Croke Park II preliminary Talks started today

Gryire

creedp wrote: »

Isn't this the thing though .. those who are looking for CP2 to happen and criticing some PS for not wanting to agree with it - are supporting something which will protect the core pay of the majority of the PS. Its difficult to understand why these same people aren't baying for the Govt to cast CP2 aside and introduce legislation to cut pay more generally.

The savings required could easily be made by compulsory redundancies of superfluous highly paid staff. Why don't the majority of not so highly paid PS demand this instead of pay cuts

creedp

Gryire wrote: »

The savings required could easily be made by compulsory redundancies of superfluous highly paid staff. Why don't the majority of not so highly paid PS demand this instead of pay cuts

Presumably because the majority of the not so highly paid PS are not being hit for pay cuts and their unions and the PSC have decided that its easier not to take a whole PS approach to this agreement. Whatever about the original CP2 the latest incarnination will remove even more people from the pay cut net, thereby almost guaranteeing a 'mighty success' for Howlin and Co even though in reality they will make sod all savings from the Agreement .. its all about reputation at this point from the Govt side.

creedp

sharper wrote: »

No I don't agree, there is zero relationship between superannuation payments being made today and pension expenses today. A euro paid in superannuation can just as easily be spent on road construction or buying pens for an office somewhere.

As stated above if you want to try and calculate net costs of government spending this is not a novel argument but you also have to apply it to other areas of government spending.

Its very difficult to keep up with this argument .. so now compulsory superanuation in the PS is simply another form of general taxation? Does the same apply to PRSI deductions for the PS? If a PS required sick benefit .. could its employer/the State say sorry but we fixed potholes with your PRSI contribution so you can shag off?

sharper

creedp wrote: »

Its very difficult to keep up with this argument ..

I have no idea what's being argued anymore except that Godge is keen to find another way to make the public sector pay bill appear cheaper.

Gryire

creedp wrote: »

Its very difficult to keep up with this argument .. so now compulsory superanuation in the PS is simply another form of general taxation? Does the same apply to PRSI deductions for the PS? If a PS required sick benefit .. could its employer/the State say sorry but we fixed potholes with your PRSI contribution so you can shag off?

PS get paid full pay for 6 months when they are off sick hence the PRSI argument us not really valid

Riskymove

Gryire wrote: »

PS get paid full pay for 6 months when they are off sick hence the PRSI argument us not really valid

it is for PS who pay Class A PRSI

the sick benefit is paid by Social Welfare

sharper

creedp wrote: »

could its employer/the State say sorry but we fixed potholes with your PRSI contribution so you can shag off?

Oh and incidentally yes it could. The social insurance fund ran dry a while back, they spent tall that money.

PRSI benefits were arbitrarily reduced, the unions didn't much care because they don't expect to need them.

sharper

Riskymove wrote: »

it is for PS who pay Class A PRSI

the sick benefit is paid by Social Welfare

The government funds the difference between what PRSI provides and full salary for public sector workers hence if PRSI sick benefit reduced to zero it would not affect them because the government would just be funding the full amount.

Jawgap

Gryire wrote: »

The savings required could easily be made by compulsory redundancies of superfluous highly paid staff. Why don't the majority of not so highly paid PS demand this instead of pay cuts

We have and advocated compulsory redeployment - the problem is unions are about membership and given a choice between lots of poorly paid members and fewer appropriately paid members, they'll go for the former.

That's a win/win for the government and the unions - government gets the unions to agree to save the TDs having to do the job they were elected to do and unions get to keep paying members.

Gryire

Jawgap wrote: »

We have and advocated compulsory redeployment - the problem is unions are about membership and given a choice between lots of poorly paid members and fewer appropriately paid members, they'll go for the former.

That's a win/win for the government and the unions - government gets the unions to agree to save the TDs having to do the job they were elected to do and unions get to keep paying members.

And I always thought the unions represented the members views!

