PDs Promise Major Tax Cuts

By Paddy Clancy

SUBSTANTIAL tax cuts and improved relief for first time home buyers were promised last weekend by Michael McDowell if his Progressive Demo crats party is returned to coalition power with Fianna Fail.

The promised measures, which McDowell denied were a step into auction politics, would mean a 3% reduction in the higher income-tax rate down to 38% and two points down to 18% for those paying at the lowest rate.

They would also mean savings of up to $22,000 for first-time home buyers with the abolition of stamp duty on house purchases.

The package of goodies, including a $130-a-week increase to almost $400 in old age pensions as well as more spending on childcare, would cost almost $6 billion.

McDowell maintained the measures were fully costed and would remain within strict fiscal limits. He said the package was affordable because if there were no significant tax changes over the lifetime of the next government, the state would collect around $8 billion more than it needs by 2012.

The commitments, unveiled at the Progressive Democrats’ annual conference in Wexford, received the support of Taoiseach Bertie Ahern who heads Fianna Fail, the senior partner in the ruling coalition.

He said he could see the benefit in a lot of the tax-change proposals, and added that the government had been working in recent years towards a low-tax regime.

But there was widespread media skepticism that McDowell could honor his pledges.

The Irish edition of the Daily Mail said he was gambling his party’s future on the extravagant promise of a multi-billion dollar giveaway in a desperate bid “to dig his party out of its electoral abyss.”

The Irish Independent feared the housing market would be thrown into chaos. It quoted the boss of a leading real estate agency as saying there was a strong possibility the market could stagnate in the run-up to a general election.

Martin O’Mahony, chief executive of the Property Team group, said prospective buyers would hold off in the hope of saving money.

Leading economist Jim Power of the Friends First group said it was unlikely the pledge would ever come to fruition. “I would be surprised and I wouldn’t advise people to hang off in the expectation that stamp duty will go,” he said.