The Danger of the Share-Buyback Epidemic

Paul Sweeney: The news that US companies will buy back over one Trillion dollars – that is $1,000,000,000,000 - worth of their own shares in 2015 is a warning of possible bad times.

When companies buy back their own shares instead of investing their money in the future, in jobs in plant and machinery, it means lower future growth for the company but also for the economy, especially when so many of them are doing it together.

Planned tax cuts likely to increase inequality

Cormac Staunton:  The Government's Spring Statement, announced yesterday, was seen by some as a bit of a damp squib, with very little detail about economic policy. However, drilling down into what the two Ministers said, we see that there is a clear intention being laid out.

Ireland's income tax rates compared to other OECD countries 

Five Alternatives to Tax Cuts

The Spring Statement will be announced today and the expectation is that there will be a heavy reliance on tax cuts for higher earners. Last week, Cormac Staunton wrote this Opinion Piece in the Irish Times, outlining five alternatives that would reduce economic inequality and help people far more than tax cuts could.

More on Income Taxes and Social Charges – Proposals for Reform

Paul Sweeney: According to economists Thomas Piketty and Emanual Saez 

“The job of economists should be to make a top rate tax level of 80% at least "thinkable" again.”

Not long ago, Ireland had top tax rates - on high incomes - of over 60 and 65% - plus social charges.  In a recent blog, I showed that today’s top rate of income tax is at is lowest rate ever. Last year TASC sought modestly to just retain the 41% rate, but it was reduced to 40%. Oisin Gilmore demonstrated the lack of evidence for 'disincentive effects' of higher taxes on high incomes in this Blog.

Why is a higher top rate of tax unthinkable for many policy leaders in Ireland today?

No 'real responses' to changes in higher tax rates

Oisín Gilmore: Last week on Morning Ireland, IBEC’s chief economist Fergal O’Brien issued some warnings about the impact of taxes in Ireland on high income earners. He stipulated that Ireland’s taxes were so high that they were leading to shortages in the supply of high-skilled labour and in particular he implied that Ireland’s supposedly high tax rates would lead to high-skilled mobile labour leaving the country. And he argued that the focus on workers earning below €70,000 was misplaced.

The Laffer Curve 

In their Quarterly Economic Outlook IBEC state rather definitively that: “High marginal rates of tax disincentivise people from  taking on extra work, from increasing their skills and from working in Ireland at all.” (p.9)

This would appear to be a case of Econ101. It appears intuitive that an increase in the tax rate means lower net pay, which should lead to workers working less. However, the empirical evidence on this is much less clear.

Shining a light on alternatives

Cormac Staunton: Two important recent announcements by Government signal moves towards addressing some of the causes of economic inequality in Ireland: free GP care for under 6’s and over 70’s and the introduction of 12 months paid parental leave (to be split between couples).

These initiatives signal an approach towards more universal public services in Ireland. On their own they do not fully address the problems. In fact in some ways they may raise more inequalities. It’s as if we are moving the country from driving on the left to driving on the right, but are doing so in a phased manner – trucks first, then a few weeks later bikes ... then eventually we’ll get to cars.

But if these moves are first steps and an indicator of the direction of public policy, then they are very welcome. At the very least, more discussion of initiatives like this should show the madness of calls for income tax cuts as a way to solve social problems and reduce rising economic inequality.

Keep Aer Lingus Local

Paul Sweeney has added a new TASC think piece arguing against the sale of Aer Lingus. You can read the full text here  

A short summary blog appears here: