I hear on the radio this morning that the PDs claim they are not engaging in auction politics with their 1 for 2 SSIA style pension deal. I wonder how voters will buy this without asking where the extra ‘free’ Euro comes from?
The substance of the plan is pretty simple – you set up an approved pension and for every two euro you put in, ‘the state’ will add another euro for it’s magic bag of money. This is exactly the same as they did with the SSIAs, which are maturing just in for this election.
On one level, people will say that all they are promising is to give us back our own money, which they took in in taxes. This in indeed true – the state has no magic money bag, it gets money by taking it from us. In between taking it from us and giving it back, there is some wastage due to the expenses of administering tax collection, the cost of giving the money back out and the odd few billion that ends up in Mick the Builder’s account in the Cayman Islands. So it is a rip off.
It is worse than that however, because it, like the SSIA’s will have negatively redistribute incomes, from the poor to the better off. Everyone pays tax – even the poor sod on minimum wage or on the dole, who pays tax on his 20 smokes, and tax on his pint, and VRT and road tax on his car, and excise on the petrol to try and keep it on the road. How many ‘lower income earners’ (that poor to you and me) could afford SSIAs? How many of them will be able to afford to set up the new SSIA style pensions? Not very many. Those that do won’t have munch to put in and will gain very little benefit.
Most of the benefits will flow to middle and upper income earners, who will be able to afford to plough the maximum allowed into this new scheme, if it ever gets off the ground. So everyone pays into the tax bucket, but in this case the better off will benefit from this handout.
If they want to create an incentive for pensions, have a simple tax credit for it – the best way for the state to intervene in the economy is not at all. Where the state does intervene, it is supposed to redistribute income from the better off to the poorer, not vie-versa. The economic message of the New Right was supposed to be ‘get the tax man out of the economy’ but it has been twisted to one where the tax system is used to give the most to those most likely to vote. The economic message of the neo-liberals, of the ‘Free to Chose’ era has been swept away by a nasty neo-conservative nanny-statism which is fostering a dependency culture among the middle classes, and turning the poor into a disenfranchised, and disenchanted underclass. The worst thing is that many in the middle classes and corporate boardroom have developed a fatal addiction to living off the state.
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