Keeping the grey vote on side is not without budget consequences

Stephen Collins, writing in today’s Irish Times (24th. August 2017).

Another classic example of focusing on those in retirement, who have more than paid their lot to the coffers over the many years in employment. Why not shift that focus to the well off in Society they appear to get all the tax breaks from Government over the decades.

One of the striking things about taking an airport coach from anywhere in the country to Dublin Airport is the number of retired people travelling free to board an aircraft to their holiday destination.

In fact, if you listen to the conversations of some of those using the service from more affluent destinations it will become apparent they are on their way to holiday homes in France, Spain or Italy.

Yet when the debate about what should be in next year’s budget gets into full swing after the Dáil returns next month the airport coach users will be classed as among “the most vulnerable in society” as the battle for scarce resources gets under way in earnest.

The inclusion of airport coaches in the free travel scheme is an example of how an initiative that was introduced for a worthy purpose has been extended far beyond the scope of its original intention and now benefits some of the most privileged in our society as well as some of the most vulnerable.

When taken in tandem with the “companion” rule which allows another individual to travel free with an eligible person and the widening of the criteria to cover a range of welfare recipients it now appears that 40 per cent of public transport users are travelling free, according to a recent report conducted for the Department of Transport.

The problem is that nothing is “free” and the cost is ultimately borne by the community. That means working people many of them on modest incomes whose taxes keep the whole system going.

It is certainly the case that a significant number of elderly people, particularly those needing care either at home or in a nursing home, can properly be described as “vulnerable” but to put all of those over 66 in the same category does nothing to promote a rational debate on how resources should be allocated.

Minister for Social Protection Regina Doherty bravely suggested last weekend that an increase in the old-age pension in the forthcoming budget will have to be considered in the context of the resources available for other groups such as single-parent families and children.

If the welfare system places a priority on pensioners so too does the tax system.

People aged over 65 pay almost €5,000 a year less in tax on an average income of €36,000 than younger people earning the same amount, according to a study carried out by the think tank Public Policy.ie.

It looked at the treatment of people aged 65 and over in terms of income tax, universal social charge (USC) and pay-related social insurance (PRSI) and some of the findings are startling.

A person, aged 65 or over, is exempt from income tax where their total income is less than €18,000 for a single person or €36,000 for a couple. This means a married couple over 65 jointly earning €36,000 pay €4,716 less in tax than a younger couple with the same income who are in the PAYE system.

The study concluded that, while a measure of preferential treatment of older people may have public and political support, there is a question about whether such stark differences in tax liability for people on the same income are justified.

The fact that a greater proportion of over-65s, than any other age group, vote certainly has an impact on the debate. This will be evident in the run-up to the budget when politicians will vie with each other in calling for an increase in the pension.

Given that older people generally do not have the same financial pressures as younger workers in terms of mortgages, rent or childcare it is hard to justify the blanket special tax treatment for the over-65s.

One of the serious problems with our tax system is the low level of income at which people enter the top rate. Finding a way to ease this will be one of the key problems faced by Minister for Finance Paschal Donohoe. Introducing the same tax treatment for people of all ages would give him some little extra room for manoeuvre.

Going on past performance it is unlikely that the Minister will take such action for fear of the political storm that would ensue.

In the longer run those who defend the interests of the elderly would do well to be more selective in their approach. If and when the next financial crisis arises they might find that the patience of younger voters has been tested too much.

In other countries the generational divide has already become a feature of political life. In the UK, older voters backed Brexit regardless of the consequences for the young. In Greece, the young now have a huge distrust of their elders for the way in which they brought the country to ruin.

In Ireland, intergenerational solidarity served to protect pensions during the financial crisis while the young took the hit in terms of unemployment, higher taxes, pay cuts and reduced levels of job security.

Younger people took the hit without complaint but that might not be the case next time around if the politicians do not have the courage to address the issue of fairness for all age groups in the welfare and tax systems.

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