Arguing tax and economics with Pearse Doherty TD

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By Cormac Lucey

Last week I took part in a radio debate with Pearse Doherty, the Sinn Fein finance spokesman, about the 2019 budget. Doherty argued that pressing social needs require additional taxation. His debating style is an example of one of Thomas Sowell’s insightful sayings. The first lesson of economics is scarcity: there is never enough of anything to fully satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.

By pointing to clear public needs, Doherty found his justification for additional public spending and taxation to finance it. But there will always be unfulfilled public needs — must we therefore always raise taxation?

In opposition, I raised three key arguments. The first is that, with tax revenues already buoyant, there is not a strong argument for raising tax levels. I also argued that the IMF believes that the optimal tax rate on higher incomes, assuming the aim is revenue maximisation, is 44% and that our top tax rate, when one factors in PRSI and USC, is already 52%.

Sinn Fein’s proposals to raise the top rate of income tax to 48% would bring the effective top rate of income deduction to 60% — more of a punishment beating for high performers than a contribution to the cause of wise government.

My third argument is that we should focus on getting value for the monies already being spent. I’m not sure my logical and well-founded arguments(!) got very far. The bulk of Twitter comments on the RTE radio debate sided with Doherty.

Published in The Sunday Times (Ireland edition)
August 2nd 2018