Thursday, 7 March 2002
Dáil Eireann Debate
Acting Chairman (Mr. Briscoe): Amendment No. 1 in the names of Deputies Jim Mitchell and McGrath arises out of committee proceedings and amendments Nos. 2 and 5 are related. Is it agreed to take amendments Nos. 1, 2 and 5 together? Agreed.
|The next €15,000||30 per cent||the middle rate|
Mr. J. Mitchell: The purpose of this amendment is to recognise that many middle income taxpayers still pay more income tax than their counterparts in the United Kingdom. The Minister admitted this on Committee Stage. Over the past seven or eight years, a great deal of progress has been made in reducing income tax but the people who have gained most are those at the top of the scale who earn more than £100,000 and the 7% of the workforce who earn more than £200,000. I estimate that those earning over £200,000 have gained £60,000 to £70,000 from tax reductions under the Government. It may be argued that was because they were paying far too much tax in the first place, and there is some truth in that. A great deal of progress has been made  with those who earn the least and the tax take on lower incomes here is significantly lower than it is in the United Kingdom – that was not always the case.
These amendments seek to extend that favourable comparison to workers in the middle incomes who pay higher income tax than those in the UK. The Minister has heard us make this argument in recent years. I raised it on Committee and Report Stages of last year's Finance Act. I realise that Exchequer finances have taken a sharp turn for the worst in the past year. The Minister would like us to believe that is solely down to foot and mouth disease and the events of 11 September. By far the largest cause is the Minister allowing current expenditure to increase by 22% when income increased by only 4%. The figures for the first two months of this year were published last week and they reveal a further increase of 22%.
The real problem for the Exchequer is the failure of the Government to confine gross and public expenditure to a realistic and tolerable level. If that had been done the Government would have been able to take some steps to alleviate the tax burden on middle income earners. As I said on Committee Stage, a significant percentage in that category are young people who are incurring the costs of setting up a home. We have a generation of young people who have not been more prosperous or better paid than they are now, but they are the first generation for a long time who have no prospect of buying their own homes in their own city, and that is a pity. This also affects Irish exiles who are very talented, well educated, have good experience and want to return home. They cannot return home because they would have to pay more tax at middle incomes, nor would they be able to afford to purchase homes.
I ask the Minister to acknowledge, as he did on Committee Stage, that there are significant numbers on middle incomes paying more income tax than those in the UK. I also ask him to agree in principle that we should aim to eliminate this disadvantage as soon as is feasible.
Mr. McGrath: The points outlined by Deputy Jim Mitchell are crucial. The point at which people reach the top rate of income tax is too low –€28,000 is quite a low level at which to enter the 42% income tax band. This amendment tries to increase the level at which one enters the top tax band. Many ordinary workers in ordinary jobs, of which many are single income families, find that it is very difficult to survive on an income of €25,000 to €28,000. They must pay for everything. Generally, they do not qualify for higher education grants and if their children go to college it will cost them an arm and a leg. If they are single parents they may reach the top tax band at a slightly higher level. Nonetheless, we need to increase the level at which ordinary people begin paying the higher rate of income tax.
There are approximately 1.7 million people in the workforce and of those, approximately 32% earn less than €10,000. The Minister will be correct in telling us that many of those are part-time workers, nonetheless it is a high proportion. Approximately 62% of the workforce earn less than £22,000. That is a huge proportion. If one were to examine what the Minister has done for that group, one would find that their income has not changed dramatically during his period of office. In that period there was a buoyant economy and some changes were made. Those with incomes in excess of €60,000 have gained the most. Those in that category have received a tax payback of approximately €1 billion during the Minister's period of office. That is a colossal amount of money to give to people who are already very well off. Those earning €60,000 or more may find it difficult to survive, but they are doing well. How can the Minister justify giving a tax payback of those proportions to that relatively small group of people while not being able to take those on the minimum wage out of the tax net?
It is all about what priorities the Government establishes when it designs the budget, tax bands and rates. The Government's record shows that the priorities it established have been geared towards the better off. The proportion of tax repayments skewed towards the better off is very high and that is disappointing. The Acting Chairman is a decent man and has represented a Dublin constituency for a very long time. If one considers any of our constituencies, regardless of whether they are affluent, the vast majority of people live ordinary lives and earn ordinary incomes. We should be looking after them. This proposal is an attempt to take some in the middle income band out of the top tax rate and have a lower 30% rate. It makes sense and I hope the Minister will change his mind. He was vehemently opposed to it on Committee Stage, but, perhaps, he will surprise us by accepting this amendment.
Minister for Finance (Mr. McCreevy): I thought the problem was that I always surprised people. The purpose of these amendments is to provide for a third, 30%, band of tax between the standard rate of 20% and the higher rate of 42%. As I stated on the many occasions that this was debated, I have been engaged on a radical reform of the tax system in my tenure as the Minister for Finance. Tax credits were introduced and increased, tax rates substantially reduced, and there was significant widening of the standard rate band. All these made the tax system inherently fairer, improved the incentive to work and contributed to economic development. In particular, the changes in tax bands and credits have considerably benefited those on lower incomes, more than 380,000 of whom have been removed from the tax net altogether since I took office.
When this was discussed by the Select Committee last week, Deputy Jim Mitchell suggested that his and Deputy McGrath's amendment would assist those on middle incomes. Regardless of what may constitute a middle income, the focus of the Government's actions in the past five years was on reducing the tax burden for the large number of taxpayers earning below the threshold for the middle rate of €43,000 proposed by the Deputies. The Government's target, endorsed by the social partners in the PPF, is to move over time to a position where this 80% of taxpayers pays tax at no more than the standard rate. For the present year, the Revenue Commissioners estimate that close to 80% of taxpayers will earn less than €40,000, approximately £31,500. These are the people whom the Government has targeted in its tax reforms.
I am not opposed in principle to a third rate, but it should only be considered when the present process of reform is completed. At present, the proposal would mean an effective cut of 12% of higher rate taxpayers at a time when greater prudence in managing the overall Government finances is called for. The proposal would cost €750 million in a full year, more than the entire income tax package in the 2002 budget.
Internationally, we are ahead of the field in terms of the tax burden imposed on those who might be regarded as being on middle to low incomes. According to OECD data, a single person on the average production or industrial wage in Ireland has the lowest tax rate in the European Union. The EU's average tax rate is 45% while Ireland's figure in 28.8%. Provisional data from the EU shows that EU average tax rate for 2000 of a single low paid person on 50% of the average production wage, APW, is 35%, while Ireland's tax rate on that income is 14.8%. For a married couple on 50% of the APW, the tax rate here is 30.8% while the EU average is 32.2%. At incomes of up to €30,000 for single persons and €50,000 for married persons, people are better off in Ireland than the United Kingdom.