Godge

creedp wrote: »

Its very difficult to keep up with this argument .. so now compulsory superanuation in the PS is simply another form of general taxation? Does the same apply to PRSI deductions for the PS?

No, us private sector are different, we get to keep our entitlements in relation to the amount we pay while the suckers in the public service can be told to get lost.

sharper wrote: »

No it doesn't, there are facts concerning what people are entitled to and entitlements the public sector wants to invent for itself.

People paying PRSI receive certain entitlements in relation to the amount they pay. You will note that over the last few years the amount people pay in PRSI has increased while the benefits they receive have decreased.

It is not the same argument, but a similar argument, or a nearly the same argument or did I really mean not quite the same argument.

sharper

Godge wrote: »

It is not the same argument, but a similar argument, or a nearly the same argument or did I really mean not quite the same argument.

Well I'm happy to leave it to people reading the thread to draw their own conclusions from your inability to follow what's being said.

creedp

sharper wrote: »

Oh and incidentally yes it could. The social insurance fund ran dry a while back, they spent tall that money.

PRSI benefits were arbitrarily reduced, the unions didn't much care because they don't expect to need them.

In that case given that the fund is owned equally by all taxpayers presumably the Govt could equally turn around to a private sector worker seeking sick benefit and tell them to take a jump.

sharper

creedp wrote: »

In that case given that the fund is owned equally by all taxpayers presumably the Govt could equally turn around to a private sector worker seeking sick benefit and tell them to take a jump.

Not an individual worker no but they can change the entitlements and they have done.

Jawgap

Gryire wrote: »

And I always thought the unions represented the members views!

Nope - it's the classic principal / agent problem

Union management need union subs to keep them in employment, therefore instead of striking deals that are in the members' interests they strike deals that are in the union's interest and that maximise membership numbers rather than welfare.

A fine trade unionist of the old school (my grandfather!) once told me that all trade union disputes are about membership - getting members and keeping members.

creedp

sharper wrote: »

Not an individual worker no but they can change the entitlements and they have done.

Agree but when they do all contributors are equally affected, irrespective of their sector.

sharper

creedp wrote: »

Agree but when they do all contributors are equally affected, irrespective of their sector.

That's obviously not the case. Public sector workers get full salary regardless of what PRSI provides. Public sector workers have no compulsory redundancies therefore reductions in Job Seeker's Benefit does not affect them.

It's not reasonable to claim all sectors are "equally" effected when one sector's employment conditions removes their need for access to those benefits.

Count Dooku

Jawgap wrote: »

No problem boss....



Top figure are from January 2010, bottom are from January 2012. Those figures show a 30% decrease in salary, despite gross salary remaining the same - as you can see the amount deducted grew by just over 40%.

I've had my pay cut(s).......

At least your pension haven't been decreased as mine and some parts of cuts are tax increases, which everybody pay

Jawgap

Count Dooku wrote: »

At least your pension haven't been decreased as mine and some parts of cuts are tax increases, which everybody pay

creedp

sharper wrote: »

That's obviously not the case. Public sector workers get full salary regardless of what PRSI provides. Public sector workers have no compulsory redundancies therefore reductions in Job Seeker's Benefit does not affect them.

It's not reasonable to claim all sectors are "equally" effected when one sector's employment conditions removes their need for access to those benefits.

My point being if the Govt changes the terms of PRSI related benefits as they did with dental/optical benefits recently, then everybody in the same class of PRSI, irrespective of thier sector, are impacted in the same manner.

There is a difference between the employer and the State when it comes to PS workers. In the case of sick pay, the State as the employer pays full pay when it employees are on sick leave. Ditto for many private sector employers, particulary large employers. You will probably have noted but won't want to acknowledge that the State as the employer has recently reduced the benefits available to its employees when it comes to uncertified sick leave. Obviosuly these reductions don't impact on private sector workers.

ardmacha

Good loser wrote:

It is in the nature of things that the die-hards (ardmacha, godge) will not yield an inch. They don't even appreciate that they are extremists and have no conception of the resentment felt towards the PS by 'those who know'.

