Barra Roantree "Was the Budget for the children of the rich or the children of the poor"

[Brendan Burgess]

Barra Roantree: Does the Government want to help the country’s poorest children, or the richest?

Budget 2025: Spending the same amount cutting inheritance tax as went to permanent payments targeted at the poorest children was an odd choice

www.irishtimes.com

An excellent summary of the government's priorities.

Among the other tax cuts announced was an increase in the lifetime thresholds above which Capital Acquisitions Tax applies on gifts or inheritances. The Minister for Finance justified this €90 million tax cut – which benefits a tiny fraction of the population – on the basis these thresholds were last increased in 2019, since when property prices have grown.

Yet despite an impressive sounding €12 per week cash rise in most social welfare payments from January, these will remain below their 2020 level in real terms (adjusted for inflation). In other words, despite five years of strong economic growth, the core rates of social welfare payments will not even have kept pace with price increases over the course of this Government.
...
For example, another two rounds of €125 energy credits will land in the door of every household before Christmas regardless of their bank balance, as will two extra months of child benefit for those with children. These temporary payments will all inevitably have to be withdrawn by the next Government. And when they are, there will be consequences for incomes at the bottom of the distribution.

This is particularly concerning given we have already seen progress on reducing income inequality and poverty stall, particularly for children.

Recent ESRI research in partnership with Community Foundation Ireland showed that material deprivation – the share of individuals in households unable to afford two or more items from a list of ten essentials – rose sharply from 17.7 per cent in 2022 to 20.1 per cent in 2023 for children.

 

[Marsupial]

My answer to Roantree's hypothetical question (which is also the title of this thread) is: NEITHER .... or BOTH.

Seems to me that he has cherry picked two small elements from a massive and wide-ranging budget in order to pursue whatever particular agenda he and his fellow left-leaning budgetary analysts are promoting this week. Next week, they'll probably be giving out about the "children of the rich" (sic) getting free schoolbooks, lunches, university fees or somesuch.

 

[Brendan Burgess]

his buddy Paul Murphy

Is that Paul Murphy of RTE or PBP?

Are you suggesting that he is a member of PBP?

 

[jdwex]

Doubt he's a buddy of Paul Murphy. His politics would probably be close to the LP or SD, he's married to Labour Senator Rebecca Moynihan!

 

[Calico]

I don't agree with increasing inheritance tax thresholds on the basis of rising property prices.

If you live in the property, or it's your (only) family home, you can avail of dwelling home relief and keep it tax free which is fair enough.

 

[Brendan Burgess]

I have heard him present papers at the Dublin Economics Workshop and other places and he is an excellent researcher and presenter.

By all means question his data. By all means differ with his conclusions.

But don't try to win your argument by claiming that he is a friend of Paul Murphy.

 

[Marsupial]

I have heard him present papers at the Dublin Economics Workshop and other places and he is an excellent researcher and presenter.

By all means question his data. By all means differ with his conclusions.

But don't try to win your argument by claiming that he is a friend of Paul Murphy.

Not quite sure what led to you imagine that I was trying to win an argument, Brendan.

I was simply making an observation on an Irish Times article that I regarded as jejeune and more than a little simplistic. Most of us - including you, I would imagine - are well aware that budgets in the round are a lot more nuanced than Rountree's portrayal of them in that article.

I have now edited my comment to remove that disgraceful smear on Mr. Rountree's impeccable reputation.

 

[Marsupial]

Is that Paul Murphy of RTE or PBP?

Are you suggesting that he is a member of PBP?

Of course not; he's not that foolish! I was merely implying that they're both singing from the same, rather threadbare, hymn book.

 

[Brendan Burgess]

Most of us - including you, I would imagine - are well aware that budgets in the round are a lot more nuanced than Rountree's portrayal of them.

Where are you seeing the nuance?

It gave money to everyone, whether they needed it or not.

It continues to run an underlying deficit when you strip out the windfalls.

Successive budgets have added to the cost of living.

Barra's piece was an opinion piece and not the detailed analysis you would expect from the ESRI, IFAC or the Central Bank.

Brendan

 

[faketales]

I don't agree with increasing inheritance tax thresholds on the basis of rising property prices.

If you live in the property, or it's your (only) family home, you can avail of dwelling home relief and keep it tax free which is fair enough.

Perhaps not following house prices but surly it makes sense that a value follows inflation to some degree.

