Tax Reform: Voters don’t seem to like job friendly taxation…

With the rise of culture war politics across the west, what about policy? “Opposition politics is partly an artform…” said Steve Richards. “Policies about what you are doing to do…” retorts John Kay.

Well, whichever it is, John FitzGerald thinks Ireland has a problem selling what he sees as job friendly taxes:

Colbert, a French finance minister of the late 17th century, said: “The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.”

In Ireland, income taxes and VAT, which are collected automatically as we earn or spend, largely stay under the public radar, whereas taxes which were paid as lump sums, such as domestic rates, estate duty, wealth tax and the income- related property tax, attracted such vocal protest that eventually they were abolished.

This hair trigger response means that successive Irish (and UK) governments have dealt with the issue of tax on a make do and mend basis. And as FitzGerald points out, there’s no real public appetite for an optimal fix:

Research shows that other forms of taxation, in particular property tax and environmental taxes, have a much less negative effect on the labour market and on labour force participation.

If more of the burden of taxation were shifted to property and environmental taxes and away from taxes on income, this could increase output and result in a rise in labour force participation, especially by women.** Some forms of wealth tax could also raise revenue and enhance progressivity, while not seriously impacting on the labour market.

Unfortunately, the more job-friendly forms of taxation are also the least popular, because of our aversion to lump- sum charges. They also tend to be less progressive than taxes on income. Major tax reform would require a very courageous government, even though the long- term benefits for employment might be substantial.

  • chrisjones2
  • aquifer

    Simple, the government should sting out of lump sum taxes by lending us the money to pay them. They own all the banks after all, and there is no point in bankrupting all the people who are already in negative equity.

  • Kevin Breslin

    Every year companies must be spending millions of pounds on research agencies that say cutting income taxes has a positive effect on the labour market. If that were true, if there was no need for an income tax, I.e. No government spending then ipso facto we would have full employment.

    Millions of pounds are spent on these research agencies and every one of them would struggle to find an explaination for why this would be the case even though it is completely inferred by a economic research that no neutral independent analyst has ever seen the numbers of.

  • Kevin Breslin

    The article does make an interesting point, because under the Republic’s system … Healthcare charges etc. are a de facto lump sum tax. So Fitzgerald’s point about the Irish being adverse to lump sum charges does not necessarily ring true.

  • Virginia

    Paying for your doctor is a tax?

  • Zeno

    “Colbert, a French finance minister of the late 17th century, said: “The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.”

    What a great quote.

  • Zeno

    I think you are a bit confused there. No income tax does not mean no government spending. The government makes more from indirect tax that it does from income tax.

  • Kevin Breslin

    Effectively it’s a tax when compared to the “free” health service of the UK. Don’t the charges go back into the health service? So effectively it’s that health service’s tax.