Yes indeed. As someone who thinks that public services should be efficiently run, not run at the whim of corrupt politicians or at the behest of ranters who want a vehicle for their petty resentments, I am rather unusual. That this is an "extreme" position is a sad indictment of the state of this country.

Good loser wrote:

Because large swathes of the general public have no detailed appreciation of the detail of the public finances and the significance of the pay (and pension) scales to the budget deficits.

Indeed they don't. Egged on by the crap journalistic standards in the Irish media most people think that the bulk of public expenditure is made up of PS salaries and pensions. If you told them that the net cost of the PS was only a little bit more than one fifth of public expenditure or less than 10% of GNP, they'd probably be incredulous.

Good loser wrote:

essentially another supine capitulation by a political class devoid of moral courage.

Once again it is hard to disagree with this. But what do you expect from politicians voted by people who have no interest in the efficiency of public services, only in their resentments and half baked fact free analyses.

The whole thing is depressing.

sharper

ardmacha wrote: »

If you told them that the net cost of the PS was only a little bit more than one fifth of public expenditure or less than 10% of GNP, they'd probably be incredulous.

If you compared the net cost of public sector pay to the gross cost of other government spending then you're naturally going to get a smaller number.

If you want to compare the net cost of public sector you have to calculate and compare it to the net cost of other government spending. You also have to include all factors that contribute to the net, not just the ones you want to like direct taxes.

Otherwise you're just cherry picking your analysis to produce the answer you want.

everdead.ie

So essentially what the unions seem to have done is taken an agreement which protected the lower paid workers (no cuts and increments delayed) to take a deal that cuts there salary and delays increments.




I'm pretty sure they are doing it wrong ..............

creedp

sharper wrote: »

If you compared the net cost of public sector pay to the gross cost of other government spending then you're naturally going to get a smaller number.

If you want to compare the net cost of public sector you have to calculate and compare it to the net cost of other government spending. You also have to include all factors that contribute to the net, not just the ones you want to like direct taxes.

Otherwise you're just cherry picking your analysis to produce the answer you want.

Some few posts back there was reference made to 'die hard' public servants and to the fact that the poor unfortunates didn't even recognise the fact that they were 'extremists'. What was especially interesting was the view expressed that the poor deluded PS didn't even recognise the resentment felf toward them by 'those in the know'! If such a scenario exists then at least the PS can take comfort from the fact that this type of response set out above exemplifies why the private sector is no different.

I know it doesn't suit the argument but then again it appears nothing suits unless it support the argument - but if you pay out €100 to a person and that person immediately hands you back €40 - what is the net cost to you? Why would you be only interested in the €100?

If you went to a retailer and buy something for a €100 but he gives you a discount at the till of 40% are you interested in the original cost of €100 or the reduced cost of €60?

However, there is no point trying to persuade someone that white is actually white when all he wants to do is argue that - No its black.

ardmacha

If you want to compare the net cost of public sector you have to calculate and compare it to the net cost of other government spending. You also have to include all factors that contribute to the net, not just the ones you want to like direct taxes.

Otherwise you're just cherry picking your analysis to produce the answer you want.

I include direct taxes, superannuation etc because this money never reaches the employee nor never leaves the government, except in an accounting sense. On in bookkeeping terms is it expenditure.

As the previous post says it is not so much as case that you pay out €100 and get back €40, it is that you give the person €60 and a bit of paper that indicates that they once had €100, like the retailer that shows the "full" price on the invoice.

sharper

creedp wrote: »

but if you pay out €100 to a person and that person immediately hands you back €40 - what is the net cost to you? Why would you be only interested in the €100?

What post are you arguing against? It's certainly not mine.

My point is only that you can't pick net cost for one area and compare it to gross costs for another. You have to use net consistently or not at all.

sharper

ardmacha wrote: »

I include direct taxes, superannuation etc because this money never reaches the employee nor never leaves the government, except in an accounting sense. On in bookkeeping terms is it expenditure.

