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:

The Value of Nothing

Cormac Staunton: A serious suggestion doing the rounds at the moment is that we should have an independent body that costs political party manifestos so that politicians can’t mislead voters with unrealistic promises of tax cuts or spending increases. This is important, but if we are to do it, we need to do it right.

Planning permissions show how little we've learnt

Paul Sweeney: This Infographic on planning permissions, published by the CSO last week, tells a lot about the Irish economy and Irish people.

Source: Central Statistics Office 

On the top left we can see that there were fewer than 2,000 applications granted for new houses in the last quarter of last year compared to a staggering 10,000 in the end of the boom year 2008. We can safely bet that most of those granted were never built as the crash happened in 2008.

Economic Inequality: Frequently Asked Questions

Cormac Staunton: Since launching our report Cherishing All Equally: Economic Inequality in Ireland we have received a number of questions from a wide range of people interested in the subject. We are encouraged by the level of debate the report has generated and look forward to continuing to discuss this important topic. 

In the meantime, here are our answers to some of the most common questions. 

The Top Income Tax is at its Lowest Rate

Paul Sweeney: This year, Ireland’s top tax is at its lowest rate for many years. Yet inequality is now recognised as the biggest economic challenge of the 21st Century and progressive tax is one of the key instruments in reducing it. Income tax is probably the most effective progressive tax. Why is the top rate being reduced?

Incarceration and Equality

Oisín Gilmore: Last month the Oscars got some press attention for the unusually politicized nature of many of the acceptance speeches. While Patricia Arquette’s call for gender wage equality got perhaps the most attention, here I want to look at some recent research relating to an issue raised when the award for best song was given to the movie Selma.

Data on Wealth in Ireland

Paul Sweeney: There has been no study of the distribution of wealth in Ireland by any government body until recently. Now the CSO has undertaken such a study which examines net and gross wealth and its distribution. It can be found here

There was substantial wealth destruction in the Crash of 2008, and this impacts on current levels of wealth today and will do so for some time because the debts incurred by some subtracts from overall net wealth.

This perhaps is the most interesting lesson from the CSO study. It is that had we not had the seven bubble years from 2001 to the crash in 2008, Ireland and a lot of our people would be a lot better off. This is best illustrated by negative equity, the person in a home for which they paid a great deal more than its present value. The debts built up in that period greatly reduced the net assets accumulated in the good years.

Arguments for a gendered investment plan

Paula Clancy: As a consequence of austerity policies the programme for gender equality in Ireland has been hard hit.  Ursula Barry’s recent TASC paper ‘Gender Equality and Economic Crisis: Ireland and EU’ highlights how gender equality in Ireland has been marginalised as an employment policy objective. This is similar to what is happening in Europe more generally, exemplified by the absence of a gender equality guidelines in the most recent 2010-2020 European Employment Strategy (EES).

Since the crisis women have been more exposed to pay freezes, job cuts and reduced pension entitlements.  Women have been more affected by cuts to public services since they are the more likely to depend on these services and women are also more likely to assume the extra unpaid work resulting from cuts to public services (European Commission, 2012).

Don’t sell, buy: Paul Sweeney on Aer Lingus in Irish Times

Paul Sweeney, Chair of TASC's Economists' Network, wrote a strong opinion piece on Aer Lingus in The Irish Times on Friday, 6th of March 2015.

You can read it here (behind a paywall)

Mathematically Progressive or Socially Progressive?

Cormac Staunton: You don’t measure how peaceful an area is by counting the number of peacekeepers. If anything, the presence of peacekeepers is an indicator of war, not peace.

We have heard lately from various sources that Ireland has “the most progressive tax and transfer system in the OECD”. This measure refers to Ireland’s income inequality before and after taxes and transfers are taken into account.

But is this a measure of peace or of peacekeepers?

Aer Lingus Watch #5

Paul Sweeney: I began Aer Lingus Watch 3 by saying that the government will not sell its stake in Aer Lingus. The Taoiseach had said that he wanted “a cast-iron guarantee” on the slots from IAG. That will not be forthcoming, I said. Cast-iron means no, if it is plain English because such a guarantee can't be given and enforced. And I thought the case was closed. For a time it appeared as if it might be opened again when a few key players in positions wavered. But the government has now sensibly rejected this bid.

That is not to say another won't materialize.

Why ‘gross’ income inequality matters

Cormac Staunton: Cherishing All Equally has prompted a discussion of economic inequality in Ireland. In a previous post I discussed why looking only at incomes is insufficient, and why we also need to look at public services and the cost of living.

In this post I want to show that when talking about income in the context of economic inequality it is important to look at gross income inequality (before taxes and social welfare), not just net income inequality (after taxes and welfare).

Five Progressive Views on Greece

Nat O'Connor: Queries: The European Progressive Magazine circulated five articles about the Greek crisis, all of which are relevant to Ireland.

More on Ireland's Low Taxation and Income Tax Progressivity

Nat O'Connor: The OECD provides a table of its member states showing total tax revenue as a percentage of GDP. In 2012, Ireland's total tax revenue was 28.3% of GDP. The lowest in the OECD was Chile on 20.8%. The highest was Denmark on 48%. Of all EU members of the OECD, Ireland has the lowest total tax revenue.

Ireland's low overall taxation is mostly due to very low social insurance charged on people's incomes. As shown in the three charts below, people on low and average incomes in Ireland pay much lower taxes than what they would pay in other countries. People on above average incomes pay less tax than they would pay in European countries, but slightly more than they would pay in English-speaking countries (including the UK).