The approach to tax reforms comes down to judgment and I have said often that I would be happy to be judged on the combined effects of the five budgets for which I was responsible. Each one must be taken as part of a sequence. My tax strategy is bearing fruit in terms of higher take-home pay and increased incentive to work. I am confident the considered judgment of the electorate in this regard will be favourable when the general election is held. It is not possible to do everything at once. I would be prepared to consider the question of a middle rate in a future budget and, consequently, I cannot accept the Deputies' amendments.
I am not against the idea of this or other rates in principle, as I stated, but I set out a programme while in opposition which I pursued in Government with additions. It was not in the election manifestos of either Fianna Fáil or the Progressive Democrats, or in the original action programme for the millennium, to remove people on  the minimum wage, because there was no minimum wage. That wage was a Fianna Fáil policy which I announced on the party's behalf while in opposition.
That the minimum wage was my idea will cause terrible trauma to my critics in the media and others. I announced it in the salubrious surroundings of the Royal Hospital Kilmainham long before that general election. This will be a problem for those who wish to portray me in a certain light and are reluctant to dispense with my reputation in this regard. It became part of our programme for Government which led to the establishment of the Minimum Wage Commission and then the minimum wage Act. In the PPF and the revised mid-term review of the plan for Government, the goal of removing people on the minimum wage was added. Therefore, as a result of this year's budget, people earning up to 90% of the minimum wage will be outside the tax net.
I followed a deliberate approach to tax reform. Both publicly and privately in all my years in this House, I was critical of the fact that every Minister for Finance was forced by dint of circumstances and lobby groups into making only small changes in the tax system. They acted to please as many as they could with little effect. I adopted a deliberate policy of saying what I would do and did it over five budgets. I have almost completed this programme by putting the tax system on solid foundations.
Mr. McCreevy: No Minister nor any politician in this House could say that, but I adopted a way of going about this, and stated after each budget that my aim was to establish a tax system based on sound principles. I introduced tax credits, widened tax bands and eliminated many tax avoidance mechanisms. The system is simpler and fairer following these changes. I want to achieve a system in which a person does not come under the higher rate of taxation until he or she has a reasonable income, and I have been relatively successful in this.
This has generated controversy at different times, because, to get to that outcome, some decisions had to be taken. I have almost completed my programme which incorporates reforming the complex PRSI system. I did part of this in the previous budget by eliminating some thresholds. It was my intention to do more this year but, unfortunately, I was unable to do so. If I started to make piecemeal changes, as I said to Deputy Noonan recently, then I would not achieve my ultimate goal.
Everyone has benefited from my tax reforms. Various articles and reports, such as the OECD's, recognise this. Even the Irish media no longer accuses me of not doing much for the lower paid. Deputy Jim Mitchell obliged me with a parliamentary question in autumn, 2000, about comparing Irish and British take-home pay, which gave  me the opportunity to lay out my schedule. At that time, he was not Fine Gael's spokesperson on finance but my answer to that question silenced much criticism, even from the trades unions, as it showed that we were ahead of the United Kingdom regarding lower incomes. Deputies Jim Mitchell and McGrath are right in saying that above certain levels we are not as good as the United Kingdom, and I will give the figures on this.
However, on lower and middle incomes, we are better than the rest of Europe, as has been commented on in European Union reports. After I announced this budget, an article in The Irish Times illustrated with graphs what I had done in my five years and said that the only criticism against me it was that I targeted the relief disproportionately at the lower paid. That is what the facts prove. Regarding the lower paid, we are way ahead of the United Kingdom and the rest of Europe, but we cannot do everything at once.
I will give the Deputy some of the UK figures. Combining tax and PRSI contributions in both countries, single people here earning up to almost €40,000 and married couples earning up to almost €70,000 are better off. I can give the Deputy the separate figures for tax and PRSI here and the figures for tax and national insurance contributions in the UK.
Deputy McGrath made the point about taking off 12 percentage points. That would automatically favour the better off. Deputy McGrath referred also to people earning over €60,000 and Deputy Mitchell referred to people earning over €200,000. The Deputies made the point that these people would be getting too much, but their proposal would give them an even bigger break than they get now. Deputy Mitchell spoke about the disproportional share of budget concessions going to these high earners, but my statistician tells me that people earning over €200,000 make up only 1% of total numbers.
Mr. Tim Callan of the ESRI wrote an article in the ESRI quarterly document on the distributive impact of budget 2002, which was carried in some of the national newspapers. Using what is known as the Switch model, it stated that compared to other budgets over the past 15 years, which would incorporate Members from different parties in this House, this budget was the most socially progressive budget. I have given those figures previously.
Mr. J. Mitchell: I am delighted the Minister has accepted the principle of a third band. Major progress has been made in terms of income tax, replacement ratios, means testing etc. I spent a number of years in this House on the back benches, but when I was a Minister in the 1980s—
Mr. J. Mitchell: Yes, and the Minister did so for noble reasons, which are to his credit. When I was a Minister I highlighted the overall impact of tax on income compared to social welfare payments which left many people better off out of work than in work, but that was always denied. When I was Minister for Transport I remember being approached by the personnel manager in Aer Lingus, who also happened to be the chairman of the institute of personnel management, and he made a speech highlighting the problems of replacement ratios. I asked him to come in to meet me and he produced tables which matched my everyday experience. I got agreement from the Government to discuss this matter with the Department of Social Welfare, which denied that anyone could be better off out of work than in work. The experience in my constituency was of people leaving jobs because of the impact of tax on their income compared to social welfare.
Mr. J. Mitchell: Replacement ratios affected our economy in a major way. That has been largely put right, although the unpopular aspect, namely, the proposed abolition of child dependant allowances to be matched with increases in child benefit, has not been dealt with. We should have faced up to that issue and phased out child dependant allowance over a period.
There is also the aspect of internal replacement ratio issues and the question of competition, which should be our first guiding light in everything we do about the economy. The people we are highlighting in these amendments are the only remaining group who are worse off under our tax code than the UK tax code. Accepting these amendments would be the last step in ensuring that people are not penalised for going to work, especially those with children, and are not worse off than those in other jurisdictions.