In booking terms you still need to have the money in the first place.

If you borrow €100 and then pay €50 back to yourself you still have borrowed €100, pay interest on €100 and have to repay €100.

As the previous post says it is not so much as case that you pay out €100 and get back €40, it is that you give the person €60 and a bit of paper that indicates that they once had €100, like the retailer that shows the "full" price on the invoice.

Again, if you want to use the net cost of public sector pay you also have to use the net cost of social welfare.

It's about making a completely analysis which is looking to find the truth the matter. You already know the answer you want and you want to tweak the analysis with cherry picked criteria to produce it.

creedp

sharper wrote: »

If you borrow €100 and then pay €50 back to yourself you still have borrowed €100, pay interest on €100 and have to repay €100.

You don't have to borrow it if you dont have to pay it out. PS don't receive a gross wage in cash and then go about handing back half of it or so in taxes/levies at some point in future.

Again, if you want to use the net cost of public sector pay you also have to use the net cost of social welfare.

What is the net cost of social welfare?

ardmacha

If you borrow €100 and then pay €50 back to yourself you still have borrowed €100, pay interest on €100 and have to repay €100.

Nonsense. If you are going to give €50 to yourself, you borrow €50. Whether there is a bookkeeping transaction that calls it €100-€50 is neither here nor there. Cash is the issue here.

Again, if you want to use the net cost of public sector pay you also have to use the net cost of social welfare.

OK, what proportion is deducted from social welfare and we'll add it to the discussion.

It's about making a completely analysis which is looking to find the truth the matter. You already know the answer you want and you want to tweak the analysis with cherry picked criteria to produce it.

Glasshouses and stones comes to mind here.

sharper

creedp wrote: »

You don't have to borrow it if you dont have to pay it out.

Yes you do. The government can't just magic up the money needed for gross salaries, it has to really exist and really be available. Your starting premise is just wrong.

PS don't receive a gross wage in cash and then go about handing back half of it or so in taxes/levies at some point in future.

From a financial and book keeping perspective, they do.

What is the net cost of social welfare?

I'm not the one proposing the use of the net figures.

sharper

ardmacha wrote: »

Nonsense. If you are going to give €50 to yourself, you borrow €50. Whether there is a bookkeeping transaction that calls it €100-€50 is neither here nor there. Cash is the issue here.

Yes cash is the issue. At the end of the transaction the government has €50 in tax income and the person has €50 in wages both need to really exist. You are proposing that somehow only the wage part has to exist but the tax income side comes from...somewhere.

Tax income is ultimately used for something, where are you proposing that money comes from? You've just taken €50 that never existed and called it "tax income" because you were paying it to yourself. If you want to actually use it to pay for something, where do you get it from?

OK, what proportion is deducted from social welfare and we'll add it to the discussion.

Ok, how about you do your own homework and complete your own analysis.

Glasshouses and stones comes to mind here.

I insist you show where I have cherry picked criteria to produce an answer I wanted.

ardmacha

Yes you do. The government can't just magic up the money needed for gross salaries, it has to really exist and really be available. Your starting premise is just wrong.

It doesn't. When you are in a hole stop digging.

sharper

Another hypothetical example:

The government creates a new tax that's 500% of current wages and applies it to public sector workers only. Each public sector worker has their pay adjusted so their take home pay will be the same before and after the new tax (i.e. the pay bill after direct taxes remains unchanged).

The new gross pay bill increases by 5x to €65bn (I'm going with) a current gross bill of about €13bn) and generates €52bn in new tax income.

Since a couple of posters are proposing the government doesn't really need to have money it pays to itself anyway, how does this not immediately fix the deficit and then some?

vinylbomb

ardmacha wrote: »

It doesn't. When you are in a hole stop digging.

Truly amazing denial of simple accounting principles going on here.

