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April 02, 2009



I was reading Michael Smith's editorial in April/May issue of Village Magazine on the bus home this evening. He asks, amongst other things, why we continue to tax the good things in life (including work) while failing to tax bad things like unstainable development, pollution, traffic congestion etc. Reading your post on top of that - I didn't hear the interview and was skeptical enough about the potential of non-income taxes to generate the amount of revenue to ensure the sort of social protections and public services we need - has drawn into sharp focus for me how accepting we PAYE workers are of income tax. I've always just taken it for granted, happy to be contributing and willing to contribute more if it it meant decent health care, education etc for all but now that you draw my attention to it, I see it's infinitely more ridiculous to be taxing work than inheritance and should certainly not be privileged.


Hi Michael,
There is another element to inheritance and it's to do with "equality of opportunity".I suspect that every single party in the state supports "equality of oppotunity".How can we be remotely serious about equality of opportuniy if the super rich can continue to pass on the pot of gold?Social dominance can simply be handed down from generation to generation and talent stifled(and with it parts of the economy).What's the solution?Abolish inheritance altogether,provide wonderful public services for all and impose penal rates of income tax on the parasitical class thus making future inheritance impossible.


Michael, you state that 2If this were done, the tax yield would increase from the current €380 million (or less than a 3 percent effective rate) to €1.5 billion (or 15 percent). This would have very little deflationary effect on the economy".

Why is this not deflationary. That income you are taxing would have gone into the pockets of individuals and spent. You are removing it in tax. So, is that not a deflationary move?


Hi Michael, Liked your article on taxing inheritance but felt you let yourself down in one part. You produced a very telling comparison between 750,000 inherited or made in the economy. But the reference to exploit a few workers was not needed - indeed it weakened your argument. The businessman who makes this money contribures to society both in his taxes and in providing employment. This seems like a good thing and we need more of it.


Sam, I disagree. The businessman or woman may be contributing to society by paying his/her taxes but the 'provision' of employment is rarely a charitable act. Businesses for the most part exist to make a profit and require labour to generate that profit. Indeed for all its touchy feely language strategic human resource management is implicitly about getting more out of people for less. It might talk about empowerment, engagement, and partnership but it is essentially about getting the employee to shift his/her view of themselves as trading labour for wages to believe that they have a higher stake than they actually do. There are lots of employers using the recession now to reduce pay and conditions, and there are lots of employees who feel that they have little choice but to accept. Who after all wants to be unemployed?

Michael Taft

Sam, Yvonne - you're both right. I take your point, Sam, it was a throwaway comment, not germane to the disucssion. If I want to make an argument that the wealthy exploit workers, I should dedicate a particular piece to that proposition.

But, yes, Yvonne, you're right. And I will do that dedicated post in the near future.

Alec, it is arguable that inheritance taxes are less deflationary is based on the idea that no one relies on inheritance taxes for the day to day expenditure. It is a once-off payment which most people are likely to sink into savings, investments (but not necessarily productive ones), etc. However, we rely on income from labour and for many of us, especially those on low-incomes or with families, a reduction in the disposable income will mean a reduction in spending; hence, deflationary. Let's put it into concrete terms. Say I get a €4000,000 cash inheritance. I'm likely to spend some of it (some it outside the state, as on a world cruise to exotic beaches). The rest I will save, invest, put away in some form for future consumption (or place it in a pension plan). Under the current regime, I'm not taxed. But if I'm taxed at an effetive 15% rate, it would leave me with €390,000. My domestic consumption is not likely to be dramatically altered. That's what I mean by less deflationary.

Fergal, you're speaking to my inner Leveller when you suggest that all inheritances should be abolished. But in this world I would be satisfied with inheritances being taxed at the same effective rate as income. When that's achieved, then we can start turning it into a more progressive rate. That would be quite an achievement.

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