I welcome the Minister's acceptance of the principle of a third rate, something we are keen to pursue if we are in Government in the next few weeks. I acknowledge the Minister has taken many good steps in this direction under the tax code but he had a very favourable Exchequer position in which to do that. Any Minister in that position would have been able to do a great deal, although perhaps not with the flair of this Minister. If current expenditure continues to escalate at 22%, he will soon have to get rid of the low  tax rates that have been introduced. He cannot have a high spend, low tax regime. They are mutually contradictory and if something is not done to stop the significant growth in current public expenditure or bring it back down to reasonable levels, his successors will be forced to pay the bills by raising taxes. I am completely against that because it is self-evident that a low tax regime has served this country well.
This amendment goes directly to the question of individualisation and its effects. I acknowledge arguments can be made on both sides of the issue, but I had a telephone call about three weeks ago from a gentleman in Mullingar, which Deputy McGrath represents.
Mr. J. Mitchell: This gentleman said that his wife had lost her job recently and the result was that his weekly tax had increased. I told him that was the effect of individualisation. That telephone call encapsulated the issue. Is it right that where one spouse loses or has to give up his or her job for whatever reason and is at the loss of his or her income, the other spouse ends up paying more tax? Last year a one income couple paid £42 per week more in tax than a two income couple and that tax liability increased by a number of pounds in the budget.
There are strong arguments for encouraging more women to enter the workforce for economic reasons. The argument against that is that there are intangible but significant social benefits to be gained if a mother can spend some years in the home with her children. I do not think anyone would argue against that. If a mother stays at home to work in the home and look after her children, she and her partner or spouse are penalised to the extent of paying close to £60 more in tax per week. How can that be right?
I would prefer if individualisation was abolished and it was recognised that there is a cost in going to work. There is a modest PAYE allowance which causes irritation to the self-employed. In the interests of equity, I would prefer if a one income couple or a two income couple were to pay the same taxes and there was a going to work allowance in recognition of the cost of going to work. If the case were presented in that way, it  would be acceptable and reasonable to people, given that there are costs involved in going to work, including child care costs, travel costs, clothing costs and other intangible costs. What is the Minister's view on individualisation? Can he justify one income couples having to pay significantly more tax per week than two income couples? What is the social justification for that or is this a statement from the Minister that he has little regard for the work of the mother in the home?
Mr. McDowell: Before I deal with the substance of the amendment in my name and the amendment in the names of the Fine Gael Deputies, I will deal with some of the issues we addressed en passant during the discussion on the first set of amendments. It will not surprise the Minister to hear that I am out of sympathy with much of the language that will be used during this debate. The assumption is that tax is necessarily a negative element. The inclination and the instinct is to think of it in exactly those terms, but we must go back to basics. The time is right for us to do that and to characterise tax for what it is, the money that is used for public investment by government on behalf of us all.
We cannot and should not have a debate on tax in isolation. We have to form a view as a society as to what should be the appropriate level of public investment. The Minister compares us to the UK and to other European countries and says that because people's take home pay here is higher than that of people in the UK, that necessarily is good. I do not look at those figures in isolation, as the Minister well knows. I look at the level of public investment and the level of investment in services as compared between Ireland and other EU and OECD countries. I looked at figures in relation to that this morning. As the Minister also knows, those figures are very stark. They suggest that the level of public investment, even related to GNP, which is the fair measure in relation to Ireland, is a good deal lower than the EU average and compares only to the UK. My colleagues in the British Labour Party are bemoaning the fact that their level of public investment is as low as it is and they are finding difficulty in raising it without raising taxes. It will be interesting to see how matters develop in terms of the British budget which is coming up soon.
As everybody would now acknowledge, the debate in the UK, which has comparable rates of tax to here, has moved on. There is now a much greater appreciation and willingness on the part of the public to acknowledge the self-evident fact that if taxes are reduced to the extent that they were in the UK in the 1980s and the early 1990s, the capacity of government to invest to the extent that is necessary – in the UK's case to maintain public services and in our case to develop public services to an acceptable rate in the first place – will be inhibited.
We talk about the way in which tax impacts on individuals, as if the only thing that matters in terms of quality of life is the amount of money in people's pockets, but that is not the only thing that matters to people in my constituency. It matters to them that even four or five years after they were promised they would be able to get the DART in Killester and Clontarf they cannot because the Government has not invested sufficiently to lengthen the number of carriages that can be put on to a train. It matters to them if they are left for four or five hours in the accident and emergency department of Beaumont Hospital. None of this can be reversed without using tax moneys for public investment, which we all know. That must be a constant part of this debate. We cannot deal with the tax argument in isolation. To that extent I come at it, as the Minister knows, from a different angle from him and perhaps some Fine Gael Deputies.
Specifically on the individualisation issue, as the Minister knows, I opposed the individualisation of the standard rate band when it was introduced by the Minister a few years ago. From his perspective, he has taken this project a good deal down the road. There is a difference of some €19,000 between the standard rate band of a single earner married couple and a double earner married couple. According to my reckoning, that means there is a difference in take home pay in the region of €4,000 between a single earner married couple and a double earner married couple. Had the bands been simply doubled or if we had a situation where the bands were simply doubled and transferable, the tax take of the two types of couples would be roughly the same. Even when account is taken of the home carer's credit, the difference for someone who takes full benefit of the standard rate band is in excess of €3,000. There is not a shadow of doubt that this change creates a great deal of resentment, particularly among people who, as Deputy Mitchell said, have gone from being a double earner couple to being a single earner couple. People usually make that transition to look after children and they are the people who are most resentful of the position in which they find themselves. They find that whereas their tax take would have been the same as a double earner couple a few years ago, their tax take now is different and not to their advantage. I said previously and, therefore, this will not come as a surprise to anyone, that I acknowledge that to reverse this will not be easy or cheap. It would be politically almost impossible to reverse it without equalising up. One could not in any realistic way equalise downwards. In terms of social commentary and taking into account where we started from, this is a retrograde move and one I continue to oppose.
Mr. McGrath: I, too, support this amendment. The Minister said on Committee Stage that his face was set in this direction and he would not go back on it. However, there are a few stark figures  that should be pointed out to him. I will quote from the Minister's tables published on budget day. The tax bill for a one income household which earns €55,000 per annum is €10,500 per annum. If the other spouse in that household were to go out to work, the State would give back that household almost €4,000 in tax. Its tax liability on an income of €55,000 per annum would be €6,640 per annum. The household's tax liability would be further extended if the household had an income of €56,000, the limit at which the Minister has given the double income allowance for a two earner couple.
