Labour tax plans

Thursday, February 17, 2011

€1,361 annual additional cost of Labour tax plans for every household.

50/50 share of taxes & spending savings means more pain for Irish families.

Labour’s high tax plans will see every Irish household hit with €1,361 of additional tax hikes, according to Fine Gael’s Finance Spokesman, Michael Noonan. He was speaking today after he announced further detail on Fine Gael’s plans to provide additional reliefs for families in mortgage distress.

Labour is a high tax Party. That in itself is a legitimate political choice to make as a Party but it is one that, in the current economic crisis, is not credible and risks prolonging and deepening the crisis we all face. The numbers speak for themselves. Every Party has to face a €9 billion adjustment of expenditure cuts and tax increases, to reach a deficit of less than 3% of GDP by 2014. Labour’s claims that a lower adjustment is sufficient are not credible. The EU has made it clear that they will not lend Labour the €5 billion it needs to fill the gap in its figures up to 2014. They will have to reduce the deficit by €9 billion, whatever they might say now.

Labour plans to have a 50/50 share of tax increases vs spending savings. On a deficit reduction of €9 billion that means that Labour is planning for at least €2 billion more in taxes than Fine Gael. If Labour somehow succeeded in extending the period of correction to 2016 as it proposes, and borrows another €5 billion in the process to cover 2015 and 2016, there will be additional interest repayments each year amounting to €400 million per year in perpetuity. And according to Labour’s programme, €200 million of this €400 million will be raised through taxation.

Table 1 below sets out the comparison between the two parties. 

Fine Gael/Labour Tax Plans Compared *

*Numbers have been rounded up for ease of comparison.

The numbers above show how Labour’s tax plans will add another €1,361 to the cost burden of every household (3,062 euro for Labour compared to 1,701 euro for Fine Gael). If the full adjustment is deferred to 2016 as Labour proposes, the tax burden on each family will be even higher, as shown in column 5. This is because of the additional interest charges on the extra borrowing incurred.

The challenge facing our country is one of the most difficult it has ever confronted. That is why Parties have to be honest with the public about what we have to do over the next four years. Our Five Point Plan is clearly resonating with the public and is driving more support to Fine Gael.

Labour is struggling to present a positive message about the future for our country and is struggling as a result. That is the backdrop to the attempts to muddy the waters with ill-informed attack ads. But behind the attacks, the facts remain. Labour’s plans will hit every household in the country for €1,361 in additional taxes. That is the core of the choice the public face in deciding who will best handle our economy in the years to come.

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