Bringing the income tax structure back into sustainable shape

This post was written by Patrick Honohan @the Irish Economy,  28 February 2009

In a previous post I pointed out how growing reliance on cyclically-sensitive taxes had left Ireland’s tax revenue exceptionally vulnerable to a downturn. In effect we were running a sizable structural deficit without noticing.

So clearly we now have to ramp up the more reliable and less cyclically sensitive taxes again.

Rates and bases of lots of taxes need to be changed. The most complicated one is income tax. In 1996, before Charlie McCreevy’s first budget, standard and higher rate income taxes were 27 and 48 per cent. Yet we were happy, growing rapidly and in effect “Europe’s Shining Light”. Such an income tax schedule did not destroy the economy. Link to article