The big question we must ask is whether the Minister is saying to single income families that they are doing a disservice to the State, that they are a burden on the State and that they are not helping the State? Is he saying to them that the Government does not appreciate what they are doing and to show how dissatisfied it is with them, it will charge them an additional tax of about €80 per week? That is the core of the issue. The Government has set its face against stay-at-home spouses who may want to raise their family or, for one reason or another, have decided not to go out into the workforce, and will penalise them to a huge extent to try to force them into the workforce. The number involved is not insignificant.
The number of families in the PAYE sector last year who qualified for the home caring spouse allowance amounted to approximately 120,000. In addition, there is the self-employed sector, a proportion of whom would also qualify. Although the number involved is not insignificant, the Minister in his wisdom seems to be set against them. In effect, he is saying he does not appreciate their status, that they should do something else and he will charge them accordingly. That is not fair to stay-at-home spouses and those who, for whatever reason, do not wish to join the workforce. It is also anti-family, in that those who wish to rear their children, rather than put them in child care facilities, are penalised. That is not a good job. The Minister is overturning a trend that has developed here in the past number of years and I am saddened he is moving in that direction.
I ask the Minister to justify how he can penalise a single income couple earning €55,000 to the tune of approximately €80 per week, as distinct from their neighbours who may be a double income couple on exactly the same income?
Mr. McCreevy: The purpose of these amendments is to commence the process of reversing the move towards an individual rate band structure for each taxpayer. However, as I indicated to the select committee, the amendments do not achieve that purpose; they merely maintain the difference in the higher income level at a significantly increased cost. This is because the increased standard rate band of €19,000 for the two income married couple would remain in place thus providing, perhaps unwittingly, for a standard rate band structure of €28,000 for a single person, the same as the budget proposal. That  is €42,000 for a married single income couple and €61,000 for a married double income couple under the proposals of Deputies Mitchell and McGrath, or €40,000 and €59,000 under Deputy McDowell's proposed amendment, compared to €37,000 and €66,000, under the Bill as published. This would also mean a married two income couple would have more than twice the standard rate band of a single person which I would not favour. The amendment regarding the standard rate band proposed by Deputies Mitchell and McGrath would cost €270.5 million in a full year. Deputy McDowell's amendment would cost €170 million.
As I have indicated on many occasions, the Government is committed in An Action Programme for the Millennium to work towards having 80% of income earners taxed at the standard rate. With allowances converted to tax credits, the only way to get the number in the top tax rate down is to widen the standard rate tax band. The most effective way to widen the tax band is to put it on an individual basis and tax a person on what they earn as individuals, whether single or married. The first step in this direction was taken two years ago. It was continued in last year's Finance Act and we are continuing along this road in this year's Bill. Considerable progress has been made and, as a result of the band widening, which is provided for in the Bill, the percentage of income earners on the higher rate will fall to 26.7%. This compares, for example, with 32% paying at the top rate in 1999-2000.
The provision of a separate standard rate band for each taxpayer is part of the Government's policy and there is no going back on it. That policy has also been endorsed by the social partners through the PPF. In the circumstances, Deputies will understand I cannot accept the amendments. We have had debates on this issue in the past. On Second Stage, Deputy Mitchell raised the case of a person from a midlands constituency which he reiterated this morning. The Deputy suggested we are now in a position where if one spouse of a married two income couple were to lose his or her job, the couple would end up paying more income tax. I indicated this could not happen in so far as our tax calculations are concerned.
Let us take the example of a two income couple, one spouse has an income of €45,000 while the other has €24,500 which is in or around the current average industrial wage. Let us assume also that the couple splits its credits equally so that each has the benefit of a personal and a PAYE credit. The net tax liability of the couple, post budget 2000, through credits and bands is €12,510. If the spouse on the lower incomes loses his or her job, there is no income attributed to that spouse on which income tax may be charged, whereas the income tax position of the other spouse may not remain the same as before that person may avail of a wider standard band, a married one earner band, he or she may also avail of the married personal tax credit. The net result is that the tax liability of the couple would fall to €7,060. In this example, the couple's income  dropped by 35% but the net income tax liability dropped by 44%. I am prepared to look at the case to which the Deputy referred and if he forwards the details I shall have it examined. If the Deputy is referring to the traditional one income couple and a married couple on the same income, that is a different question and we have been down that road many times before.
Given that we have discussed this issue so many times, there is a sense of deja vu about it. I happen to think the sting has gone out of the Opposition in regard to it. Whatever about Deputy McDowell, Deputy McGrath is preparing for the election campaign in County Westmeath. I do not expect Deputy McDowell to go around his constituency preaching this particular gospel. Were he to do so he would offend a great many trade union activists all over the country and the established policy of SIPTU for many years, endorsed in the height of my troubles by the SIPTU Equality Officer, Ms Rosheen Callender, who is not noted as a supporter of mine. I greatly appreciated her comments at a difficult time when it would have been far easier for her, given her political views, to have said nothing. I do not know Ms Callender very well but, as I said on Committee Stage, she has risen in my estimation, because it would have been far easier for her to have stayed at home and said nothing. However, she did what she considered was her duty. In fact, Ms Callender was opposed to the home carer's credit when I introduced it.
Whatever about Deputy McGrath's position, I am always amused at Deputy McDowell's position on the matter of widening the standard rate band. As long as I have been in political life and from my student days I always knew that those who wanted equality in these areas were those on the left of Irish politics. Deputy McDowell is adopting a position which is not in keeping with that of any of his trade union activist friends, either now or in the past. Deputy McGrath has a battle to fight in County Westmeath on a particular level. I look forward not only to his comments in the election campaign but the comments of other parties.
It must be remembered the married couple tax credit is double the personal tax credit. There is also the home carer's allowance which I introduced when I started to widen the standard rate band. The Fianna Fáil election manifesto stated that I would introduce the £2,000 home carer's allowance at the standard rate. I would not have attempted to introduce it in my first step in the widening of the standard rate band except for the hullabaloo created. I would have introduced it at the end of the second or third phase of the widening of the band.
