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.

Mick is founding editor of Slugger. He has written papers on the impacts of the Internet on politics and the wider media and is a regular guest and speaking events across Ireland, the UK and Europe. Twitter: @MickFealty