American Chamber of Commerce cannot have it both ways on tax reduction

To mangle an old saying, the only certainties in life are death, taxes, and calls from US business lobby groups to lessen the impact of taxation on their members and the executives of US companies operating here.

Louise Phelan, the president of the American Chamber of Commerce in Ireland, on Thursday urged the Government to reduce the amount paid by those on the higher rate.

Phelan, a formidable networker and lobbyist who has the ear of Taoiseach Enda Kenny, was speaking at the chamber's Spring Lunch in Dublin.

She said the "high marginal tax rate and the low entry point to that rate are major barriers" to attracting key talent, ie, the senior executives of US firms here such as Google, Apple and Intel.

It is true that since the onset of the crisis personal taxation rates in this country have sky-rocketed so that the marginal rate of income tax is now effectively 51 per cent with all levies included.

But it is also true that one of the reasons personal tax rates rose so fiercely is because the Government took the strategic decision not to raise the burden on corporations, such as the members of the US chamber, many of whom have been castigated internationally for using aggressive tax-avoidance measures.

The extra tax revenue the Government needed at a time of crisis had to come from somewhere. If not from companies themselves, then from those employed by them.

The members of the chamber cannot have it both ways.

Phelan said a reduction in the higher rate tax burden would stimulate the economy. However, a reduction in the tax burden on the lowest paid workers in the economy would have a far greater effect because those workers have a greater propensity to spend more if their take-home pay increases.

Better-off workers save more cash if they get a tax cut, while low-paid workers spend more if they get a boost to their take-home pay.

Spenders are what Ireland needs. Not savers.