What has amused me in this debate, and again this morning, is that what was regarded by many commentators and left wingers as the dark old days of Ireland in the 1940s, 1950 and 1960s when equality was not an issue, up to and including the tax year 1980-81, there were not double bands. It was an innovation in the 1980-81 budget and  Finance Act to have double married bands. Effectively, I have stepped back—
Mr. McCreevy: At that time there were not as many double income couples and there was no hue and cry in the 1950s, 1960s and 1970s about this issue. I have looked at many papers, but it has not been suggested in any of them that the measure was anti-family. The Government met its obligations under the Murphy judgment in 1981, but it decided also to double the bands. Although there was no demand for it at the time, nobody said that it was anti-family. I have restored the system that applied then, which is uniquely Irish and does not apply in many other countries. This is a matter of equity and fairness, among other things. One can use the labour market argument, but it is basically a matter of fairness in the taxation of earnings.
Deputy McDowell raised the matter of the supposition that tax is a negative thing. Most left-wing thinkers, including the Deputy, disagree with my philosophy in this regard. I have no difficulty with those who hold his opinion, but at least I understand it, even if I cannot share it. The philosophy is not unique to those on the left wing in Ireland as it has been embedded deeply in the political and economic psychology of many central European countries during the past 30 or 40 years. Such thinkers believe, to put it simply, that the wealth a person creates somehow does not belong to him or her, but to the State. I totally reject the idea that the State is obliging taxpayers by allowing them to keep their money. One should be allowed to retain one's earnings as an employee or an employer.
The State's role is to encourage people to better themselves, to do greater things and to be more ambitious. This creates greater economic wealth, which the State can redistribute in particular directions through its taxation system. One cannot distribute something one does not have, which is why I fundamentally disagree with an economic and political approach that starts with the endgame, which begins by putting in place a taxation system so that moneys can be redistributed. We should have a taxation system which encourages individuals and thereby creates greater wealth. With respect to both philosophies, I believe the system I advocate is the one which has created greater wealth. It has allowed greater resources to go into particular areas.
The question of taxation is the essence of democratic rule. People in Deputy McDowell's constituency may want a particular public service, but the electorate as a whole has elected Deputies to make decisions on taxation and public expenditure. People want certain things and the system of taxation which enables that is at the core of our democracy. I believe that people respond better to incentivisation than anything else and I  have had the opportunity to put that into practice. Deputy Jim Mitchell referred to another aspect of this, which is the growth in public expenditure. I admit public expenditure has grown, but it has been in line with the resources we have been able to make available.
Mr. McCreevy: The Deputy should indicate the areas in which the Government should not have spent. Should it not have doubled the amount of money going into the health service? Should it not have brought old age pensions up to £100 per week, as promised? Should it not have brought an extra 20,000 people into the health service? Should it not have put more resources into education? Should it not have allocated £40 billion towards the national development plan, a large chunk of which was for infrastructural development?
Mr. McCreevy: We have increased expenditure in these areas while maintaining budget surpluses, which is the only way to reduce the national debt. It may remain static as a percentage if GNP or GDP increases, but I have reduced it both in percentage and absolute terms. While running these substantial surpluses, I have allocated €8 billion to the national pensions reserve fund. If I had not done so, I would have been able to use the money to reduce the national debt further. Ireland's national debt is now the second lowest in the European Union. I do not mind if people want to have their cake and eat it coming up to an election, but one cannot simultaneously increase public expenditure, retain reasonable levels of taxation, reduce the national debt, increase expenditure on roads and abolish vehicle registration tax to reduce the price of cars. Someone has to pay the social welfare, education and Garda bills at the end of each month. I have tried to introduce a fairer and more equitable direct taxation system to allow people to regain control of their money.
Mr. McCreevy: My approach, in a nutshell, was to significantly reduce levels of direct taxation, such as income tax, corporation tax, capital acquisitions tax and capital gains tax, while increasing very few areas of indirect taxation.
Mr. J. Mitchell: I am happy to respond to the Minister. In reply to a point made by Deputy McDowell, higher levels of taxation do not necessarily lead to higher yields. The lower rate of taxation yields a higher return because there is more economic activity in that sector. I agree with the Minister in that respect, but I do not believe he should spend money as if it is going out of fashion. Spending money per se is not a great idea unless one is going to get a return for it. The Minister has ranted about higher allocations for roads and other matters, but he has not spent money as he planned. He has not spent enough on capital projects. Investment in infrastructure sows the seeds of future economic growth, but the Minister has failed to meet deadlines on all fronts in that regard. He has thrown money at the health service and expenditure in that sector has doubled, in real terms. I have raised this matter for years as Chairman of the Committee of Public Accounts, but with what result? Money has been wasted and squandered without results.
The Minister has exceeded by £13 billion his target of five years ago of 4% growth per annum in real terms. He may try to justify this by saying that economic growth was much greater than expected, and we can buy into that to a certain extent, but I want to know why so many people have been left behind. Why do widows receive only £90 per week, without applying for free schemes? Why do 20% of children leave primary school with learning difficulties, at least three quarters of which are avoidable? There is a queue of many years for the psychological assessment on which the provision of additional facilities for schools is based. Where has the extra £13 billion gone? It certainly has not gone to the less well-off in society. People with disabilities needed €36 million this year for services to give them hope, but they were given €6 million. There are social as well as economic priorities. By and large I agree with the Minister's priorities, but I am astonished that a Government led by a Taoiseach from my constituency can be so unaware of the considerable list of gaping holes regarding the poor which have gone unattended.
These amendments deal with the mother in the home who has chosen to forego an income to look after her children. All mothers have a right to make such a choice without being penalised, but that is what this Government has done through individualisation. Equally, every mother has the right to go out to work and the costs of doing so should be recognised by the tax regime. The stress and pressure which many double income families experience must also be recognised.
The Minister is coming to the end of five years in office. In real terms he is spending £13 billion  more than was available five years ago yet he has left a trail of misery among many groups. I do not understand how the Minister could have accomplished this given the largesse available to him. I do not see why he should deliberately discriminate against the mother who chooses to stay in the home. I place great value on this role which should also be recognised by the State.
I am not in favour of high taxation, but I am seeking to highlight the other side of the equation, namely, that tax is used for public investment. It may not all be well spent, as Deputy Mitchell has rightly stated, but we cannot undertake public investment without tax. I acknowledge that the tax wedge five or ten years ago was higher than was sustainable, that it produced serious disincentives and had to be reduced. However, I have stated previously that we have gone too far and I do not like the way in which we have approached the issue.