I'd say you would give arguing against the existence of gravity a good go.

Jawgap

sharper wrote: »

Yes you do. The government can't just magic up the money needed for gross salaries, it has to really exist and really be available. Your starting premise is just wrong.


......

.....unless its for a bank.....

Anyway, the government can't pay out cash it hasn't got (which is different to money).

Accepting that, why can't they cut a little bit of all outgoings including public sector pay and take in a bit more through a modest increase on the marginal rate of income tax, or even by being a bit more imaginative and reducing VAT or changing the tone of the debate so people are encouraged to spend more?

I'd say if CP2 had been handled in a much fairer way the deal would have got through with a lot less friction.

sharper

Jawgap wrote: »

.....unless its for a bank.....

Only the ECB can create money, whether for a bank or anyone else. The Irish government cannot.

Accepting that, why can't they cut a little bit of all outgoings including public sector pay and take in a bit more through a modest increase on the marginal rate of income tax, or even by being a bit more imaginative and reducing VAT or changing the tone of the debate so people are encouraged to spend more?

Income taxes have increased, VAT has increased, property tax has been created and brought in this year, water rates (which are effectively another tax) are coming soon. You're acting as if the tax side of things has been left alone when it hasn't.

sarumite

creedp wrote: »

I know it doesn't suit the argument but then again it appears nothing suits unless it support the argument - but if you pay out €100 to a person and that person immediately hands you back €40 - what is the net cost to you? Why would you be only interested in the €100?

It doesn't suit the argument because its based on flawed logic. The government give you a gross salary. You then hand back the government x amount of that salary in taxes in exchange for government services. Your argument would only hold if you weren't receiving anything in return for your taxes, which isn't the case.

Jawgap

sharper wrote: »

Only the ECB can create money, whether for a bank or anyone else. The Irish government cannot.



Income taxes have increased, VAT has increased, property tax has been created and brought in this year, water rates (which are effectively another tax) are coming soon. You're acting as if the tax side of things has been left alone when it hasn't.

I think you're confusing balances, money and cash - the ECB creates balances (which can go on to be cash or currency or a different instrument altogether), governments - as the promissory notes demonstrate - can still create fiat money.

.....and if your argument is that taxes have been 'touched' and are now immune then why not extend to PS pay - it's been 'touched' and if its back on the agenda, then all government expenditure and income should be up for consideration.

ardmacha

The new gross pay bill increases by 5x to €65bn (I'm going with) a current gross bill of about €13bn) and generates €52bn in new tax income.

Since a couple of posters are proposing the government doesn't really need to have money it pays to itself anyway, how does this not immediately fix the deficit and then some?

You are proposing that the government increase its expenditure and increases its taxation in a bookkeeping sense. The money it spends is the same, i.e. the PS net salaries and so the deficit remains the same. This is precisely my point, the cost of the PS in this scenario is exactly the same although the government has dicked around the bookkeeping.

sharper

Jawgap wrote: »

I think you're confusing balances, money and cash - the ECB creates balances (which can go on to be cash or currency or a different instrument altogether), governments - as the promissory notes demonstrate - can still create fiat money.

I'm not familiar with the word "balances" in this context.

What's being confused here is money and currency. Most appear to be referring to currency as "cash" which is fine but there's a suggestion that the Irish government can create money and only needs whatever amount of currency on hand. This is not correct and even if you think about logically the Euro system could never survive at all if member governments could create money - Greece would just create whatever amount it needs and devalue the whole thing.

In the promissory note example nobody is allowed to use the money, it ceases to exist when it's paid back. It's not something that would have likely been allowed outside of a crisis.

.....and if your argument is that taxes have been 'touched' and are now immune then why not extend to PS pay - it's been 'touched' and if its back on the agenda, then all government expenditure and income should be up for consideration.

I am not claiming tax is now immune. I'm pointing out that taxes are increasing this year and will likely increase again next year or the year after under current plans.

