Failures in public services linked to low taxes

A trade union economic thinktank has linked the hospital emergency department crisis and other public service shortcomings to low levels of tax.

Tom Healy, director of the Nevin Economic Research Institute, said the country gets “what we pay for or don’t pay for”.

“Overcrowded A&E, lack of nursing home places, seasonal factors, under-investment in community health, emergencies in public mental health services, large classes, limited public childcare supports, limited public transport, rural areas under pressure, homelessness growing visibly on the streets every night, a direct provision system that will be the subject of high-level apologies in the 2040 — might there be a link to the taxes we pay (or don’t pay?),” said Mr Healy.

“Yes, a lot of tax revenue is going to pay off public debts, including private debts that were nationalised. But that is only one part of the story.”

Mr Healy said public services cost just over 35% of GDP here, not counting interest on public debt.

“That 35% comes from income taxes, social insurance, Vat, corporation tax and other taxes,” he said. “We get what we pay for or don’t pay for.”

Mr Healy said income taxes are not noticeably out of line with other EU states.

Using OECD figures, he said those on the average wage here pay the lowest amount in taxes, including PRSI, USC, and ‘ordinary’ income tax of those surveyed — single people on such a wage pay 17.9%.

He then looked at lower paid workers — those earning 67% of the average wage here. The OECD figures showed they made the lowest tax return of the OECD countries at 11.5% including USC, PRSI and ‘ordinary’ tax.

He also looked at what he called “relatively well-off tax-payers, those on 200% of the average wage”. He said: “In this case, we are probably looking mainly at the top 10%-15% of taxpayers. The estimated tax paid is 34.9%.

“Even allowing for the distortion introduced by tax reliefs, the broad picture remains the same — for high- income earners, the amount of income tax paid is not much above the average for other EU/OECD countries. It is well below what is paid by high-income individuals in Germany, Netherlands, Belgium, Denmark, and Sweden.”

Mr Healy said there was a need to invest more in services, particularly health, community health, and education. He said some of the investment could come from a commercial source, particularly in terms of infrastructure, transport and broadband.

“There is still some scope for raising taxes on better-off individuals and households,” he said “Obviously, there is a limit and there is a balance that needs to be struck. If you look at the bigger picture, Ireland is still below the EU average when it comes to tax revenue.

“There is a case for tax at the lower end as well but the difficulty there right now, is that the economy is barely crawling out of recession so I think there is a need to hold line in terms of living standards for lower income households.”

He said it was alarming that many people made no connection between low taxes and inadequate public services. “In the competition for the next phase of economic development, it would appear that cutting taxes is priority item number one on the list,” he said.

However, he added: “We must not take the eye off the ball of the social wage.”

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