Question - What country had a Robin Hood 90 per cent tax rate on its wealthiest citizens? The Soviet Union? Cuba? No; the United States. And lots of European countries as well.
In the years after World War II everybody thought it was simple justice that the very rich should pay high tax rates. In fact the US president, Franklin D Roosevelt, talked about a top rate of 100 per cent back in 1942: in effect, a maximum wage tax.
Today, the top rate for the rich in the US is 38 per cent, when their lawyers and accountants cannot find ways to dodge even this modest figure. There has been a huge transfer of wealth throughout the world in the last 30 years upwards to the rich – the Sheriff of Nottingham effect, perhaps.
This gets to the nub of a number of questions which have been bothering Insider in recent times, and which relate directly to water charges.
Water charges - a bank bailout mechanism
More and more we are seeing our taxation system eroded from a progressive model where everyone pays according to his/her means to a more individualised tax system where everyone pays at the point of use, Therefore, no matter what your wage, you pay at the same rate for refuse collection, motorway tolls, college ‘registration fees’, and now, water charges.
“But Insider,” I hear some of you say, “water is precious and we should conserve it, especially in the context of higher demand.” Correct, you will get no argument from Insider here.
However we already pay for water via our central taxation to the tune of approximately €1.2 billion per year. In fact, after the abolition of rates in the 1970s, taxes were increased to make up the shortfall. On at least four other occasions over the years, taxes were raised by successive governments, which argued that the increase was necessary for the provision of local services, many of which have been subject to massive cuts and privatisation in recent years.
So why, if we are cutting services and selling them off to private operators, are we being asked to pay more for them?
This begs the question, if the Government now wants us to pay directly for water, what happens to the €1.2 billion we currently use for the provision of water services?
Some of it will have to go to help subsidise Irish Water until it can increase water charges to get full cost recovery as many mainstream analysts say, but what about the rest of it? It will be used to pay down some more of the interest on the unsustainable national debt which is largely the result of the bank bailout. Thus in essence water charges add up to nothing more than a bank bail out mechanism.
Of course there are major problems with our water services, as we here in Galway can testify, with cryptosporidium, toxic levels of lead, and burst water mains being a common feature over the years. After years of neglect by Fianna Fáil, Fine Gael, Labour, the PDs, and even the Greens, we have a shambolic piping network that sees 41 per cent of our clean, treated water, lost through leaks. So yes there is an urgency for us to upgrade and have proper infrastructure installed, and of course this has to be paid for, and 41 per cent of the cost could be eliminated if the leaks were fixed for a start.
Price hike after 2016?
A fundamental feature of the debate around water charges has been the lack of a full discussion on how we pay for it. The mainstream parties all unquestioningly accept the troika demand that it should be done by imposing direct charges, but what would be wrong with maintaining our somewhat progressive taxation system that sees everyone pay, according to their means, as opposed to direct charges, which impact most on low and middle income households? Even a measly 2.5 per cent wealth tax on all incomes over €1 million would bring in the finances required while lifting the burden on the most vulnerable.
Groups such as the Anti-Austerity Alliance, the Socialist Party, and the We Won't Pay campaign have brought to Insider’s attention concerns around the issues of cost, the collection of PPS numbers by IW, as well as the eventual privatisation of our water resources.
The AAA claims that the figures being put out by IW and Government ministers regarding costs are vastly underestimated when compared to the real figures for average current water consumption. This would likely see a dramatic increase in water charges after the 2016 introductory price cap expires.
There are also serious data protection issues in relation to the application packs that IW is currently asking householders to fill out and return, which include asking people to fill in their PPS numbers. IW is a semi-private company. Giving it personal information such as this could result in that information being passed on to others, especially in the event of IW being privatised.
The basic cost, as outlined by the Commission on Energy Regulation, also indicates that the ‘rip off republic’ is still very much alive and well, with the average cost being outlined at €4.88 per thousand litres compared to a western European average of under €2.
Despite all the talk of economic recovery and the “end of austerity”, as Labour leader Joan Burton has proclaimed, it appears the Government is talking out of both sides of its mouth as it imposes one of the heaviest austerity measures yet in the form of the water charges, just prior to what is claimed may be a neutral budget.
As always, Insider has his ear close to the ground and the murmurings around the campfires indicate that the Government and IW could have a major fight on their hands if they insist on implementing these charges. A growing mood of opposition is building that could very well see a repeat of the 1990s defeat of water charges. Watch this space.