‘Progressive’ vs ‘Fair’: An Elementary Distinction, Blurred

Progressivity

Image from the Department of Finance Budget 2013 ‘Fairness’ presentation.

I left this comment on the Irish Times piece today by a group of Young Turk Fine Gael backbenchers, titled ‘In spite of tight budgetary situation there are still a number of options for the economy’.

It is a barbarism for the authors to declare, in the context of taxation policy, that ‘most progressive’ means ‘fairest’.

In macroeconomics, to say the tax system is progressive is a positive statement. To say the tax system is fair is a normative statement. This used to be an elementary distinction learned by any economics student. This is a distinction that the Fine Gael government, and the Department of Finance, want us all to unlearn: why?

Because Fine Gael, first and foremost, is the party that protects the interests of the wealthy.

As another commenter points out below, the ESRI figures do not account for a whole range of taxes and charges that are regressive in character: they focus only on income. But the trend in Western economies has been away from direct taxes on income towards increases in indirect taxation – hence the introduction of property and water taxes, VAT increases. Any agency representing High Net Worth Individuals -the super-rich- will tell you that the shift away from direct taxation to indirect taxation redounds to the benefit of their clients. (see for example the Knight Frank Wealth Report 2011) .

What is considered ‘fair’ is a matter for political interpretation. For instance, is it fair that 62 percent of health expenditure comes via social insurance funds in the EU-15, whereas in Ireland, it is zero percent? No doubt from the point of view of employers it is. How about from the point of view of low income workers who have to rely on a crumbling health system that privileges the wealthy?

Well, I don’t think Fine Gael is inclined to ask, because social rights don’t enter into any definition of fairness that Fine Gael might ever come up with. But wealthy unsecured bondholders will always get their billions when their investments go belly up, and it is only ‘fair’ in such circumstances that Paddy ponies up out of money for his hospitals and schools.

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