In this blog NERI Co-director, Dr. Tom McDonnell summarises the main points of his latest NERI Long Read on tax and welfare.
Are our tax and welfare systems fit for purpose in the 21st century? Did Budget 2024 actually make any economic sense in the short-term or the long-run?
The last week saw a heated back and forth between the Irish Fiscal Advisory council and the Government over the scale and structure of the most recent budget. Budgets come and go and it seems the system will tick on from year-to-year with sometimes modest reforms. But is this enough?
In the 8th of the NERI series of policy long-reads I take a step back and briefly assess short-and-long-term fiscal policy challenges for the Republic of Ireland within the context of certain assumed economic and social goals. Most of these challenges and all of the goals apply equally well to Northern Ireland and indeed to many other jurisdictions.
I argue that a series of looming megatrends and rising challenges means we must reassess how we want our tax and welfare systems to work. These challenges include ageing demographics, climate action and adjustment, deglobalisation, disruptive new technologies and many more.
We must confront the choices and trade-offs. Our demands for better funded public services in areas like health, education and social protection may well be insatiable but our economic and political capacity to generate tax revenues is inherently limited by our resources. Political systems, political parties, media and special interest groups often, with of course some notable exceptions, tend to downplay this fundamental truth with potentially unfortunate consequences for long-run stability.
In the long-read I try to establish what an appropriate set of goals might be, what our policy design principles for achieving those goals should be, and then I make some modest policy suggestions towards this end. You can read the long-read in full here. Its far from the final word but we need to begin the debate about our long-term goals and how best we can use the tax and welfare system to achieve them.