Complexity of inequality means we must move beyond single indicators

Cormac Staunton: Yogi Berra, the great American Baseball player who died last week at the age of 90, is credited with the immortal line: “It’s like déjà vu all over again”. In the wake of “Ireland’s Great Wealth Divide” on RTE last week, the recurring debate around inequality statistics in Ireland continues.

Part of the problem is complexity. While there have been many efforts to create single indicators that summarise economic inequality (such as the Gini coefficient), these have in turn only led to more discussion around how best to measure the distribution of economic resources.

Here I just want to address some of the issues that have arisen in response to my own take on this.

Ireland's Great Inequality Debate

Cormac Staunton: Irish people know that the world is an unequal place. The exact scale of this divide was brought home to viewers who watched David McWilliams’ documentary, Ireland’s Great Wealth Divide on RTE 1 this week.

It showed that people believe that the Top 20% in Ireland have more than 60% of all wealth. In fact they have 72% of all wealth – that’s 1 in 5 people owning almost three quarters of the value of all the land, housing and financial assets in the State.

In Ireland as elsewhere, the issue of inequality goes to the heart of most discussions in economics and indeed politics. It is, after all, the age-old question of who gets what, when and how. It’s about how we allocate resources which are, ultimately, scarce.

What about the PAYE Worker?

Paul Sweeney: For decades there used to be a refrain heard endlessly on taxation. It was “What about the PAYE worker?” Will we hear it more often soon if some get their way.

There has been a strong lobby by the self-employed and their lobbyist/advisors to get special income tax reductions for them in the forthcoming Budget on 13th October. They argue, correctly that the very high-earning self-employed pay a higher USC than PAYE workers and they don’t get the PAYE allowance - unless they are also employees (which they can be).

There is a surcharge of 3% on individuals who have non-PAYE income that exceeds €100,000 in a year. This surcharge applies to the non-PAYE income only. The PAYE credit is €1,650 a year for employees only. So do the Schedule D taxpayers or self-employed have a case for “similar treatment” with PAYE workers through special income tax reductions?

No, because their tax treatment is designed to give the PAYE worker approximately the same taxation. 

A Very British Coup

David Begg: About twenty years ago a television serial entitled ‘A Very British Coup’ was screened by the BBC. It featured Ray McAnally in the role of a left wing Labour leader elected to power in a landslide General Election.

From the beginning the Labour Government was opposed overtly by the media and covertly by the civil service and business establishment. It incurred the wrath of the US President by demanding the removal of nuclear bases in Britain.

Time to Curb Income Tax Privileges for Artists, Sports Stars and the Corporate Elite?

Paul Sweeney: Did you know that certain people enjoy special income tax privileges in Ireland? Some of them earn far more than the rest of us, but the government has decided that because they are deemed to have special talents, they should pay far less income tax than we do.
There are three groups who enjoy special income tax privileges.
1. artists
2. top executives of multinationals
3. sports people

More jobs, but a growing gap between good and bad jobs

Paul Sweeney: An important EU institution, which is based in in South Dublin and does valuable work, is Eurofound. It has just released “The European Jobs Monitor 2015” , an interesting report on the type of jobs which are being created. In spite of the recovery, the news is not all good.

Tax Breaks Won't Solve Homelessness

Nat O'Connor: Some campaigners have called for tax breaks to help provide more housing for people who are homeless. The homelessness crisis is serious and requires urgent responses. But tax breaks have all sorts of negative consequences compared to alternative options, not least the option of tax-and-spend to address the crisis.

What follows is a quick sketch of the problem and the scale of the solution required, followed by some observations on tax breaks.