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February 12, 2007

Comments

Fergus O'Rourke

Michael, let me first say that I congratulate you on your website (I hate the b-word) to which I am a RSS-subscriber. In relation to this post, I am not sure if you are wrong in the general line that you are taking, but I feel that like other reactions along the same lines there is quite a bit of knee-jerk to it. For example, you say "The issue here is that Labour’s tax cuts, without compensatory tax rises in other areas, will send the numbers in the wrong direction." Indisputably so, but is there not plenty of scope for this ? And if adjustments do prove necessary, they can be made at the higher end perhaps, thus arguably re-balancing the tax incidence in the opposite direction to that taken in recent years. We are not saying, are we, that the present tax rates are optimally configured ?

WorldbyStorm

But Fergus, that's not what was on the table during the speech. Nothing about compensatory rises elsewhere, etc, etc.

The point is, and I think Michael is completely correct in his analysis here when he refers to it as a 'coda'. Yet this is the 'coda' which has exercised not merely the broad (or let's be honest the rather narrow) Irish left for the past day or two, but the media and the bien-pensants. And no doubt Rabbitte sincerely believes that's a good days work.

My fear is that Labour is slipping into the same sort of zero sum approach to economic matters which the centre right has played here for the last decade where taxation policy becomes a mark of political virility whatever the expense to the social and societal fabric.

This aside destroyed more than three years hard work done by Joan Burton and her team of advisors. All the effort taking on the Dept of Finance and Ministers for Finance wasted in silly gesture politics.

Michael is fully correct regarding the dependence on a narrowing tax base. Examine the current tax sourcess,

a) Corporation Tax. The majority of CT is now paid by a small number of multi nationals who process much of their European sales through Ireland. It is unlikely that our colleagues in the EU will continue to allow this to happen. Ireland is also becoming too expensive a place to do business.

Stamp Duty. This is making an excessive contribution because of the property bubble.

Capital Gains Tax. This too is property based and will not continue much longer.

VAT. We have the highest level of VAT dependence, even with our various exemptions.

Other taxes. CAT & others make very little contribution.

This proposed arrangement will cost approx. €1,200M. The unfair treatment of one income households will continue.

There must be some viral disease that this rabbit could be given.

Michael

Thanks for your comments, Fergus, and the fact that you are a subscriber. I certainly hope I'm not being knee-jerk here which you are right to caution against. And it would be foolish to go to the barricade on headline tax rates. There is the interaction of varying taxes, the burden and the breadth of the tax base to take into account. However, I think it is legitimate to be sceptical of Labour's new tax cut programme.

Some of the problems I have is that it is (a) not thought out or integrated into a wider economic/fiscal programme. This is compounded by the fact that Labour has not produced its own policy document on this area. They did so back in 2000 with 'New Directions, New Priorities' (http://www.labour.ie/download/pdf/new_direction.pdf).

The numbers are out of date but the principle behind putting together a well-argued fiscal approach is worthy even if I might niggle that it didn't go far enough in advancing the case for higher expenditure. If the Left is to be taken seriously on economic issues it has to do more than demand more money to be spent while claiming it can cut taxes, all in a blizard of numbers that obfuscates rather than enlightens. In this respect, why hasn't Labour (or indeed ICTU or any other progressive organisation) entered the debate over enterprise strategy which is clearly linked to a growing economy. We leave all that messy stuff about the market to the Right and then complain that no one takes us seriously.

(b) I wish the issue of compensatory tax rises was viable. But the whole thrust of economic debate for such a long time is the centrality of reducing that most evil of things - taxes. If things went belly up - not in apocalytpic way but more insidiously with slight contractions happening everywhere - is it really feasible to increase the top rate of tax by 4% (that would compensate for the 2% drop in the standard rate) or slap capital gains tax on the sale of homes? A tax-rising agenda is not even on the cards (which is why McCreevey resorted to raising taxes by stealth through non-indexation of bands). Not only are we not challenging the agenda of 'low-tax, low-spend', we are now in danger of being co-opted into it.

(c) The third problem (but by no means the last) is the failure to engage with people in an open and honest dialogue about tax. To say, as Rabbitte has in the past (and something I believe he is sincere about) that we want public services and social protection on a par with best practice in Europe, but not detail how we are going to pay for that - well, 'there ain't no such thing as a free lunch'. Ultimately, you can't get European style services without European level of taxes.

Obviously, a few weeks before an election is not the time to engage this debate. But sooner or later, if we want to win people over to higher living standards, we'll have to start. Labour's proposal postpones even further that necessary dialogue (even in political terms - you have to admit that if a party spoke honestly with the electorate, that in itself would be so novel people would at least listen).

