Now that the first blast of dust has settled in the debate on the Irish budget, ERSI analysts have asked – Is It Fair? The short answer is, who cares about fairness when ( nearly) everyone is feeling pain? The more complex one is that it all depends on from where you’re looking at it. Relative fairness may have been achieved better than a Sinn Fein platform rant would have you believe. But absolute fairness becomes harder to claim lower down the scale. Perhaps the best that can be said here is that the cuts come from a higher base than in the UK, where people also start to pay tax a cool 9k earlier than in the Republic (at least before the Budget takes effect)., as Andy Pollak’s recent post reminded us. But again, who in the Republic cares about comparisons with the North?
A caveat should be entered here too. Anyone who delivers dogmatic verdicts on the basis of relativities and outside comparisons had better be sure they’re comparing like with like, taking in tax credits and the cost of living. Comparisons within the same State system is tricky enough, never mind between two quite different systems.
Why is it that the Irish government like most others balk at soaking the rich with higher tax rates at times like these? The answer has little to do with the charge of going out of their way to outrage public opinion by giving one final bung to old cronies. How perverse is that? It’s because major redistribution during a recession adds to costs at exactly the wrong time and because of one other brute fact: that holding tax down as low as possible (even at these deflationary levels) boosts the chances of the growth that Ireland desperately needs. This is the deal that Obama has settled for in the States. And it’s in American growth that Ireland’s best hopes lie in pulling out of recession sooner rather than later.