Ireland to Tax Private Pensions to Keep Government Jobs Spending from Adding to the National Debt

This Should Scare Everyone in America

May 10, 2011

Economic Policy Journal - The Irish government plans to institute a tax on private pensions to drive jobs growth, according to its new jobs program strategy, announced today, reports BI.

Problem 1 with this is that by taxing one group, you eliminate jobs that would have been created by that group. Instead what happens is that the money is put through the government meat grinder and jobs are created in a central planning style that have little to do with what is really required in an economy based on the wishes of consumers.

The tax on private pensions comes about because of the poor way the Irish government has run its finances to date. It has lost its ability to increase revenue in any other way, even by borrowing. It can't sell debt due to soaring interest rates, and the EU-IMF has instituted severe spending rules as part of its bailout, yet, the desperate Irish government has still figured out a way to tax and spend.

The tax on private pensions will be 0.6%, and, supposedly last for only four years. Somehow, I doubt the termination date, think more in terms of a higher "emergency" higher rate.

Bottom line: The nature of modern day governments is to tax and spend. Ireland is a little further down the road than the United States, but not much. Politicians of every stripe will go after every pool of money they see.

Unless there is a fundamental change in attitudes about who deserves to be elected (very, very unlikely) what is going on in Ireland now is just a preview of what will eventually go on here in the United Sates.

Be prepared.

Irish Bombshell: Government Raids Private Pensions to Pay for Spending

May 10, 2011

Business Insider - The Irish government plans to institute a tax on private pensions to drive jobs growth, according to its jobs program strategy, delivered today.

Without the ability sell debt due to soaring interest rates, and with severe spending rules in place due to its EU-IMF bailout, Ireland has few ways of spending to stimulate the economy. Today's jobs program includes specific tax increases, including the tax on pensions, aimed at keeping government jobs spending from adding to the national debt.

The tax on private pensions will be 0.6%, and last for four years, according to the report.

From the jobs initiative release:

The various tax reduction and additional expenditure measures which I am announcing today will be funded by way of a temporary levy on funded pension schemes and personal pension plans. I propose that the levy will apply at a rate of 0.6% to the capital value of assets under management in pension funds established in the State.

It will apply for a period of 4 years commencing this year and is intended to raise about €470 million in each of those years. The levy will not apply to pension funds established here and providing services and benefits solely to non-resident employers and members. Further details regarding the proposed application of the levy are set out in the Summary of Initiative Measures.

Ireland's ability to levy further taxes on other parts of the economy is restricted because its economic growth has been inhibited in the wake of a financial crisis that crippled its banking sector and decimated its public finances.

Unwilling to budge on the country's low corporate tax rate, Enda Kenny's Irish government has chosen to target pensioners for funds to grow the economy. Whether it turns out to be an example to other countries seeking alternative ways to raise revenues with aging populations is yet unknown.