Labour's Tax cut can work - Political Quote

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Monday, February 12, 2007

Labour's Tax cut can work

In Saturday's speech, Pat Rabbitte made a dramatic move on tax committing Labour in Government to cut the standard rate of tax by 2% points in the first two years of Government.

For some years now, income tax in Ireland has been structured around two rates. The lower or ‘standard’ rate and the higher rate. In 2007, a single person will pay tax at 20% on income up to €34,000, and tax at 41% on income over €34,000.


In his Budget speech last December, Brian Cowen reduced the higher rate of tax from 42% to 41%. He promised that if returned to Government after the election, Fianna Fáil and the PDs would cut the higher rate again to 40%.


In his conference speech on February 10th, Pat Rabbitte stated that, rather than reducing the higher rate, Labour would cut the standard rate from 20% to 18%.


At present, cutting the top rate of tax only benefits taxpayers who earn more than €34,000 (single person) and those who earn most benefit most. When the standard rate is cut, all taxpayers benefit. Those on lower and middle incomes gain most, as a proportion of their incomes.


The average industrial wage at present is about €32,000. It is likely to rise to just under €34000 by the end of 2007. So it is clear that the FF/PD tax plan gives nothing to workers on or below the average industrial wage.


But the big question must be an we afford it?


The Government this year ran a surplus of €2265m – so they were €5,190 million better off than expected in the Budget for that year. It is a normal part of the Budget process to include a tax package, to a greater or lesser extent – the income tax package in Budget 2006 cost just over €1250 million. This makes the 2% cut readily affordable.

18 comments:

el tom said...

Is this really such a great idea? Ireland already has one of the lowest tax burdens per capita and as a percentage of GDP in Europe... perhaps it would be more equitable to raise tax rates for the rich and use the growth to fund public services?

Or do you think that would represent to great a drag factor to growth?

Political Quote said...

I earn a lot less than the average industrial wage and I can tell you that this tax cut will mean a lot, an awful lot, to me and the likes of me.

We have one of the lowest tax systems yes but one of the highest in hidden taxes. For example electricity (which is state owned) has risen by 20%, 5 years ago it was the cheapest in EU now it is one of the most expensive.

Passports used to cost 30 now they are 75 etc etc. Our gov has been keeping direct taxes low but indirect taxes have risen.

The current gov are planning to cut the top rate of tax. This will only help the high earners. Labour are going to cut the lower rate and this will help everyone.

We have no need to raise taxes as we are swimming in money over here gov wise.

What we need is better management of the money not more tax rises.

Simon said...

If this was not a labour policy you would be against it. The 1 billion it costs could be used to finance housing, medical cards, education in disadvantaged areas. All stuff that has actually benefits. And the idea behind tax cuts is usually to stimulate the economy which this will do little. Indeed with the rise of inflation will probably get rid of this tax cut pretty soon.

Where as a measure such as a cut in VAT by 2% could bring down the price of living and reduce inflation some what.

As for electricity costs what are Labour going to do about that. Fire some over paid workers in the ESB. Privatise some power stations to let in competition. Upgrade the grid to allow competition. I don't think so. Use taxes to subsides electricty costs? So we pay electricty by stealth.

Political Quote said...

I can honestly say that I have never, ever opposed a reduction in the standard rate of tax!

I am surprised at your comments that tax cuts are only to stimulate the economy. Surely you believe that if the gov doesn't need the money it shouldn't take it out of our pockets?

There is plenty of money left over for all finance housing, medical cards, education in disadvantaged areas. In fact these issues are part of our Five Commitments.

As to electricity prices, under this gov they have risen from the lowest in europe to the highest.

Oil prices have driven the price up.

The gov are also artifically increasing the price of electricity to assist private companies to come into the market as they could not compete with the ESBs prices five years ago. So this is a case of privatisation increasing the price of electricity.

In the UK electricity prices are higher then they were before privatisation.

Don't give us the privatisation guff. You can't privatise utilities. It ends up costing more in subsidies then he does running them by state.

Simon said...

Surely you believe that if the gov doesn't need the money it shouldn't take it out of our pockets?
So you think we need no more spending on social inclusion measures fair enough.

In the UK electricity prices are higher then they were before privatisation.

yes and in the period 2000-2005 they had the greatest decrease in prices of any EU country. in a time of record oil prices. and even greater decrease then the largely nuclear French state monopoly.

