The Budget & The Rich


The government’s economic think-tank, the ESRI, wrote in the Irish Times in the aftermath of the budget that the measures taken over the past four years have been “strongly progressive” i.e. that they redistributed wealth from the rich to the poor. However, this is a somewhat convenient timeframe to apply and ignores the impacts of the measures announced in the 2011 budget.

A number of individuals and organisations subsequently addressed the fallacy of this argument. Firstly, Pat O’Brien pointed out in the Sunday Business Post that self-employed people with incomes over €175,000 had their income tax rate cut by 3%, while the “Universal Social Charge” (a combination of the income and health levies) will now be payable by everyone with an income over €4,004 as compared to €15,046 previously. The Unite trade union then calculated that “those who earn €1 million a year will pay €10,936 more on income tax and PRSI but that under the Universal Social Charge, they will pay €34,931 less than under the Health and Income levies which they replaced.” Their economic advisor, Michael Taft, details further ( how the budget has redistributed wealth from the poor to the rich.

If you look past the effects on people’s incomes, it also becomes clear that the intended effects of the budget are somewhat at odds with the ESRI’s analysis. Sara Burke, writing in the Irish Times on 14/12/10, outlines how cuts in the minimum wage and social welfare, VAT increases and the imposition of charges for health services as well as cuts in said services will impact disproportionately on the poor. While the tax system may remain moderately progressive as a whole (if you allow for the super rich who often pay tax at effective rates in single figures), none of the above outcomes could be described as “strongly progressive”, if the word is to retain any meaning and not just becomes another euphemism for attacks on the poor and workers, like “reform” and “adjustment”.