I find the tax fee if living in it situation a bit unfair on say the person who has moved out as they need some freedom / be closer to work etc but are paying rent at an unsustainable level.

I wonder is it abused a bit where people are casually renting but say they haven’t officially moved out.

It’s a different story if the person has gone on and bought a family home if their own.

 

[T McGibney]

I wonder is it abused a bit where people are casually renting but say they haven’t officially moved out.

"Casual renting" must be a thing of the past, between tenancy registration obligations and cost?

 

[Dr Strangelove]

Most of us - including you, I would imagine - are well aware that budgets in the round are a lot more nuanced than Rountree's portrayal of them in that article.

Roantree’s article was the most nuanced I’ve read of all the media commentary.

My only quibble is that he doesn’t focus more on the lack of large public infrastructure spending.

 

[faketales]

"Casual renting" must be a thing of the past, between tenancy registration obligations and cost?

Reduced I’m sure but certainly not gone.

Very common with rent a room where people come and go.

 

[Calico]

Perhaps not following house prices but surly it makes sense that a value follows inflation to some degree.

I find the tax fee if living in it situation a bit unfair on say the person who has moved out as they need some freedom / be closer to work etc but are paying rent at an unsustainable level.

I wonder is it abused a bit where people are casually renting but say they haven’t officially moved out.

It’s a different story if the person has gone on and bought a family home if their own.

The qualifying criteria for dwelling home relief are set out below:

Qualifying conditions for inheritance on, or after, 25 December 2016​

You will be exempt from Capital Acquisitions Tax (CAT) on the inheritance of a dwelling house if:

• the house was the only, or main, home of the disponer at the date of their death. This condition does not apply if you are a dependent relative.
• you lived in the house as your only, or main, home for the three years immediately before the date of the inheritance
• you do not own, or have an interest in, any other house at the date of the inheritance
• you do not acquire an interest in any other house from the same disponer between the date of the inheritance and the valuation date
• the house continues to be your only, or main, home for six years after the date of the inheritance. This does not apply if you:
  • are aged 65 years or over at the date of the inheritance
  • are required by reason of employment to live elsewhere
  • or
  • are required to live elsewhere because of mental or physical infirmity, and this is certified by a doctor.

Qualifying conditions for inheritance on, or after, 25 December 2016

This page provides information regarding the inheritance of a dwelling house on, or after, 25 December 2016

www.revenue.ie

I am not sure if you can rent an apartment but still meet the "living in the house as your only, or main, home for the three years immediately before the date of the inheritance". I guess probably not. If so I think this should be changed. For example, think of someone in their twenties who is renting independently but whose parents pass away. Or any adult children for that matter. If you don't have a home, you should be allowed to inherit one once tax-free imo.

 

[faketales]

The qualifying criteria for dwelling home relief are set out below:

Qualifying conditions for inheritance on, or after, 25 December 2016​

You will be exempt from Capital Acquisitions Tax (CAT) on the inheritance of a dwelling house if:

• the house was the only, or main, home of the disponer at the date of their death. This condition does not apply if you are a dependent relative.
• you lived in the house as your only, or main, home for the three years immediately before the date of the inheritance
• you do not own, or have an interest in, any other house at the date of the inheritance
• you do not acquire an interest in any other house from the same disponer between the date of the inheritance and the valuation date
• the house continues to be your only, or main, home for six years after the date of the inheritance. This does not apply if you:
  • are aged 65 years or over at the date of the inheritance
  • are required by reason of employment to live elsewhere
  • or
  • are required to live elsewhere because of mental or physical infirmity, and this is certified by a doctor.

Qualifying conditions for inheritance on, or after, 25 December 2016

This page provides information regarding the inheritance of a dwelling house on, or after, 25 December 2016

www.revenue.ie

I am not sure if you can rent an apartment but still meet the "living in the house as your only, or main, home for the three years immediately before the date of the inheritance". I guess probably not. If so I think this should be changed. For example, think of someone in their twenties who is renting independently but whose parents pass away. Or any adult children for that matter. If you don't have a home, you should be allowed to inherit one once tax-free imo.

Yes. It doesn’t really reflect the current situation where a person may be renting and unable to afford to buy.

Then again where do you draw the line? Some living in a one bed apartment they bought with a partner and two kids? Hardly a perfect set up.

I don’t really like the conditions. Set the limit at 1m and get rid of the exemption.

