The Late Debate

6th November, 2009

I¬†was on the Late Debate on RTE1 last night. Inevitably the contribution from Garrett Fitzgerald earlier in the day came up in the show. The gist of his point was that we should not be cutting spending at this point to close the budget deficit. We don’t, according to Garrett, have a problem with high spending levels. Our problem is with low taxation. The solution, therefore, is to increase tax levels.

I had to disagree with him for 3 reasons.

Firstly, as things now stand public spending as a % of national income is at 55%. This puts at the very top of the European league table. To be honest, this is as much to do with national income contracting as anything else. But that share is still unsustainable and needs to be reduced.

Secondly, if you are earning 36k per annum your marginal rate of tax is 50/51%. That’s simply too high to take any further.

Finally, labour and enterprise are what will create jobs and wealth. How will taxing them help our country recover?

Where is he is right is that are tax base is too narrow and that too many people are exempted from paying income tax. However these are problems that you fix when income and wages are growing ie during recovery and growth. You don’t do this kind of surgery at the trough of a recession.

So, on this occasion, I’m sorry to say that he got it wrong.