Monday, February 03, 2020

Ireland is already a socialist state!

With the exception of Spain and Sweden, which have ruling socialist parties with minority governments, Europe hasn't been a very welcoming place for left of centre parties in the past decade.

In the Irish general election campaign a surge of support for left of centre parties, in particular, Sinn Féin, has triggered some alarm that traditional rule dominated by centrist parties will be replaced by socialism.

However, Ireland is already a socialist state - most of the population of 4.9m are in receipt of government payments while the Government itself facilitates cash welfare for some of the biggest companies in the world!  

Direct public spending on Welfare, Health and Education account for over 63% of the total current + capital spending of €80.4bn in 2020.

  • The Department of Employment Affairs + Social Protection has reported 2.1m beneficiaries in 2018 (see P. 17 of report). This total includes about 630,000 parents who are receiving Child Benefit. When 1.3m children are added, the total beneficiaries amount to 3.4m people;
  • There are about 138,000 farms in Ireland and in 2018 according to Teagasc, the public agency, Direct Payments (i.e public welfare) accounted for 74% of farm household income. The total population involved was at about 0.2m; 
  • In September 2019 there were 0.408m Irish public employees according to the CSO
  • The tally is already 4m from a population of 4.9m — the so-called professions such as medicine, law, consultancy etc. rely on the State for a portion of income which is sometimes substantial;
  • The Department of Business, Enterprise and Employment costs over €1bn to run including issuing grants to business. Add €0.6m as the cost of research and development tax credit that has been ineffective, and a public science budget of almost €1bn, that includes higher education, we get a cost of  €2.6bn that is mainly a benefit to business  — while multinational and local firms have a poor record of supporting university research.        

Irish tax system

In 2017 Revenue data show that of 2.5m earners 883,000 were exempt and 488,000 paid the higher rate. In 2020 the number of income earners has grown to 2.8m while the exempt account for 34%; 1.2m or 44% pay the 20% rate and 22% pay the 40% rate.

The top 1% (incomes over €200,000) pay over a quarter of income tax and USC (Universal Social Charge), while those earning over €100,000 (the top 7%) pay half, according to the Irish Tax Institute.

Dr Barra Roantree,  an economist at the Economic and Social Research Institute, said at a recent lecture that “Before taxes, inequality in Irish household income is much higher than the EU average. But our tax system does more to reduce this than any other country in Europe.

"Inequality in income before taxes and benefits has increased over the last 30 years, leaving that of the top 10% of households more than 2.6 times that of the median – or middle – household in 2017 (the most recent year for which data is available).

- However, inequality in household take-home income has declined on most measures over this time. This is largely because growth was particularly strong for lower-income households between 1997 and 2007, when incomes for the bottom fifth of households rose by an average of more than 12 per cent per year in real terms (after accounting for inflation).

- In 2017, taxes lowered the Irish Gini coefficient by a fifth: almost twice the EU average"

In 2017, the Gini coefficient in Ireland was 0.544 for income before taxes and benefits (the highest in the EU), 0.377 before taxes (the 5th highest in the EU) but 0.306 for take-home income (the 13th highest in the EU)