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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