 

[T McGibney]

Yes. It doesn’t really reflect the current situation where a person may be renting and unable to afford to buy.

Then again where do you draw the line? Some living in a one bed apartment they bought with a partner and two kids? Hardly a perfect set up.

I don’t really like the conditions. Set the limit at 1m and get rid of the exemption.

I remember the late and brilliant tax consultant and lecturer Frank Brennan, despairing of the multiple conditions in the tax code which he claimed encouraged and rewarded younger people for remaining dependent on their parents and discouraged and punished those who chose to live independently.

Probably in relation to Dwelling House Exemption, I recall him noting that there was a general assumption in the tax code that it was somehow honourable and noble to be "looking after one's parents" by continuing to live with them info advanced adulthood while he noted that many or most doing so were doing that because it was the handiest and cheapest place they could find to live.

These days the Dwelling House Exemption seems to constitute a cast-iron incentive to someone with a young family, and with elderly parents living in a valuable property, to abandon their spouse and children and move back in with their parents in the hope of winning a substantial tax-free inheritance in the form of the house if the longest surviving parent lives for a further 3 years.

It's basically a repeat of the dysfunctional incentives that 40 years ago prompted farmers to remain single and uncommitted while continuing working for 20, 30 or 40 years on their father's farm, eventually inheriting it once the father died, sometimes by which time the beneficiary might well himself be nearing retirement age.

 

[Marsupial]

Roantree’s article was the most nuanced I’ve read of all the media commentary.

My only quibble is that he doesn’t focus more on the lack of large public infrastructure spending.

Yep; we badly need more National Childrens Hospital scenarios. That'll keep the naysayers happy.

 

[Marsupial]

Where are you seeing the nuance?

It gave money to everyone, whether they needed it or not.

It continues to run an underlying deficit when you strip out the windfalls.

Successive budgets have added to the cost of living.

Barra's piece was an opinion piece and not the detailed analysis you would expect from the ESRI, IFAC or the Central Bank.

Brendan

My response was simply an opinion too, Brendan!
I hadn't realised that I was obliged to dance to the Burgess beat on every financial topic, but will endeavour to keep my dissident opinions to myself in future. Anyway, the sun is splitting the stones here in the Algarve so I'm heading out for a stroll, a swim and a traditional British Roast Beef lunch - including Yorkshire pud!

 

[Dr Strangelove]

Yep; we badly need more National Childrens Hospital scenarios.

In this century capital spending overruns were common approx 2003-2008 and approx 2019-date.

These were periods characterised by higher-than-2% inflation and full employment.

The government has to pay the going rate for goods and labour.

Contrast the NCH with the Luas extensions of the 2010s when the economy was in the toilet: Point, Citywest and Cross-City. All done on time and within budget.

 

[faketales]

I remember the late and brilliant tax consultant and lecturer Frank Brennan, despairing of the multiple conditions in the tax code which he claimed encouraged and rewarded younger people for remaining dependent on their parents and discouraged and punished those who chose to live independently.

Probably in relation to Dwelling House Exemption, I recall him noting that there was a general assumption in the tax code that it was somehow honourable and noble to be "looking after one's parents" by continuing to live with them info advanced adulthood while he noted that many or most doing so were doing that because it was the handiest and cheapest place they could find to live.

These days the Dwelling House Exemption seems to constitute a cast-iron incentive to someone with a young family, and with elderly parents living in a valuable property, to abandon their spouse and children and move back in with their parents in the hope of winning a substantial tax-free inheritance in the form of the house if the longest surviving parent lives for a further 3 years.

It's basically a repeat of the dysfunctional incentives that 40 years ago prompted farmers to remain single and uncommitted while continuing working for 20, 30 or 40 years on their father's farm, eventually inheriting it once the father died, sometimes by which time the beneficiary might well himself be nearing retirement age.

Exactly. I suspect the intentions of the policy are to ensure that a son or daughter who may have lived their entire life with their parents (and I suspect often may have some undiagnosed additional needs and not be working full time) is not left with a tax bill and a need to move out of the family home after their death,

However there are probable many more situations where the son or daughter has significant savings and is more equipped to pay a tax bill than someone renting.

And it seems to ignore the idea that tax policy can drive behaviour rather than just reflect it.

Its also far easier to do live with parents if the house is in an urban area with lots of employment opportunities or is sizeable enough where there maybe a separate living area / some privacy.

Tax policy shouldn't drive social behaviours.