When will Ireland be all grown up? When it can be honest about how the State pays for itself? Are we there yet? Not if the disgraceful response of the once and future taoiseach Leo Varadkar to the report of the Government-appointed Commission on Taxation and Welfare is anything to go by.
The first thing to be said about this report is that it’s one of the best official documents produced in Ireland in recent decades. It’s an exemplary piece of public service: well-written, clear, thoughtful, honest. Every citizen should read it.
The second thing to be said about it is that the current Government asked for it. It did so because everyone knows that there are huge problems with the sustainability of our taxation system.
Yet Fine Gael, which is part of that government, seems determined to rubbish the report before the public has a chance to get to grips with it. It’s doing this in the most irresponsible way, with attacks that come very close to political smears.
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The report is 547 pages long. It took me a week to go through it. I very much doubt that many people, even those in professional politics, had read it before Varadkar went on the attack.
The report was published on September 14th. Varadkar sprang out the traps on the very day of publication, claiming that a number of the commission’s recommendations are “straight out of the Sinn Féin manifesto”.
This was an open slur on the members of the commission, who were appointed, let’s remember, by Varadkar’s party colleague Paschal Donohoe.
So far as I am aware, none of the commissioners has any ties to Sinn Féin. The chair, Niamh Moloney, is professor of law at the London School of Economics. Marie Bradley is a tax consultant. Philip Brennan is the former assistant secretary of the Revenue Commissioners. Sandra Clarke is a former president of the Irish Tax Institute. Fergal O’Brien is the chief lobbyist for Ibec. Anne Vaughan is the former deputy secretary of the Department of Social Protection. And so on.
This is a very mainstream group, drawn from academia, the Civil Service and civil society.
It seemed possible that Varadkar was just shooting his mouth off with the Sinn Féin slur. If so, he could have apologised to the members of the commission. He has not done so.
And then, in a letter to The Irish Times, a Fine Gael councillor, John Kennedy, claimed that the commission’s report had “a heavy emphasis on ‘redistribution’ and in the case of the recommendation on capital acquisitions tax, this sentiment borders on being an example of bona fide Marxism”.
Bigger State
What did the commission do to become the target of such hysterical red-baiting? It tried to think honestly about how a mature democracy in Ireland’s circumstances can raise the money it needs to sustain its society and its economy.
Its great sin was to face the fact that Ireland needs a bigger State with more revenue. It did this because no honest and objective analysis could do otherwise.
The three big reasons for this are all obvious. The State has to solve a generational housing crisis. It has to support an ageing population with a far better health and social care system. And it has to adapt to climate chaos and lead a very rapid shift to a zero-carbon economy.
Two other considerations weigh very heavily on tax policy. One is that Ireland has the second most unequal distribution of market ( “earned”) income in the developed world. This means that the State simply has to engage in that vile Marxist practice of redistributing income through the tax and welfare systems. Otherwise, the levels of inequality would be so great as to lead to social collapse.
The other is that nearly all the slack in the current tax regime is provided by a tiny number of American multinational corporations. Corporation tax has ballooned to 19 per cent of total tax revenue — and more than half of it comes from just 10 taxpayers. That’s a level of dependency that no democracy can be comfortable with and that no fiscally responsible government can take for granted.
Add in the very high levels of public debt we have inherited from the great banking and property crash of 2008 and no grown-up can see our current tax regime as either sustainable or adequate.
The “crime” of what we might laughingly call the Bolshevik Shinners on the commission is that they are not content to lay out this problem. They actually want to fix it.
Taxing wealth
Fixing it means taxing wealth as well as income. But that is not what some of Fine Gael’s core constituents want to hear. For them, the report’s equivalent to The Satanic Verses is the heretical sentence: “The share of taxation from property and wealth is low and should increase.”
Hence the fatwa. The commission has to be politicised and denigrated because it makes far too powerful and logical a case for reforms of capital acquisition and capital gains taxes, and for a site value tax.
Since 1987, the share of total wealth held by the top 10 per cent of income earners in Ireland has risen sharply. In 2020, the richest 10th of Irish households, had net wealth of at least €788,400, while the poorest 10th had net wealth below €600.
This wealth is also increasingly concentrated in older households. Generation Rent has a measly 2.8 per cent of Irish household wealth.
But taxes on wealth account for only about 6 per cent of Government revenue. What this means in practice is that younger and less wealthy people have to pay a higher proportion of tax than they would do otherwise.
And it seems quite clear that Fine Gael wants to keep it that way. There’s a large and disproportionately powerful part of Irish society that benefits more and more from the reluctance of the State to tax wealth and property.
Varadkar’s slur on the commission was aimed at pre-empting public debate on its carefully reasoned proposals to shift more of heavy lifting on to taxes on wealth and property. The point is to position his party as the defender of the possessor class.
Fair enough — if he were honest about it. The most basic demands of honesty are twofold. Firstly, to acknowledge that this is picking sides against the young and the dispossessed. And secondly to say where the extra revenue is going to come from if not, as the commission proposes, from increased taxes on inherited wealth, assets and property.
The incoming taoiseach has done neither of those two things.
This is not the politics of a mature democracy. It’s not even conservatism. It’s populism for the comfortable classes.
Grown-up politics is about making choices. Choosing to dismiss all increases in taxes on wealth is choosing to increase taxes on income and to keep our fingers crossed that nothing bad happens to any of the 10 golden-egg laying American corporations.
When we have a taoiseach who chooses to acknowledge that reality rather than to scare us off a hugely important document, our politics might be approaching adolescence.