Notes on the Front

Thank god someone is talking common sense.  Tom O’Connor, economist at the Cork Institute of Technology, was on Morning Ireland arguing that rather than cutting expenditure, we should be looking to increase taxation on the wealthier sections of society  His premise is that our tax take is low and what we need to stimulate the economy is more tax revenue.  Currently, there are only two drivers of the economy – government expenditure and consumption.  To cut either is only to prolong the recession.  More tax revenue would ensure the maintenance and hopefully improvement in essential services while at the same time freeing up more ground for borrowing.  The extra revenue could come from a variety of sources, namely increased taxation on those with incomes of over €100,000 per year and the elimination of regressive tax expenditure (that is, reliefs, allowances, exemptions, etc.). 

What a breath of fresh air.  To further buttress Mr. O’Connor’s argument that we can raise taxes without harming economic growth I offer a few proposals:

• Cut tax and social insurance subsidies to those on large salaries – say over €500,000.
• Abolish tax relief on co-located hospital developers and medical insurance for private hospitals (or cap the maximum relief allowable for medical insurance)
• Impose a 1% tax on all house property valued above €1 million. Extend that tax to ‘second houses’ which are not rented (and registered) list
• Transfer the subsidies to fee-paying schools to national schools with debt problems (the current subsidy to fee-paying schools would wipe out all national school debt)
• Phase out mortgage interest relief to those with incomes over €100,000 per year
• Extend Health Contributions Levy to capital and inheritance income (PRSI should also be applied but Health contributions are paid directly into the Exchequer)
• Freeze or cut thresholds under inheritance and gift tax – currently a daughter/son can pocket €500,000 in unearned income without paying any tax.
• Increase Capital Gains Tax by 5% – it’s still well below the 41% income tax rate
• Slash the annual pension contribution threshold by €100,000 – this will only affect people on high incomes
• Increase VAT on truly luxury items – yachts, Jaguars, Jacuzzis, handbags that retail for €1,000, etc.
• End the subsidies to employers who take off their employees’ contribution into a pension scheme but don’t pay anything in themselves
• End the exemption of principle residences from capital gains tax – after paying off the mortgage, inflation and repairs/improvements (after all, its unearned income)
• Property left derelict after a year – impose a 1% tax on the market value
• End every subsidy (tax reliefs, allowances, etc.) for anything to do with property speculation

Okay, maybe not everything on this list is workable. Whatever we do we have to ensure that it doesn’t contribute to less economic activity (interventions in the housing market should be treated with particular caution). But there are plenty more where these come from – the subsidies, either direct or indirect, that flow to the wealthier sections of society and paid for by the rest of us.

So come up with your own and e-mail them to the Cabinet. Its fun thinking of how those who have benefited the most must now sacrifice the most.