You are saying "they should tax a bit and cut a bit". They are taxing, it's a thing that's actually being done right now and is planned to increase again.

sharper

ardmacha wrote: »

You are proposing that the government increase its expenditure and increases its taxation in a bookkeeping sense. The money it spends is the same, i.e. the PS net salaries and so the deficit remains the same. This is precisely my point, the cost of the PS in this scenario is exactly the same although the government has dicked around the bookkeeping.

Ok and the government now has €52bn in tax that it paid itself. If the cost is exactly the same, where did that €52bn come from?

Godge

sharper wrote: »

Yes you do. The government can't just magic up the money needed for gross salaries, it has to really exist and really be available. Your starting premise is just wrong.

The government only needs the cash to pay the net salary.

Notional monthly gross salary of €1,000, less deductions of paye, usc, prsi, pension levy and superannuation, gives a cash wage of €500 (figures only illustrative). The government only needs to find the €500 as that is the cash amount paid to the employee.

This is why it is different to the private sector. In the private sector, the employer needs to find the gross salary plus employers PRSI. It then pays the net salary in cash to the employee and pays the deductions plus employers PRSI to the government. In the public sector, the second part of this transaction does not need to exist - sometimes for accounting purposes and separate payrolls it does exist but it can be eliminated by the creation of a single public sector payroll.

sharper

Godge wrote: »

The government only needs the cash to pay the net salary.

In this context you are wrong. The government does not deal in "cash", it does not move pallets of currency around and distribute it to people.

It needs to transfer money to people's bank accounts and then transfer money to its own income tax accounts. Someone will go an ATM and then have currency.

The cash/currency versus money argument is irrelevant. The money in the income tax account will then be transferred to someone else who will use it to withdraw currency.

The money still has to come from somewhere. The government is explicitly prohibited from just inventing it. Otherwise the government could just pay itself enough money to wipe out the deficit.

Godge

sharper wrote: »

In booking terms you still need to have the money in the first place.

If you borrow €100 and then pay €50 back to yourself you still have borrowed €100, pay interest on €100 and have to repay €100.



.

Completely wrong example as it based on a lack of understanding of how a budget deficit and financing of same would work.

If you have projected expenditure of €100 on the gross pay bill and projected income of €50 in the taxes from that pay bill, you only need to borrow €50 to pay the public servants.

sharper

Godge wrote: »

If you have projected expenditure of €100 on the gross pay bill and projected income of €50 in the taxes from that pay bill, you only need to borrow €50 to pay the public servants.

Then address the examples above and explain how income tax receipts increase by €50 when the government never had that €50 in the first place.

Godge

sharper wrote: »

In this context you are wrong. The government does not deal in "cash", it does not move pallets of currency around and distribute it to people.

It needs to transfer money to people's bank accounts and then transfer money to its own income tax accounts. Someone will go an ATM and then have currency.

The cash/currency versus money argument is irrelevant. The money in the income tax account will then be transferred to someone else who will use it to withdraw currency.

The money still has to come from somewhere. The government is explicitly prohibited from just inventing it. Otherwise the government could just pay itself enough money to wipe out the deficit.

Nobody is saying the government doesn't need money from somewhere, all they are saying is that government only needs to fund the net pay element as the rest comes back to it.

As for your 500% tax example, you wonder why it doesn't solve the budget deficit, that is because you made a nonsensical assumption that the net pay of the public servants would be adjusted to compensate. That negates the 500% tax.

This is how a 500% tax would have to work in reality.

Government applies 500% tax to public servant on gross wage of €1,000. Public servant receives no pay from Government but has to pay €4,000 to government out of income from second job in the private sector or savings.

Result: Government has income of €5,000 and expenditure of €1,000 on public service pay, giving a surplus of €4,000 which can be spent on student grants and the construction sector.

sharper

Godge wrote: »

As for your 500% tax example, you wonder why it doesn't solve the budget deficit, that is because you made a nonsensical assumption that the net pay of the public servants would be adjusted to compensate. That negates the 500% tax.

