May 10, 2006
FG should scrap stamp duty if it wants to win the next electionPosted in Irish Independent · 7 comments ·
So what’s the big idea? What would make you sit up and listen? What’s the pitch to the average person?
Listening to the Fine Gael Ard Fheis over the past few days, it is difficult to see what it might do differently. It is also easy to conclude that Fine Gael hasn’t yet twigged that it is in opposition. It sometimes does not seem hungry enough.
You’d think that the manifesto of an opposition party would be like the aggressive sales pitch of a company trying to take business from a rival for the account of a valued and prized client.
We, the electorate are the client. It seems reasonable to suggest that the first lesson for the opposition is to realise that it is not the people’s choice and as they voted for the incumbents, they are happy with the status quo.
So the opposition’s pitch has to be forceful and different. It has to say to you that your life will be different if you vote for, in this case, Fine Gael.
Logically, it would seem that the first thing a party must do when trying to identify extra seats is identify the future battle ground.
Like all parties, Fine Gael has to tap into the ‘Baby Belt’ – the huge suburban arc that encircles our major cities. Here the population is growing rapidly. Meath and Kildare are the most fertile counties in the country and, looking beyond Leinster, the population of counties Cork, Limerick and Galway are rising faster than the respective cities.
These new estates are brimming with young commuters, creches, teak lacquered decks and Jackie Skelly workouts. Stats from the GAA – always one of the best indicators of social dynamism in the country – reveal that more clubs are springing up here than anywhere else in the country.
Today’s GAA clubs signal tomorrow’s election terrain. Their presence shows that the area is full of young married couples of voting age. We would expect therefore, that these countries would have seen a huge increase in their electorate last time out. But no, that did not happen. The young commuting parents did not turn out to vote in the election.
In fact, Ireland shows bizarre electoral trends. In Europe and the US, the more educated you are, the likelier you are to vote. Elsewhere, it is those with education who are more likely to get exercised, agitated and involved and who tend to believe in the political system’s ability to change society.
In Ireland, the opposite is the case. For example, one of the best barometers of levels of household education here is internet connectivity at home.
You would expect therefore that those “logged on” regions would vote most but again, they don’t. There is a better chance of seeing at the polls an elderly bachelor farmer in Leitrim with no formal education, than a young university-educated couple in Kildare. So our educated opt out politically.
On top of all that, Ireland also breaks the other golden rule of voter behaviour. Everywhere else, the minute people have children, they vote. It is as if the baby reawakens some sense of community in previously hedonistic individuals. In Ireland, this is not happening. Young couples in the baby belt are queueing to enrol their children in schools but not lining up to vote.
So it is clear that Fine Gael needs to get inside the heads of these putative voters. But how does it do that?
By saying that it will not tolerate public sector waste? Well maybe, but it’s not a credible position because most people realise that government overruns are in no politician’s interest. (It is not as if there is an explicitly profligate party running on a money wasting ticket.)
So they need to do something that grabs attention, makes economic sense and gets the voters’ juices flowing. Why not go for the big one? Why not abolish stamp duty? Homeowners hate stamp duty, even if they are not actively moving at the moment.
Every aspirational voter, trader upper or seller hates stamp duty. It is seen as a money-making exercise for the state. What exactly is stamped? Why does this particular stamp cost so much?
Equally, stamp duty is a regressive tax. As a tax on transactions it prevents the market from working properly and if it were abolished, more properties would come on the market.
More importantly, for a political party it is a popular move which might just ease pressure on the housing market because prices would automatically fall to the pre-tax level. Obviously prices could go right back up as many people who couldn’t face giving between 7pc and 9pc of the cost of their new house to the state, jump back in.
But the age-old adage that taxes tend to impede the market must surely hold true, whether it is income tax or stamp duty.
How popular could it be? Well, every day we spend an extraordinary ï¿½85m buying houses. That is ï¿½31.5bn each year. In all, about 108,000 houses are sold each year of which 80,000 are new and 28,000 are secondhand. About one in three of these new homes are sold to investors, who pay stamp duty – implying that over 54,000 people paid stamp duty last year.
The department of finance reckon that stamp duty from houses netted ï¿½2bn last year out of a total tax take of ï¿½40bn.
In total then, nearly 55,000 people – the majority working families – paid on average ï¿½40,000 stamp duty last year.
There are big variations in this headline figure, but politically, cutting stamp duty would constitute an enormous tax cut, it would be enormously popular and it might also ease some pressure on the housing market.
By targeting stamp duty, Fine Gael could target the very aspirational class – those young families who will be looking to trade up in the next few years – that have so far remained uninterested in voting. (Sceptics might rightly say that we need tax increases not tax cuts, but that is not going to happen and anyway, it is credit rather than government tax breaks which is driving the economy.)
There are two sound ways in which the state could recoup this foregone ï¿½2bn.
One would be to increase taxes on petrol, which are comparatively low by European standards.
This would be green and the cash could be ring-fenced for public transport spending exclusively.
A second way could be to reintroduce rates or some sort of localised tax take, thereby giving local authorities the wherewithal to run affairs locally.
Both of theses taxes would be far preferable to stamp duty.
More important for the opposition is to present the voters with something that grabs our attention, enhances our wealth and affords a redirection of the tax system.
Stamp duty is a regressive tax which angers people and the higher house prices go, the more stamp duty goes to the state.
If Fine Gael really wants to win this time next year, it will have to go for the “big one” and accept that with the electorate undecided, “fortune favours the brave.”
* Figures courtesy of Joan Henry at HOK auctioneers