tax.

In Ireland, tax on inheritances comes in the form of the Capital Acquisitions Tax (CAT). This tax, which also covers gifts, was increased from a nominal rate of 20% to 22% in the April budget, but due to a range of exemptions and reductions that cover pretty much anything anyone would ever be likely to inherit, the actual effective rate will top out at 2% even on the largest inheritances, and in the vast majority of cases will be zero.

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An Economic Miracle Cure? The Case For A Negative Income Tax In Ireland

Ireland is in the middle of what can only be described as a complete economic meltdown, with a recession to the tune of 8% of GDP, unemployment reaching into double digits, and a catastrophic decay in the public finances. Attempts to deal with these problems have unfortunately been limited to tinkering around the edges with marginal changes in the tax rates and limited cuts in public expenditure. The recent mini-budget has continued with this approach, and there have been very few proposals that have gone much further than creative accountancy when it comes to the budget, and little more than platitudes regarding a reduction in the unemployment rate, let alone anything that seriously addresses the collapse in GDP.

There is, however, a little known miracle cure that could do the trick for the Irish economy. It’s a relatively simple idea that could create 300,000 jobs, save the Government €2 billion, bring down the cost of living, dramatically increase Irish competitiveness and turn the corner towards economic growth. Sounds too good to be true? Perhaps it is, because nobody’s ever actually tried it.

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