Charlie McCreevy should not tax child benefit to save money in December's budget, but should abolish or curtail Special Savings Incentive Accounts, argues Tony McCashin
Miriam Donohue has suggested that child benefit should be taxed on the grounds that higher-income families receive the same amount as poor families (The Irish Times, September 20th).
She illustrates her case by comparing two hypothetical families.
One, the Joneses, is a middle-class family in which the father receives a salary, bonuses and the use of a company car. The other, the Smiths, is a low-income family in which Mr Smith is unemployed.
Both families receive child benefit of €382 per month in respect of their three children, but the Joneses are sufficiently well-off to be able to put aside some of the child benefit money into one of the Government's Special Savings Incentive Accounts.
This argument ignores the overall system of child-related payments in social welfare. The accompanying table summarises this system: the key point is that there are two other child payments.
First, low-income families dependent on social welfare will not only receive child benefit, but also child dependant additions paid weekly with their social welfare payment. Currently, with unemployment assistance these payments are €16.80 per child per week. The notional Smith family with three children would receive €50.40 per week (€201.60 monthly) in addition to Mr Smith's unemployment payment and his wife's child benefit.
Second, family income supplement is specifically for low-paid workers with dependent children, and the amount payable is related to net earnings and the number of children. For example, if Mr. Smith's net weekly pay was €350 he would receive just under €24 weekly, while his wife would continue to receive child benefit.
The system of child income support is a mixed one. One payment, child benefit, is paid at the same rate to all families - rich and poor - and is proportionately greater for poorer families. The two other payments are for poorer families only.
Miriam Donohue's argument raises a more fundamental question as to the objectives of child benefit. She acknowledges some of them: help with care costs and the need for women in the home to have access to an independent income, for example.
The key point about child benefit, however, is that it is paid out of tax revenues from all taxpayers - from those with children and those without.
Child benefit then redistributes income across households and families at given levels of income.
The wage system does not distinguish between earners on the basis of the number of children, and the purpose of child benefit is to narrow the gap in living standards at the same level of net earnings between the bachelor, on the one hand, and the parent with children on the other.
A whole series of official reports have dealt with this question (the report of the Commission on the Family, the Commission on Taxation, the Commission on Social Welfare, the Expert Working Group on the Integration of Taxes and Benefits, to instance a few) and all acknowledged in varying ways this principle of redistribution to families.
None of this is to argue that the current child income support system is without fault. But simply taxing child benefit will not deal with these problems, it will exacerbate them.
As the Minister for Finance, Charlie McCreevy, searches for public-spending savings as he prepares for the budget in December, the danger is that child benefit will be portrayed out of context as an unnecessarily universal payment.
It is merely one of a range of payments which together offer a mix of supports: a basic level of support for all families and targeted support for poor families.
Miriam Donohue trivialises child benefit by linking it to Special Savings Incentive Accounts; in her illustration the well-off family is saving some of the child benefit money in one of these SSIAs.
From what we now know about Mr McCreevy's savings scheme - its cost and the fact that it is only of benefit to people who can afford to save - the logic of Miriam Donohue's examples is not that child benefit should be taxed but that the savings scheme should be abolished or curtailed.