The Minister points out that those countries which pursue a philosophy similar to his have created additional wealth, but I am not sure that is entirely correct. I could also point to countries in western Europe which have not pursued the same course as the Minister in which levels of wealth and economic growth over the decades have been as high as in, for example, the US. What is beyond doubt is that those countries which pursued the Minister's philosophy, such as the UK in the 1980s and the US for a long period, in addition to creating wealth also created inequality on a level which most of the rest of us find unacceptable.
The equality issue is interesting as regards this amendment. However, it misses the essential point that before the Minister embarked on the process of individualisation it was open to a married couple in which both partners worked to divide the standard rate band and the personal tax credits or allowances as they wished. They had the choice of doing so and it was not necessarily the case that the male partner had the tax credits or the standard rate band. I benefited enormously from the Minister's individualisation agenda over the past couple of years in so far as my wife  always succeeded in earning just enough to use up the entire standard rate band and most of my allowances. As a result virtually everything I earned was taxed at the higher rate whereas, courtesy of the Minister's changes, I now at least have a standard rate band of €19,000 for which I am eternally grateful. Nonetheless we had the choice, which we exercised, to divide the standard rate band and our tax credits in a particular way. In our case my wife took the lot and, no doubt, we were not unique in that sense. However, the point is that the choice was ours and we exercised it in a particular way. Therefore, the Minister's argument about equality does not stand up.
Acting Chairman: Amendments Nos. 6 and 7 are related and may be taken together. I ask Deputies on both sides of the House to confine their comments to the amendments rather than a general review of spending.
The purpose of these amendments is to increase personal tax credits to take the minimum wage out of the tax net. The Minister has pursued several agendas over the past five years and budgets. He has pursued the individualisation agenda which we have just discussed and for which he had no mandate as it was not signalled to the electorate in 1997. He also reduced the rates of income tax for which, as he said many times, he had a clear mandate, even though I disagree with it as a method of reducing tax. As part of the PPF two years ago he committed himself to “endeavour”– I think that was the word he used – to take the minimum wage out of the tax net.
We sometimes phrase this issue incorrectly and, perhaps, the amendment should suggest that the first €236 of weekly income of all taxpayers is taken out of the tax net. We have gone as far as we can in terms of tax reductions, but this is the one aim which we should have, but have not achieved. If necessary this aim should have been achieved at the cost of not doing quite a few of the other things which the Minister has done. He pats himself on the back for introducing the minimum wage and, to some extent, I acknowledge that fact. He took the lead in this regard and the experience of the past three or four years has proved wrong the naysayers, of which there were many, including in his Department. There is no  evidence that the minimum wage has done away with many jobs as many economists predicted three or four years. I acknowledge that the move towards an hourly minimum wage was a welcome development on which we have to build and develop.
The basic principle is simple, namely, if we take the view that people should not be paid less than €236 for a 39 hour week then surely it is unconscionable, and it is certainly inconsistent, for us to take some of that money from them. If we introduce a minimum wage largely as an anti-exploitation measure, as I think was the case, then it is inconsistent to then take some of that money back by way of tax. That is the central point behind this amendment.
Mr. J. Mitchell: I support this amendment in principle. The problem with the minimum wage is that it is extremely costly if one adopts the Minister's approach. Under this approach it is not only those on the minimum wage who benefit, but all those who pay tax. In order to give the well justified relief to those on the minimum wage we have to give the concession to others, even those on large incomes. This ends up costing a fortune.
If we continue to adopt the Minister's approach it will cost almost €1 billion. I have seen different formulations which would reduce this figure to, in one case, €650 million and in another to £150 million, which is about €200 million. This is before one takes account of the Minister's budgetary proposals which cover 90% of those on the minimum wage. We cannot justify further concessions to people on high incomes and we must find a way of meeting the objective of these amendments without the huge burden of giving the concession to those higher up the tax net. There is a formula that would cost about £75 million – give the tax back and provide on a tapered scale for those marginally over the limit at the end of the tax year. It is not perfect but the tax could be given back, thus allowing for the fact that it was on loan to the Exchequer. We would be targeting the very group that needs to be targeted without giving up the concession. A major part of the cost of the concession goes to those who earn more than the minimum wage. We all agree that those earning less than the minimum wage should not be paying tax. There is 10% of income remaining that must be covered and we must find a way to do it; there is every possibility we could do it this year by way of retrospection. I hope the Minister accepts the principle that it should not be delayed any further and that, in so far as it is possible, he should find a way to target the relief solely towards those on the minimum wage, with a tapering relief for those just above it.
Mr. McCreevy: The amendments propose increasing the basic personal tax credits for married and single persons over and above those already provided for in the Bill. The cost of the  increases proposed by Deputy McDowell would be €545 million in a full year and would, therefore, almost double the cost of the entire income tax package in the budget for 2002. The purpose of the amendment, as explained by Deputy McDowell, is to exempt the minimum wage from tax but the amendment would go further in that, when taken together with the revised employee tax credit of €660 proposed in the Bill, it would exempt from tax income of almost €500 per year in excess of the annual minimum wage. Provisions in the Bill already give rise to significant increases that will bring us up to a position consistent with the available resources and the commitment under the PPF where incomes at 90% of the minimum wage will be exempt from tax. I remind the Deputy that the PPF commitment is to remove all those earning the minimum wage from the tax net over time.
As I pointed out on Committee Stage, the percentage of low paid earners in the tax net has decreased as a result of the five budgets I have introduced. This year's budget means 692,000 people will be outside the tax net altogether. This represents 37% of all income earners, compared to a figure of 325,000, or 25% of income earners, before the 1998 budget. The increases in tax credits already provided for in section 3 of the Bill will cost €400 million in a full year, while the overall budget package designed to consolidate the strategy to remove more low paid from the tax net and more middle income earners from the top tax rate will cost €624 million. That is the most that can be afforded in the current economic circumstances and I therefore oppose the amendments.
The Deputies referred to the cost of getting more people earning the minimum wage out of the tax net altogether and Deputy Mitchell referred to different ways of doing this. The cheapest way is to start with exemption limits. I have gone away from exemption limits, however, in the tax code because the dreadful step off a cliff came into being.