It does not negate the tax, it simply creates an enormous gap between gross and net pay as a thought experiment to test the concept the government doesn't have to borrow for gross pay only net.

Clearly a 500% tax makes no sense but you can construct the scenario any way you want but ultimately you need to explain why the government can't just pay itself all the money it needs.

Godge

sharper wrote: »

Then address the examples above and explain how income tax receipts increase by €50 when the government never had that €50 in the first place.

Deficit requirements and cash payments are not the same thing.

Again, to give another example.

Currently, public servants are paid €10,000 per year. Income tax is set at 50%. Public servant gets €5,000 income and pays €5,000 tax. Government needs to raise taxes from private sector or borrow money to fund the €5,000. Let us say that it manages to raise €4,000 in taxes from the private sector.

Tax income is €9,000, Expenditure is €10,000, deficit is €1,000, government needs to borrow €1,000.

Now, let us say government triples public service pay to €30,000 but introduces a special pre-tax 66.66% public service levy. Everything else remains the same. The private sector pays €4,000 in tax and the public servants get €5,000 in income.

Tax income is now €29,000, expenditure is now €30,000 but the money the government needs to borrow remains at €1,000. What is therefore important to the budget arithmetic is the net pay paid to the public servants versus the income gained from the private sector.

The gross pay paid by the government to the public service is irrelevant in determining the budget deficit or the government borrowing requirement.

This is why, for example, I have been saying that the figures for Croke Park II are a sham, as the money is being taken off higher public servants who are paying higher marginal rates. Therefore while the figure for the public might be €300m, the real figure for the budget deficit is much lower.

sharper

Godge wrote: »

This is why, for example, I have been saying that the figures for Croke Park II are a sham, as the money is being taken off higher public servants who are paying higher marginal rates. Therefore while the figure for the public might be €300m, the real figure for the budget deficit is much lower.

This is true of any cut you make the government spending (same as the gross V gross, net V net argument).

If you cut €1bn from the capital spend budget then you lose X% right away in tax revenue depending on how much was going to pay construction salaries.

Then you have whatever goods and services were going to be consumed within the economy.

That's why a deficit the size of Ireland's is such a crisis, closing it is always going be extremely difficult and why I keep saying there's no such thing as "Cut this instead of increasing that" or "Tax that instead of cutting this"

sharper

Godge wrote: »

Currently, public servants are paid €10,000 per year. Income tax is set at 50%. Public servant gets €5,000 income and pays €5,000 tax. Government needs to raise taxes from private sector or borrow money to fund the €5,000. Let us say that it manages to raise €4,000 in taxes from the private sector.

Tax income is €9,000, Expenditure is €10,000, deficit is €1,000, government needs to borrow €1,000.

Ok let's imagine there's only two individuals involved here, one private sector paying €4k in tax and one public servant being paid 10k gross, 5k net.

The private sector guy pays his tax and lodges it in the revenue's account. They have now received 4k in tax and their balance is +4k.

They now pay the public sector guy his salary. They pay him the 4k from the income tax account + 1k borrowed, the other 5k doesn't really exist but is assigned as tax revenue anyway. The revenue bank account is at 0k even though income is marked +5k.

In other words tax income is not 9k, it is 4k because 5k of it does not exist and cannot ever be spent on anything.

If the government wants to spend that 5k it has to borrow it. Otherwise it just doesn't exist.

Going back again to the consistency argument, if you want to use public sector pay minus direct taxes you'll have to reduce income tax, GNP and GDP by the same amount when calculating taxable income, otherwise you're talking about taxing non-existant money.

Also again I'm happy to explore whatever set of criteria so long as it's applied consistently and used appropriately. It's not at all reasonable to apply special sets of criteria to subsets of government activity and then compare it elsewhere using different criteria.

For example, using this criteria the public sector pension bill is significantly more expensive than would be otherwise considered since it attracts little tax.