I'm afraid I'm more sympathetic to WorldlbyStorm's observations. As to Anonymous, the reference to 'viral disease' is a bit extreme but, I suspect from the tone and info of the comment that you may have been involved with developing Labour's economic policies (and not involved with the tax cut proposal). If so, the grievance is understandable. It would be interesting, therefore, to hear more - as in a simple, 'Where did this proposal come from and what was the intention behind it?'

Daniel Dunne

I know Labour dropped the idea of socialism some time ago (and we are all adjusting our positions all the time) but it seems now to be hell bent on throwing out the core values of social democracy too. "Payback time." Should I give up and join the Greens (again!).

Michael

I'm not going to suggest joining or quitting this or that progressive party. Wherever constructive and non-sectarian activists are working is good. I'd just suggest that each progressive party has its own contradictions (admittedly some are bigger than others). You might find yourself caught between the proverbial frying pan and fire. As well, there is no progressive future in Ireland without Labour playing a leading role. The challenge is to strengthen this tendency whether from the inside or outside. Or, as the Simpson's Fat Tony said, when asked by his acolyte whether he should shoot Homer 'sniper' style or 'gangland' style - 'Follow your heart'.

Luke Mc

I think wailing about this one policy is a little naive. The Government had a coherent strategy for attacking Labour. Now they don't. It simply removes the biggest weapon from the government's hands, and allows us (us Labour people, and also progressives of various hues) to shift the battle to the areas we know we can win on, like climate change, like the PDs ideological inability to provide quality public services such as health, housing or transport. Compare the Labour proposal to the PDs "non-auction politics" madness of 18% standard and 38% higher, which is grossly unequitable. This is a battle cry of a policy, and it makes me feel like we can win the election. The importance of this cannot be overstated.

Michael

Thanks Luke Mc for your comment. You are correct about the tactical need to shift the debate on to the Government's weak points - I made that exact point in the post. So, while I didn't agree with the 'taxes won't rise' slogan Labour was previously using, I understood it and didn't feel a need to criticise it.

Tax cutting is altogether a different beast. It first undermines credibility. There is no economics that can justify the claim that a low-taxed country can aspire to best European practice in social and economic modernisation while at the same time cutting taxes even further.

Second, it ascknowledges the Right's command over the agenda re: taxation and expenditure. Instead of challenging it, we have succumbed to it. We are not debating how we can progress the economy through social provision, rather we are debating how best to cut taxes. The debate is now stuck there.

As someone who works for a local Labour candidate I want to see any increase in the polls for Labour. But 'win the election'? No, we won't win the election if we end up supporting either a Fianna Fail or Fine Gael-led government (in that respect we could end up losing seats and still end up in Government - do we 'win'?). We won't even start to hope to win an election until we achieve credibility and seriousness on the central issue of taxation. I fear that promising to cut taxes while at the same increasing spending won't do it. It didn't in 1977.

But here's to hoping for a bump in the polls, nonetheless. Is that contradictory? I suppose so. Some people's contradictions are bigger than others, mine included.

Luke Mc

Michael,
I agree about your long term ambition, it is important that Labour strive to lead government at some stage. But that ain't going to happen in the next four months. I believe that a FG-Labour-Green government is the best option for the country and I believe it is one that most people in this country would find acceptable. I personally feel that a carbon tax may become inevitable during the lifetime of the next government, meaning that the benefit of the 18% rate could well be made up by a tax on high carbon emitters, which would be progressive.

I understand your antipathy to the two main right-wing parties, but I think you must also factor in the incredibly corrupting influence that FF have on Irish society. Removing them from office is a real priority for me, and even if we lost seats but managed to throw out this shower we have at the moment, I WOULD regard this as a victory of sorts.

Michael

Let's focus on where we agree, Luke and that is that Labour should strive to lead a government at some stage. I'm just anxious that it happens sooner rather than later. If we had all sat down the day after the 2002 election result we might be closer to that goal today.

Still, this train won't stop until the election so there's no sense in wishing it were otherwise. But we can think about the future (you get a lot of time to think leafleting roads that never seem to end). And resolve to act.

So how about this? The Monday after polling day let's meet in O'Neill's around 5:00 regardless of the configuration the Left may find itself in. I always find pre-figuring new progressive alignements in society is a lot easier with a pint in hand. And the first round's on me.

Lorenzo

Pearse or Suffolk Street?

Michael

Geez, Lorenzo, I didn't know you were interested in establishing the theoretical base for a coalescing of progressive forces in order to challenge the hegemony of the historical duopoly of Irish politics. But if the Left is not an open conspiracy, its nothing. You're choice.

Lorenzo

Well if you're going to be talking like that, you'd better make it Suffolk street.

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Take care of it and keep it on the road!

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