Fun, Fun, Fun ‘Til Her Daddy Takes Her Calculator Away

We can all have fun in Household Budget Survey land. Conor over at Dublin Opinion has expressed his excitement at delving into 85 pages of dense rows of numbers and categories after devouring a take-away and a Stephen Segal film. I, too, with a glass of wine in hand after watching, what else, Sideways, sat down to satisfy my stat-lust. Where else can you find that in the bottom 40% income groups, no one buys limes? Or that the poorest 10% spend a higher proportion of their income on church contributions than anyone else? Or that the richest 10% spent nothing on funeral expenses (the rich must ‘die harder’)? This data produced by the CSO will keep us warm well into the winter nights and, as a consequence, the social and cultural debates will range from the deeply profound to the wonderfully frivolous.

Let’s leave aside the headline stories about the Survey – that we are spend-spend-spending until we drop now that we have more money than ever to break our falls. For truly, no one story or analysis could do justice to this magisterial data set. Similarly, we might be tempted to analyse the rich-poor gaps but as the CSO points out for a variety of reasons:

The EU-SILC (the EU Living income Survey) is recognised as the primary source of data on income in Ireland.

But that leaves us so much to parse, compare and deduce from. I’d like to try my hand at a small set of figures: the extent to which higher income groups’ spending patterns attract higher state subsidies. For instance, if the state subsidises house-purchasing more than it does rent, we can get an idea of where that public expenditure is going by analysing the spending patterns of the different decline groups. Similarly with VHI relief or a whole group of other categories. So, in Stephen Segal-like fashion, let’s jump into the maelstrom.

Public subsidies are heavily skewered to house purchase as opposed to tenants. The CSO provides a helpful category – beneficiaries of mortgage interest relief:

Nearly ¾ of mortgage interest relief goes to the upper-half of the adult population (the top four deciles of households equals 50% of all adults). Relief for health insurance is only slightly less regressive though this may be an under-estimate as a number of low and even middle income households may not get the full tax relief if they are not fully in the tax net (these figures only relate to expenditure and not to the actual distribution of tax relief).

Taken together, these two reliefs cost the Exchequer (that is, the taxpayer – which is everyone; from the richest to the poorest) over €500 per year (that’s before the Government increased mortgage interest relief in the last budget – therefore, it’s higher). It is questionable whether the vast majority of people are getting ‘value for money’ here.

It is has long been established that pension contributions are highly regressive. The CSO gives us an update – if only for pension expenditure:

While the top 25% of income earners account for nearly 70% of private pension expenditure – the distribution of tax relief would probably be even more regressive as those on the top rate get 41% relief while those on standard rate only get 20%. And this means a lot of money – employees and self-employed pension relief costs in the order of €1 billion a year (and that’s not counting the pension funds’ full tax exemption).

So the distribution of over €1.5 billion in public expenditure is skewered to the highest income groups. By contrast let’s take a look at one particular tax – refuse charges.

Charges for this absolute necessity of domestic life are skewered in favour of high income groups. This extremely regressive tax (or levy or charge) has such an impact that many low income households pay less in income tax or PRSI than they do refuse charges. In any event, the lowest income group pays five times more than the highest income groups as a % of gross income, even though they have nearly 18 times less income.

None of the above should lead us to an ‘abolitionist’ conclusion. All of these are quite reformable: all housing subsidies could be integrated into one taxable ‘Housing Benefit’ payment of equal amount to private and public sector tenants and first-time home buyers. Health insurance relief would be redundant under a regime of ‘universal health insurance’ which would give everyone equal access to hospital and GP care free at the point of use. Similarly, with pension contributions – a state earnings-related pension would replace the need for private pension relief. Even refuse charges: a recycling-incentive levy could be both progressive and efficient but the abolition of economic charging for essential public services would raise the spectre of a new ‘local’ tax – something all political parties shy away from.

But such reforms can be discussed some other time. Today, let’s celebrate the stat-fun the CSO has provided us. For the above is only the tip of the iceberg. So take out your calculators out have fun.

Here’s another taster: the top 30% of households make up 2/3 of all air travel expenditure. How does this fit in with budget airlines’ insistence that cheap fares ‘proletariat-ises’ air travel?