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27 April 2006 Edition

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Economy: Robbing poor to give tax cuts to rich

The PD policy record has been one of Robin hood in reverse, robbing from the poor and tax cuts for the rich

The PD policy record has been one of Robin hood in reverse, robbing from the poor and tax cuts for the rich

PD tax figures don't add up

Almost four years to the day of their 2002 election manifesto launch the Progressive Democrats published a new tax policy last weekend that bore striking similarities to the broken promises of their 2002 proposals.

Speaking at the party's annual conference, PD Chairperson Senator John Minihan promised that a couple earning €100,000 would not pay income tax at the top rate which would also be cut from 42% to 40% and that low income couples could earn up to €40,000 annually without entering the tax net. Minihan called it his 100-40-40 policy. Expect to hear a lot more of it in the coming months.

However in 2002 the Progressive Democrats also promised to cut the top rate of income tax from 42% to 40% and proposed that those on the minimum wage would be removed from the wage net.

Over the following four years, the higher rate of tax remained untouched, and the coalition government managed in 2003 to put more people on the higher rate of income tax than any previous government.

In terms of the low paid, only at the very minimum wage rates were households taken out of the tax net, while the only tax that was actually cut was corporation tax on the profits of business from 16% to 12.5%.

In fact up until the 2005 budget income taxes were increasing because of the only minor widening of tax bands. Workers who got wage increases to cope with inflation and other rising living costs found themselves suddenly on the higher band of tax because of McCreevy's and then Cowen's scrooge-like attitudes.

Elitist and patronising

Now with an election coming, the Progressive Democrats suddenly find themselves back in the tax cuts mood. However their new policy has three serious flaws and also offers an incredibly elitist and patronising view of voters.

The first flaw in the PD proposal is that they are also proposing to increase public spending without telling us how they would fund the increases. PD leader Mary Harney told the conference that, "It is not a question of increased public spending or tax cuts. You can have both".

Maybe Harney has found a way round the incredible spending blunders that nine years of the PDs in government have been part of, like the cost overruns in the LUAS and the port tunnel, the flawed public private partnerships or the millions squandered in the health service on ill planned initiatives that have yielded no returns. Nor did the PDs explain exactly how much they will spend on public services in coming years, or as they are in government now why there wasn't tax cuts like they have proposed in last December's budget.

Stealth taxes

There was no mention of the second flaw in the PD policy, that of stealth taxes and massively increased living expenses for most 26-County households. Over the years of this PD/Fianna Fail coalition a lot of households have seen their income tax fall. They have also seen a rise in VAT, year-on-year double digit increases in VHI payments, not to mention massive price rises in electricity and gas, new service charges for waste, and then there is that little matter of buying a house, something that after nine years of the PDs in government has now more than doubled in cost.

Then there is the failure of the PD proposals to deal with the issue of tax reform and the high income elite who pay no tax. Last year Harney floated the idea of a minimum 20% tax rate for the super wealthy, that they must pay a tax rate of at least 20% despite taking advantage of any tax breaks or other reliefs that still exist. This has, it seems, been quietly forgotten now that the party is back in pre-election mode.

Stench of self interest

Finally there is the stench of self interest in the plans. Michael McDowell said at the conference that tax reform is not just for the wealthy, "it is for the coping classes". What does this mean, coping with what? Maybe he means "coping" with traffic gridlock, overcrowded A&Es, substandard housing and under funded schools.

Who are McDowell and the Progressive Democrats kidding? Maybe though it is a case of who are the PDs actually making policies for. Mary Harney spoke in her speech of the party's privatisation agenda. This would allow "firms blossom in the freedom of the open sum". The reality of this has been slave wages in Irish Ferries, massive profits and no benefits for customers in Irish Life, job losses in Greencore and incredibly a phone network that is now bottom of the EU in terms of vital broadband access and ongoing investment.

The PDs will no doubt push these proposals as being for the benefit of the average Irish household. They aren't. The PD policy record has been one of Robin hood in reverse, robbing from the poor and tax cuts for the rich.

An Phoblacht Magazine

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