Wednesday, April 14, 2004

More pap from CORI

Again, CORI have come out with more guitar paying, tree-hugging pap. After an intelligent discussion about questions of inequality in Ireland, again the suggestion of increasing the basic adult rate of social welfare by €47 have been suggested. Secondly Ireland has been criticised as a low tax economy.

Not only is the welfare increase, it would do enormous harm to completitiveness and quality of life. This is because social welfare rates do not take into consideration other benefits given to welare recipients and their values. For example, a single person in Dublin may be entitled to rent allowance of up to €110 per week. They receive a medical card which gives them free medical treatment (saving them up to €78 per month on medication and GPs fees of €40 per visit). There are also some extra entitlements for pensionres and those on disability and lone parent payments. Even a single person living in rented accomodation in Dublin visiting a doctors every second month receives a net value of just over €266 per week. Compare this to a person on the minimum wage of €7 per hour working in a full time job on a 37.5 hour week. They received €262.50 per week, before tax, after tax just €254. So in these scenario the person on social welfare is already better off than somebody working in a low paid job.

Lets take another scenario. Unemployed person living in Cork, who gets €70 per week in rent allowance, and visits the doctors only 3 times a year. Medication prescribed value of €200 per year. Net income almost €208 per week. Still only about 45 euro behind somebody working - who effectively is getting just over 1 euro per hour more for working FULL TIME! And this doesn't take into account Christmas bonuses etc. Not only that, but the unemployed/disabled have exponentially better chances of social housing, and can sit on their arses all day!

Lastly, lets take the example of somebody working for €20,000 per year, paying rent of €100 per week (about average in Dublin and many cities.) They are left with €238 per week. But lets say they are asthmatic and visit the doctor twice a year and use the maximum €78 per month on medication. This whittles their wages down to €219 per week.

Now if you start to increase social welfare rates by even €15 per adult per week, this increases net benefits to consderably above somebody on a minimum wage, and almost the same as the working person on a median wage! Why should we take taxes from low earners and redistribute them to non-earners? Where is the logic. I think the social welfare system should be left as it is, but there should be a real effort to remove people on welfare out of the pricate rented sector, where rents are being artificially inflated and landlords (notoritiously mean in Ireland) subsisidies removed, into social housing and voluntary housing associations. This would make private rented accomodation genuinely competitive, which it is not at the moment.

The second problem is that even somebody on the minimum wage pays tax. One of the net results of the so-called tax giveaways of recent years is that lower paid workers are paying an increasingly larger share of tax while better off workers have access to tax avoidance schemes that minimise tax on their incomes (examples are the SSIA scheme, holiday homes, even nowadays mortgage tax relief - which gives ten times the rate of relief that a tenant gets). There is a real need to reschuffle the tax system to tax better paid workers slightly more while reducing the tax burden on lower waged workers. The Fine Gael suggestion of reintroducing a middle tax rate was a good one. This would enable a three tier system which would enable middle income earners to pay a little less. Something similar exists in the UK where there is a starting tax rate of 10%, which mainly benefits very low earners.

There is another idea which would work - to introduce a higher tax rate for high earners while at the same time lowering the lowest tax rate - this would give back some of the extra tax taken from high earners.

Unfortunately tax is extremely contentious in Ireland at the moment because of the heavy dominance of neo-liberalism in the voting population. Unfortunately the voters are not yet ready for a Gordon Brown style budget and would probably reject any notion of Robin Hood taxation policies, unlike in the UK which has already seen 20 years of the devastation of neo-liberal policies on the vulnerable lower 50% of workers.

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