Political Quote said...

The decrease in UK power prices even during the high oil prices shows how much profit there is to be made on privatisation.

As to the economy Labour will spend money where its needed eg social inclusion as you point out and not where it is not eg
electronic voting 62 million, Bertie Bowl, Pulse, etc, etc etc,

Simon said...

The decrease in UK power prices even during the high oil prices shows how much profit there is to be made on privatisation. No it does not. to prove that you would have to show non privatised countries decreased prices lower.

not eg
electronic voting 62 million, Bertie Bowl, Pulse, etc, etc etc,


That does not answer the question why a tax cut is better then using that money for social inclusion

Political Quote said...

A.

Yes it does because the only way they could reduce prices while oil costs were rising was because the price was inflated way above what they needed hence they could still make a profit while making cuts.

B.

Those are just a few examples of how gov money is being wasted instead of being spent where it is needed. Labour will stop this waste and we can still cut taxes.

Can I ask you do you oppose the cut in the upper tax rate proposed by the PDs?

Simon said...

Yes it does because the only way they could reduce prices while oil costs were rising was because the price was inflated way above what they needed hence they could still make a profit while making cuts.
So wage cuts, improved efficentcies, consolidation have no effect on prices in a business at all do they.

Those are just a few examples of how gov money is being wasted instead of being spent where it is needed. Labour will stop this waste and we can still cut taxes.
Please stop dodging the question you make bertie look straight talking. So here is the question again.

why a tax cut is better then using that money for social inclusion

Can I ask you do you oppose the cut in the upper tax rate proposed by the PDs
Yes.

Political Quote said...

A
I am sure they do but not to that extent. Besides what so great about wage cuts? Would you like your's cut?

B
The government's resources can be handled better to deal with such issues AND we can still afford to give people more of their money back.

C
You should make your opinion better known within your party.

Simon said...

I am sure they do but not to that extent. Besides what so great about wage cuts? Would you like your's cut?
That really is not the point. ( I could go on about it but not at this point in time) The point was that there is many ways to explain cuts in costs other then just jumping on the conspiracy band wagon.

AND we can still afford to give people more of their money back.
So it is better to give the billion back to the rich (this is still going to disproportionally give more money to the rich then the poor many of whom don't even pay tax anyway) then give to the poor. Fair enough.

You should make your opinion better known within your party.
What makes you think I am a PD can some not think for themselves and not be in a party. Can someone disagree with you and not actually be in any political party.

Political Quote said...

A
Is there a conspiracy? Tell me more.

B
What do you mean when you say "give money to the poor"

C
If you say so

Simon said...

Conspiracy. the price was inflated way above what they needed hence they could still make a profit while making cuts.

You implied they as a group conspired to keep prices up. which implies plans, implies conspiracy.

What do you mean when you say "give money to the poor"
I thought you were a socialist. Social inclusion, funding deprived areas, etc etc.

Political Quote said...

Oh you mean cartels and pricefixing. Are you saying such a thing is unheard of or even uncommon?


You keep talking about social inclusion. What do you mean by social inclusion?

Do I think we should spend more money in these areas? Yes we do.

I also think we should give the lower paid some of their hard earned money back. We can do both.

We can do both because we have billions, that €000,000,000s, in surplus revenue in a population of just 4 million.

Now is the time to reduce the tax burden and make tax fairer.

Simon said...

As you are accusing the electricty companies of what are basically crimes. I suppose you have proof to back this up?

Depends on your definition of lower paid. Many of them don't pay tax anyway. And will not gain one iota from Labour's tax policy. But it will benefit the rich.

While the health service, education and transport are all poorly funded. And you think that this underfunding can be solved simply on the vague belief that Labour will manage to find a few quid here and there. Come on the deficiencies are far beyond that.

Political Quote said...

I am saying that there is no way your super efficent power companies can reduce prices while fuel prices rise dramatically without their having hiked up their prices in the past. It is just economics, they must have had a huge mark up to do this or are you suggesting that they are running at a loss?

The majority of the people of this country are low income earners like me and I assure you we DO pay tax.

There is no vague belief only hard facts or are you suggesting that the extra 5,000,000,000 in un-expected tax receipts for this year is "vague".

Come on!

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