Mr. McCreevy: The Deputy is proposing a new version that includes tapering. Over the years I have got down to a figure of 1,000 people on marginal relief, getting rid of the very real disincentive that existed against engaging in the workforce. If I wanted to go down that route by exempting the minimum wage by increasing the exemption limits, it would cost €67.9 million in a full year but it is the least progressive step in my view. Deputy Mitchell has tabled an amendment that would taper relief at the end. We had marginal relief at the step-off point before and it caused many difficulties and I have tried to get away from that. In all of my budgets, I have increased the personal allowances and the personal tax credits and that has had the effect of getting rid of that problem. I have not been increasing the exemption limits and I would be  reluctant to go back to that. My approach has been the most effective way to do this. I am not adverse to new thinking in this regard but I would not advocate returning to the exemption limits. It was a goal of mine to get rid of them totally and I have nearly succeeded. Exemption limits only apply to a very small number of taxpayers now and they are mostly older people.
Mr. McDowell: Deputy Mitchell is right, there are a number of ways to skin this cat and one is by using exemption limits. It would also be possible to do this by increasing the PAYE tax credit although I favour increasing the personal tax credit. I am persuaded by the same argument as the Minister about exemption limits. It was highlighted by the Tax and Social Welfare Integration Group some years ago that the marginal relief in place to deal with the exemption limits that previously pertained simply did not deal with most of the problems, there could be serious disincentive effects, and people would end up taking home less even though they were earning more. Exemption limits are not the way to go even though they are the most efficient in terms of cost to the Exchequer.
While I am not nervous about a small increase in the PAYE tax credit, I am conscious of the fact that it is not transferable between spouses so, to maintain consistency in my argument about individualisation, we could hardly go down the route of individualising the personal tax credits as well. By a process of elimination the best way – and probably the cleanest way – to do this is to increase the personal tax credit to take the first €236 of weekly income out of the tax net. The Minister pointed out that I have gone a little beyond that. I did that to take into account that the minimum wage will increase in October, providing for a somewhat higher figure.
This relates to the age tax credit and reflects the discussion we have just had. The Minister has, in relation to the tax burden on older people, moved along the exemption road, whereas my preference is to move along the tax credit road. We are all agreed that people who have retired are entitled to a certain additional benefit in terms of their tax credit and should pay less tax on income than others. The main reason for that is that most older people derive most of their income from pensions. We are saying that private pensions should be treated in a way that is more beneficial from a tax point of view than earned income. We agree with the Minister about the thrust of policy  in the area and it is simply a matter of whether we go the exemption or tax credit route. For the reasons I gave earlier, I prefer the tax credit route.
Mr. McCreevy: The purpose of this amendment is to increase the age tax credit for married persons from €410, as proposed in the Bill, to €550. The cost of the amendment is estimated at €3.1 million in the full year and if it were extended to single and widowed persons, as in equity it would have to be, it would cost €5.4 million. The elderly already have favourable treatment under the income tax code and rightly so.
I appreciate the Deputy is anxious to remove from the tax net those with small personal or private pensions in addition to the social welfare pension. This would also be my wish. However, as I mentioned on Committee Stage, it boils down to choice of method and my preferred method is to proceed by way of increasing the exemption limits rather than increased tax credits. This targets available resources on those most in need and removes a majority of pensioners from the tax net. The Bill substantially increases the exemption limits for those aged 65 years and over, both married and single. The new limit will be €26,000 for married couples and €13,000 for single people, a virtual doubling of the limits since I took up office. Married couples will be tax free on occupational pensions of up to €254 per week. This year alone, as a result of increased exemption limits, more than 11,000 elderly people will be removed from the tax net. As a result of tax improvements over the past five budgets, 71,500 elderly people have been taken out of the tax net. While I have the same objective as the Deputy, I am satisfied my approach is more appropriate. In the circumstances I cannot accept the amendment.
Mr. McDowell: Will the Minister explain why he prefers the method of the exemption route in this instance when a little earlier, admittedly in a different context, he outlined why he did not like this route?
Mr. McCreevy: I agree there is an inconsistency but my approach to the tax exemption route has ensured that almost all have been removed from that step-off, except for a small number aged 65 years and over – I understand it may be 1,000 or 2,000. The disincentive question is not an issue for those in that age group.
When I took up office I implemented reform in this area. Apart from effectively doubling the exemption limits, I abolished the conditions applying to those aged between 65 and 70 years and those over 70 and 75 years of age, thus ensuring that the same conditions would apply to those over the age of 65 years. As a result everybody has benefited.
Mr. McCreevy: At the various ECOFIN meetings in Europe there has been an emphasis on the need to encourage people to continue working beyond the age of 65 years, whereas the emphasis in this country during my political career has been on reducing the retiring age. However, our demographic profile is much different from the rest of Europe. I understand there are 64,855 people over the age of 65 in the tax net.
Mr. J. Mitchell: There is a general view that it is good to continue giving concessions to the elderly. However, this ignores the fact that some of the elderly are very wealthy. On the one hand people on incomes of £103 per week are not entitled to medical cards, yet friends of mine, who worked in Guinness and the various banks and are on pensions of perhaps £120,000 per annum, are entitled to them. There is a need for some perspective on this issue.
The culture of retirement of people in the early to middle 50s needs to be revisited as it is not, perhaps, what the economy needs. While I acknowledge that help for the elderly is a good thing per se, any general election candidate who might argue to the contrary would risk losing his or her deposit. However, in the interests of equity it must be asked if we can tolerate a situation where those over the age of 65 who are very wealthy should be entitled to a medical card while those under the age of 65 who have an income of only £103 per week are not.
Mr. McCreevy: Europe is looking at this whole area and policy makers in this country will have to address it in future years. I am advised by my statisticians that 25,095 people aged 65 years and over pay income tax at the top rate of 42%, which illustrates the point made by Deputy Mitchell on the number of wealthy elderly people.
The amendment relates to the tax credits given to parents of incapacitated children. For many years the allowance, as it was then, was virtually unchanged. While the Minister has increased it in recent years it is still at a very low level.
This is a complex area in the tax code because other tax credits have also to be taken into account. In another section of the Bill, the Minister considerably increased the tax credit given to those who employ carers, some of whom would  also benefit from this amendment. I commend his move in this area but it is only of benefit to those who can afford to spend up to €30,000, the maximum threshold provided for, on employing a carer to look after a disabled child or elderly relative.
The credit proposed in the amendment is nothing more than an acknowledgement to parents of incapacitated or disabled children because the costs incurred by them in any given year would be considerably greater. I have been lobbied by people in my constituency who consider that the acknowledgement of the additional costs they necessarily incur in looking after a disabled child should be increased to a more realistic figure.
