Nevin Economic Research Institute suggests more tax to avoid spending cuts

Thursday 18 October 2012 15.04
The Government plans a €3.5bn adjustment
The Government plans a €3.5bn adjustment

A trade union-linked economic think tank has suggested that next year's Budget targets could be reached without having to make any cuts to Government spending.

The Nevin Economic Research Institute says most of the adjustment could come instead from a doubling of the planned tax increases in the next Budget, targeted at high-income households.

In its latest Quarterly Economic Observer, the Nevin Institute says the Budget adjustment should be done in a way that avoids causing further damage to domestic demand.

It says the Government’s plans for a €1.25bn tax rise, and a €2.25bn spending cut, will further delay recovery of the domestic economy, and reduce employment by around 30,000 jobs.

It says the Government should boost the economy by not making these cuts, aside from a planned saving of €400m in efficiencies under the Croke Park Agreement.

The think tank says the Government should restore the planned €500m cut in capital spending.

These measures, it argues, would result in 21,000 more jobs than the Government plans, saving on social welfare payments, and yielding additional tax revenue.

It says a billion in extra taxes would be needed, additional to the Government’s planned tax rises.

These should be targeted at the top 20% of tax cases - those earning more than €100,000 a year, who would end up paying an average of €1,500 a year extra.

This would result in an adjustment of €2.7bn, rather than the €3.5bn planned by the Government.

The Nevin Institute argues that the resulting economic growth would mean the State could meet the Troika target of a budget deficit of 7.5% next year.

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