06/12/2011: Budget 2012 - quick guide

In days to come I will be writing about the Budget 2012 in the press, so this is a quick summary of my current view. The Budget is a combination of:

• Safety (35%) - the Croke Park remains intact and largest vested interest in the state remains unchecked
• Platitude (5%) - a belated, but welcome increase in mortgage interest relief for 2004-2008 buyers
• Homage to Bertie (10%) - all measures aimed at stimulating growth in the economy are property reliefs and tax incentives and
• Absurdity (50%) - explained below

Absurdity of this Budget arises from glaring logical inconsistencies of its measures and stated policy objectives:

1. The Irish Government is concerned with the stability of the banks deposits. It raises DIRT and CGT
2. The Irish Government is concerned with jobs destruction. It raises VAT, fuel taxes, capital taxes and does nothing to correct for egregious, entrepreneurship reducing USC surcharge on self-employed. It also makes it more risky for firms to hire workers
3. The Government is concerned with tax revenues lags. It introduces tax hikes that will drive more economic activity into the Black Markets - VAT, petrol tax, cigarettes tax etc
4. The Government is concerned with declining private consumption. It introduces VAT hike, cigarettes hike, and measures reducing disposable income
5. The Government is concerned with skills bottlenecks. it introduces higher cost of education
6. The Government is concerned with high demand for public health services. It raises cost of buying private insurance, thus cutting back incentives to hold that which at least partially offsets rising costs of higher demand for public services
7. The Government is concerned with underfunding of private sector pensions. It removes 50% credit for employer PRSI for contributions to occupational pension schemes