Mr. McCreevy: The amendment proposes to increase the incapacitated child tax credit by 50% over and above the increase already provided for in the Bill. The cost of the increase would be €2.5 million in a full year. The incapacitated child tax credit is already substantially increased in the Bill, by over 22%, which is a generous increase by any standards. The Government also intends to invest approximately €1.27 billion in substantially increasing child benefit, which will apply to incapacitated children. In addition, where appropriate, an incapacitated child may be the subject of a claim in respect of the home carers tax credit or, alternatively, the relief in respect of a person employed to care for an incapacitated individual, which I am more than doubling in this Bill.
In the Bill I have allocated €100 million to fund cuts in personal income tax credits alone and this is as far as I can be reasonably expected to go within the financial constraints of this year's tax cutting package. I therefore cannot accept the amendment.
Mr. McDowell: In his last comment the Minister is pushing out the boat. Nobody could seriously claim this is an expensive tax credit. I am not sure of the numbers affected but it will not impact seriously on the Exchequer finances. It is no more than an acknowledgement of the self-evident fact that parents of disabled children incur considerable costs.
Mr. J. Mitchell: I strongly support the amendment. Those covered by it have not benefitted as much as they should from the Celtic tiger. Current spending in real terms has increased by £13 billion in the past five years.
The umbrella organisation representing the disabled associations – the blind, deaf and those in wheelchairs – looked for a package of €36 million but only got €6 million. We are not able to find €30 million to help them. Carers in the home are under a lot of physical and mental stress and if the Minister or Government had any concept of social justice or a caring society these things would have been done long ago.
Mr. McCreevy: I have sympathy with the Deputies' views but I have made considerable progress in this area. Deputy McDowell referred to another section of the Bill which doubles the number of people who can afford to take on a carer in this regard. There are approximately 9,500 people who gain from this increase but I will look at this for a future budget.
“4.–The maximum income allowance which determines qualification for the Home Carer Tax credit as set out in section 466A of the Principal Act shall be not less than the annual value of the old age contributory pension.”.
I tabled this amendment to flag the fact that in this year's budget the Minister has not increased the earning allowance earners have before spouses can claim the home carer's tax credit. As it stands, one can earn between £4,000 and £6,000 on a tapering basis, which is €5,000 to €7,000 odd, before one's spouse loses the home carer's tax credit.
While tabling this amendment, I acknowledge that at the moment the old age contributory pension does not infringe upon that, at least not to any great extent. However, we must keep an eye on the fact that people who are on social welfare benefits could find their spouses disqualified from claiming the home carer tax credits simply by virtue of the fact that we are increasing social welfare benefits even though this year the Minister did not increase the earning allowance.
Mr. McCreevy: This amendment proposes a new section 4 which provides that the income disregard of the carer's spouse should not be an amount less than the old age contributory pension which, for 2002, stands at €7,660. The current income disregard is €5,080 and there is a taper, so the reduced entitlements apply to those incomes up to €6,620. I assume the Deputy's amendment would increase the income disregard from its current level at €5,080 to €7,660, which means there would be full entitlement to home carer's tax credit at income levels up to €7,660 and reduced entitlement where the income is between €7,660 and €9,200.
The income disregard was introduced to allow the home carer to have a small income in his or her own right while retaining the tax credit and the existing system provides for this. It was intended to cover situations where spouses forfeit a second income to care for dependants in the home. I appreciate that the situation with income disregard has not increased and increases in  income can result in some people losing entitlement to the credit or having only reduced credit. However, there should be discretion to take decisions in this area in the annual budget and it should not be that such disregards are increased in line with particular social welfare payments.
Mr. McDowell: Does the Minister consider, taking social welfare income as income, obviously, it is desirable that somebody on a social welfare pension should have his or her spouse forego part or all of the allowance by virtue only of the fact that the person has a social welfare pension?
‘476A.–Where an individual who subscribed, as part of the initial public offering, for shares in Eircom plc, has sustained a loss (“the loss”) and such individual is not entitled under any other provision of this Act to relief for such loss than for the 2002 year of assessment the individual may in computing his or her liability to tax take a deduction equating to the amount of the loss at the standard rate.'.”.
This amendment seeks to give effect to the Fine Gael proposal that those people who bought Eircom shares and who cannot avail of the capital gains offset should be allowed to offset their losses against other income taxes.
I have been amazed by some of the initial reactions to this proposal, much of which I consider to be ranting and raving. The position is that all the institutional investors in Eircom availed of risk advice and expert advice. They were able to reclaim their losses in Eircom against other capital gains. Capital gains is income from capital investment and is already treated favourably in that it is only taxed at 20% in the pound. Those whose incomes come from work – earnings – pay 20% on the initial tranche but pay 42% on higher incomes plus health levy and PRSI. Those whose income comes from capital gains are already at an enormous tax advantage, paying perhaps more than 30% less tax on every pound than those in employment.
This issue goes beyond Eircom and if it were extended beyond Eircom it would raise major issues that would need further study – I am not excluding the need for further study. If we are  aiming for a shareholder society which we should be, we should not allow capital gains losses against any income; it should not just be confined to capital gains, which it is in this case.
The result is that big corporations with lots of experience and risk analysis available to them have already received their 20% rebate and we estimate the cost to the Exchequer at €140 million. Most ordinary people have no experience of investment or risk analysis. They were carried away by the Government's hyping of the flotation which cost £74 million. They were not aware that the Government had jacked up the price of the share against the advice of the Eircom board.
There should be the same concession for the ordinary man in the street who invested in Eircom as the big institutional investors. It says something about our society that there is a growing group of people who are so capitalist in their outlook that they have no concept of equity or social justice and who would deride a proposal which is manifestly fair. It is confined to this issue because of the Government's role in it. The maximum cost of this proposal would be €90 million, a once-off cost as there are no repeat costs involved. That is the maximum estimate because we assume that everybody who was not an institutional investor was unable to claim the capital gains offset. I am sure some of those wealthy individual investors would have other capital gains against which to offset their losses. The €90 million is a maximum and I do not doubt it would be some millions less than that.
The issue of old age pensioners who borrowed from the credit union and who have no tax liability has been raised. We have provided for that and they would receive a rebate of money. There would be very few in that category but there would be some. If we are interested in social justice that goes all the way. However, this gives rise to the greater issue, which should be studied in the future, of the implications of encouraging ordinary people who do not have capital gains or a useful portfolio of shares – they may have modest shares – to get more shares in order to encourage private savings. Why should we not let them offset their losses on such investments against their income taxes in the way institutional investors can already offset them? Not only institutional investors but wealthy individuals with investment experience and resources to invest can already claim 12%.
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