Wednesday, October 15, 2008

Ireland Today

John McCain likes to trot out Ireland as a shiny example of what those low, low business taxes can do for a country.

OK, let's do that. Here is what is happening in Ireland today.

Ireland is raising income taxes and slashing spending in a crisis budget unveiled Tuesday - with the government leading by example and pruning its own paychecks.

Finance Minister Brian Lenihan said painful changes are required to cope with an economy facing its first recession since 1983.


Ireland did enjoy a boom for a number of years - and now they are running a deficit that will require tax increases and painful cuts. Those tax increases will come on people; with businesses threatening to leave for "cheaper markets", they won't raise their tax rates, and instead have to require the public to make up the difference.

Lenihan forecast that the economy will shrink by more than 1.5 percent this year and by another 1.0 percent next year, while unemployment will rise from its current 10-year high of 6.3 percent to an average of 7.3 percent in 2009. Those developments mean tax collections will fall and state welfare costs will rise.

Lenihan moved up his government's usual year-ahead budget speech from December to reflect a stunning reversal of Irish fortunes following the Celtic Tiger boom of 1994-2007.

The finance chief announced a special levy on people's 2009 paychecks adding 1 percent to the income tax deducted from incomes up to euro100,000 ($137,000) and 2 percent on those earning more.

He said the government decided to impose a levy, rather than an outright hike on income-tax rates, in hopes that the extra deduction could be withdrawn in 2010.

Meanwhile, national sales tax on most purchases will rise from the current 21 percent to 21.5 percent. Tax on bank deposits will rise from 20 percent to 23 percent.


They are also going to raise taxes on airline tickets, gasoline, wine and cigarettes. And a 21.5% sales tax? Wonder what Joe the Plumber would think about all that. Ireland is also going to cut 41 state-funded agencies and close army bases.

Even with these increases and cuts, they still aren't going to solve their deficit.

He said that, even if his budget plans work as projected, Ireland still faces a record 2009 budget deficit of euro12 billion ($16.5 billion) - or 6.5 percent of the country's expected gross domestic product.


Next time McCain brings up Ireland, someone might want to get him up to speed on current events. Then again, he will probably just ignore the facts and continue to mischaracterize the situation, just as he has done with every single issue raised in these debates.