In his rush to join the "tax cuts chorus" being sung by Mary Harney and others, Oliver O'Connor has seriously misrepresented SIPTU's position and mine.
He seems to think that Fianna Fail and the PDs made only one election promise in May-June 1997 - to cut the top rate of tax - and that SIPTU is objecting to them keeping their promise to the electorate.
Not so. On tax, the current coalition parties made at least two other important promises. One was to ensure that 80 per cent of taxpayers would pay no more than the standard rate of tax. The other was to honour the terms of Partnership 2000.
The coalition's first budget partially honoured one of those three promises: it cut 2 per cent off the top tax rate. But it has not honoured the other two. SIPTU is urging it to do so.
Paragraph 1.3 of Partnership 2000 specifically committed its signatories to keeping within the framework of the NESC report Strategy into the 21st Century. The tax component of that strategy explicitly stated that the priority, in reducing taxes, should be to reduce the burden for lower to middle income-earners. This, it said, meant giving priority "to increasing basic allowances, rather than reduction of income tax rates".
From the point of view of equity, honouring Partnership 2000 and keeping the "80 per cent" promise, that first budget was a disaster. But in its second budget the Government did try to redress some of the imbalance. It made progress on increasing tax-free allowances. It raised the minimum entry point to the tax net from £79 per week to £100 per week, as sought by the unions and others - one of SIPTU's main demands last year. It also began the move to tax credits - another of our major demands. However, on its own "80 per cent" promise, and SIPTU's other main objective, this Government has made no progress at all. Worse, it has allowed things to slip backwards.
Two years ago, 62 per cent of taxpayers were paying at the standard rate of tax. This Government promised to raise that proportion to 80 per cent. But that proportion has fallen to 56 per cent.
The solution is not to keep reducing the top tax rate, while keeping so many tax payers on that rate. The solution is to raise both the entry point to the standard rate and the entry point to the top rate.
This is what SIPTU has been advocating for many years. It's not, as Mr O'Connor scornfully maintains, a question of "Des Geraghty and SIPTU still fighting the last general election". We took this position before, during and after that election, because it's the one that clearly benefits lower and middle income-earners most. And for reasons of equity and equality, the higher earners among us are prepared to receive lower gains than we otherwise might.
It should, at this stage, be beyond dispute that if you devote resources mainly to increasing the tax-free allowances/tax credits, all taxpayers benefit more or less equally, in absolute terms. So proportionately, the lowest-paid gain most.
If you widen the standard-rate band, everyone earning over £14,000 per annum gains. They all gain equally, in absolute terms. Proportionately, the middle-income earners gain most.
But reducing the top rate of tax is the least equitable move. A majority of taxpayers gain nothing at all. Those on average earnings may gain even less than under the other two options. Those on the highest incomes gain most.
SIPTU's tax priorities for the start of the new century are therefore clear.
We want the Government to honour its own promise of getting 80 per cent of taxpayers off the top rate of tax. This is costly and unlikely to be achieved in one go; but they must make major moves towards it.
As regards cutting the top rate of tax: we do not believe that resources should be diverted to giving huge gains to the very highest income earners at the expense of the majority of taxpayers - certainly not at the expense of achieving our key objectives for the start of the new century. These are: to get workers who earn only the minimum wage, for a standard 39 hour week, out of the tax net altogether; and to see all workers on average earnings paying tax at the standard rate only.
We will judge Budget 2000 by the extent to which it achieves these very reasonable and equitable objectives; and the extent to which it addresses the problems of poverty and inequality in our society through welfare and social inclusion measures as well as fiscal policies.
I have no problem debating, with Mr O'Connor or anyone else, the merits and demerits of SIPTU's tax strategy. But I deeply resent the implication that our strategy is in some way "undemocratic" because it involves asking the Government to keep all its promises to all taxpayers - not just one of its promises to one small section of taxpayers.
Des Geraghty is SIPTU Vice-President
