Two years and seven weeks after it ended, Des Geraghty and SIPTU are still fighting the last general election. Widen the bands, don't cut the rates, was the platform of the out-going Rainbow coalition, backed by the labour movement. The Rainbow lost. A new government was formed by the two parties which had made a joint statement on taxation in the course of the election. If a democratic mandate means anything, it means there is a mandate for the tax policies put forward by the Government. This means cutting the top rate of tax to 42 per cent "and possibly 40 per cent" within its lifetime, as well as reform of the bands. The tax credits system addresses the latter; the former is still mandated by the electorate.
It is called crass, selfish, greedy, short-sighted, stoking up inflation and whatever, but it is the fundamental, democratic starting point. Of course, there is a mandate to continue the partnership process too. But this does not over-ride all other mandated policies.
One has to pay to be a member of IBEC or of a union; one cannot join CoRI without being a religious; one cannot credibly join the INOU, a self-selected group, if one is part of the 95 per cent employed. By contrast, citizenship is free, a birthright for all.
It would totally discredit the partnership process if it gave rise to a permanent government of civil service and social partners, with the hapless, elected government of the day merely passing through, playing musical chairs with the cabinet seats.
Any protest about the possible endangerment of the democratic process will be brushed aside in the efforts to influence policy for the Budget and to conclude another partnership agreement. The least we citizens can ask for is an occasional reminder from government, and an occasional acknowledgment from the social partners, that elections and citizenship have priority over other mandates.
What about the rates and bands and the demands of fairness and equity which Mr Geraghty made much of in an RTE interview? The top rate of income tax being set at 46 per cent has nothing to do with fairness. It is no indicator of equity. No mere number, be it a marginal tax rate or a definition of poverty as 66 per cent or 50 per cent of average or median income, is a litmus test of public morality.
Given our level of poverty why, in the eyes of SIPTU, do the demands of equity mean that a person on £17,000 should keep 76 pence out of her next £1, while someone earning £40,000 should keep only 54 pence? This has nothing to do with equity. It is arbitrary. It has everything to do with the membership of SIPTU and their demands. It is all about old-fashioned bargaining.
Generally the argument that the rich, some of whom are union members, should pay their "fair share" is based on the idea of progressive taxation - that the more one earns, the more one pays. But is a top marginal rate of 46 per cent fair? Why not 65 per cent, as we once had? Why not, on the other hand, 35 per cent?
The labour movement has always, in my memory, argued that whatever happened to be the highest marginal rate at the time was "fair". No government has ever reversed a cut in the highest rate. And so one can rightly conclude that the "fairness" of the top rate has always been a matter of political expediency, simply arbitrary. The argument on equity grounds for maintaining the top income tax rate at 46 per cent is not based on any principle.
If we want to have an argument based on fairness, why not allocate all the £950 million Des Geraghty wants in tax cuts to alleviating persistent poverty and increasing old age pensions? Forget about cutting tax for anyone who is earning the average industrial wage, a person who is not poor. Give no tax cuts for SIPTU members, and none for people paying the marginal rate of 46 per cent either. Would that be "unfair"? It surely cannot be more "fair" to devote that £950 million to tax cuts for people not living in poverty.
My view is that economic growth and wealth creation are needed if we are to have any hope of eliminating consistent poverty. These require a low-tax burden on business and on marginal earnings. They also mean we have to tolerate income inequality. I don't expect SIPTU to agree, but plenty of others in the labour movement know it well. Why doesn't SIPTU argue for something altogether more radical like the elimination of taxation on labour altogether? Then we'd never have to argue about the so-called fairness of this or that marginal rate.
Oliver O'Connor is managing editor, Fintel Publications
