Friday, 3 April 2009

Talent? What talent?

Jim Power, chief economist of Friends First, recently said there “was room” for a 4% increase in the top rate of income tax in the forthcoming mini budget. In Ireland’s “low tax economy”, any income over €34,000 constitutes “top rate”.

Most of us are aware, too, that there has been much talk of increasing the current income levy, along with upping PRSI contributions to remedy the domestic mess created by Government policies that pumped up capital asset prices and a corresponding credit-fuelled bubble

The argument now is that Ireland Inc. is in serious trouble, and we must all pull together in the national interest. Yeah… right. Let’s just make a very lazy prediction here and forecast that those who will be hit most by the fiscal recriminations will be in the PAYE sector - soft, but legitimate, targets in the Government’s eyes. An extra 4%? No problem.

Contrast this with Power’s thoughts on Gerry McCaughey being obliged to resign from the Dublin Dockland’s Development Authority (a State body), after it was found he had rather creatively (we won't say dishonestly) used a Government-provided residency tax loophole to avoid paying capital gains on the sale of Century homes: the asking price of which was inflated greatly by the aforementioned bubble. The economist saw McCaughey’s resignation as evidence of a “witchhunt’, and declared that the country could not afford to lose businessmen of his “talent”.

The simplistic (and convenient) right-wing economic philosophy being trotted out here is that some very talented individuals are out there "generating" and "creating" wealth. Wealth that will eventually drip down to the rest of us, if we just let the geniuses do their magic. Thatcher said the same thing some time in the 80s, but the Drip-down Theory is only reaching Ireland now.

But at least Thatcher was ideologically consistent. The UK boom of the 80s occured largely on the back of deregulation, and real commercial activity. Unlike the reverse-socialism of Ireland's tax shelters and property incentives.

While we are on the subject of economics, is there any chance we might lose “talented” experts such as Jim Power? In October 2006 the same guru predicted a “soft landing” for the Irish housing market, claiming “strong fundamental forces” were behind its growth. Many of us knew back then, of course, that this statement was utter nonsense. In fact, I remember laughing out loud upon hearing it.

The Irish economic boom was created by cuts in capital gains taxes (which the super-rich still dodge paying anyway), low corporate tax, property incentives and shelters mentioned numerous times on this blog, and cheap credit - further facilitated by the “talent” of the banking sector, and their sloppy regulation that pushed it over the edge. Now it is over, and we know for certain that the days of semi-literate builders buzzing their arsecracks about the skies in their helicopters are finished.

Maybe if we ever manage to produce a Bill Gates, or a Steve Jobs, or somebody who can make a fortune out of innovation - rather than building apartments and houses fuelled by tax breaks – we can talk about “talent”.

And we should never listen to an economist who is attached to any kind of financial institution, as they are simply playing the tune of the Establishment.

Given how economists such as Jim Power got it so wrong, for so long, it is amazing they are still in jobs.

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Ella said...

Hi GM, of course in the real world, the people who benefited (anyone who availed of tax breaks and/or used tax loop holes) from the Celtic Tiger should be the ones who pay, but of course you are right it's the PAYE worker who will have to pay. It's sickening, for a certain elite in this country it would appear that paying tax is an option but for the rest of us it's compulsory.

Harald75 said...

Given how economists such as Jim Power got it so wrong, for so long, it is amazing they are still in jobs. ...

... and, even more amazing, that there are still so many people who believe what they (have to) tell us.

Locky said...

As I said on another blog, (but I think it bears repeating), leaving the present shower of politicians, economists, bankers and other assorted wankers in charge of our economy is like asking the captain and crew of the Exxon Valdez to take charge of the clean-up.

Jim Power and his ilk just don't get it, do they? Our political, financial and economic leaders FAILED. They did not do the jobs they were paid to do.

They are the weakest links.


The Gombeen Man said...

Good way of putting it!!!

Anonymous said...

hi there GM it is heartbreaking to see what the banks are doing to the chopper class just because they cant make their payments, my greatest fear is this talent will be lost to godless england where these sensitive modest chappies will have to line up with 20 east europeans for one job driving adumper, and drink warm pissy english beer iwont mention the bedsits and the bangers and beans diet , ijust hope biffo has an easter bunny to pull out his fat arse or the germans come to their senses and hand over a shipload of euros before its too late

The Gombeen Man said...

Yes, Anon, it is heartbreaking. We'll be sending them over emergency parcels of Denny's sausages and Barry's Tea before the year is out!