Agenda for a Progressive Finance Minister

The possibility of a progressive government allows us to dream of very serious reforms by a progressive Minister for Finance. These are some thoughts.

Tax and Public Spending

Gradually raise the low level of total taxation in Ireland to a little above the EU average and thus enable major public investment and greatly improved public services. There is a strong demand for greatly improved, 21^st century quality public services in Ireland on radio and tv programmes, by NGOs and individuals. 

Taxation

Review all tax subsidies to business and income taxpayers with a view to eliminating most of them, to remove unintended and very costly distortions, most of which are deadweight. In the few cases where there may be a proven case that the subsidies/breaks/ expenditures do offer a return, retain them. Offer cash payments instead of these hidden tax breaks to sectors/ businesses where they can deliver for business and for the country. 

For example, SARP gives a tiny group of executives who are paid between €75,000 to €1,000,000 a tax reduction for 5 years and they also get subsidies for schools fees and expenses. 30% of income over €75,000 up to a limit of €1,000,000 is free of income tax. This undermines the horizontal equity of the income tax system. End subsidies to property companies REITs etc, property investors such as investors in student accommodation, the horse racing industry, etc. Immediately limit offsets of losses against profits (including capital losses to gains).

Join with EU to tax Transactions (Tobin tax - a revenue raiser, and it limits market turbulence).  

Perhaps consider a tiny charge on emails to reduce/eliminate online SPAM and fraud.

Use taxation for redistribution. The rich are so now so rich that redistribution will actually generate both revenue and productive incentives within the economy, as the rich spend and invest little. Low interest rates reflect the vast sums chasing a home. Curb Trusts and other avoidance mechanisms and make tax exiles unwelcome in Ireland, unless they contribute.

Raise taxes on the transfer of wealth (with state loans for inheritors of farms, businesses and houses) but terminate the 90% reduction in inheritance tax on business property, land buildings plant etc – which has no ceiling – Business Relief - for the children of the super-rich.

Work with the EU and OECD to coordinate tax systems in Europe to end destructive tax wars between states (eg here Malta offers a max income tax of €15,000 a year or Portugal which has no tax on capital gains).

Consider a small wealth tax on individuals (not households) with over say €2m net each.

Massively increase the auditing and anti-avoidance capacity of the Revenue.

In order to reduce tax and public spending on welfare over time (which is very effective in reducing Ireland’s gaping market inequality), legalise trade unions’ collective bargaining rights.

Property Taxes

The last thing a progressive government should do is abolish taxes on property. Property taxes, then called rates, were abolished in 1977 by a populist government and this act with massive increased in public spending reduced the country to debt and penury for over a decade. Every Irish government was afraid to bring in a property tax until the Troika correctly forced it’s reintroduction.

• Property taxes are equitable, falling mainly on the wealthy;
• are a stable source of income for the state;
• damp-down property price fluctuations;
• can be used for local initiatives;
• and are very, very hard to dodge.
• Their design can be amended as needed.

However, there is one reform made by the anti-tax advocates which should be considered. 53% of the 1.15m Irish owner-occupiers own their own homes outright and a considerable number of others have small mortgages. Thus for the small minority who have large mortgages, mitigation on the property tax can be introduced. Also to reduce the Dublin/rural disharmony where rural McMansions may be untaxed, square footage can be factored in with market value in the calculation.

Investment

Greatly increase public investment in public transport, cycleways, tram systems in all cities,  the environment, public housing and in innovation. Borrow from the EIB and other EU bodies to the maximum allowed under the notorious Stability and Growth Pact (with other progressive EU states, seek immediate reform of that pact). End all PPPs etc which are not delivering value and terminate the vast array of subsidies to private interests. The first of which is to capitalise the vast sums in subsidies to private landlords through a massive investment programme in the best public housing.  End the financialisation of housing.

Climate Repair

Ireland is lagging on climate repair and this must be a priority of a progressive government. It is vital that there is a Just Transition so that the minimum are left behind from farmers to fossil fuel workers. Innovation can provided cutting edge jobs and we can work with EU innovators on building new carbon free industries and transport systems. Tram systems for all cities must be considered, along with cycleways, pedestrianisation, greenways and eclectic plug-in points.

Public Service Reform

As public spending on improved public services is ramped up to EU levels, simultaneously radically reform of such spending is needed to generate much greater value for money. Radically reform public administration to bring it into the 21^st century, with  major inputs from employees and their unions, with public service managers taking long-term responsibility for their sectors, building corporate memory, taking responsibility and delivery of efficient services from the central civil service through local authorities to all other areas. End outsourcing and Public Private Partnerships except where they deliver real measurable value for money and do help to deliver major one-off programmes. Ireland has a fine public service but it could be greatly improved. This is a must if we are increasing taxes to fund better public services.

Adequately fund and implement Slaintecare in full cooperation with all workers and their unions.

Continue to reform Garda management and fully fund the army so that not one public servant/soldier depends on FIS.

Reform local authorities to take back all the outsourced services from waste to parks, traffic management etc and recruit trained managers who will manage staff instead of outsourcing workers.

Posted in: Economics

Tagged with: departmentoffinance

Paul Sweeney     @paulsweeneyman

Paul Sweeney is former Chief Economist of the Irish Congress of Trade Unions. He was a President of the Statistical and Social Enquiry Society of Ireland, former member of the Economic Committee of the ETUC, a member of the National Competitiveness Council of Ireland, the National Statistics Board, the ESB, TUAC, (advisor to OECD) and several other bodies. He has written three books on the Irish economy and two on public enterprise, including The Celtic Tiger; Ireland’s Economic Miracle Explained and Selling Out: Privatisation in Ireland, chapters in other books and many articles on economics.