Varadkar: "We need to cut tax but increase social insurance to get a fair society"

Brendan Burgess

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I missed this article by Leo Varadkar when it was published in the Indo last month.

We need to cut taxes but increase social insurance to get a fair society


The USC is associated with the financial crisis and you get nothing for it. It's Fine Gael policy to abolish it. It is very different to PRSI for which you get clearly defined benefits. Perhaps it would make more sense to simplify the system and replace the USC and PRSI with a new PRSI-style charge: Social Insurance.

We could go further in years to come by restoring the linkage between earnings and benefits and extending treatment benefit to give people more refunds for medical expenses. It would also underline the contributory principle according to which everyone who can pay, should pay something into the system, knowing that they will get something out of it.
 
I would generally agree.

But there needs to be a clear link between what you pay in social insurance and what you get out. If you contribute for years you should get a lot more than someone who makes no contribution at all.

The tax system should be used to improve fairness, not the social insurance system.

Brendan
 
I would also agree.

Merge USC with PRSI.

[However, try to maintain a broad base]

Build a stronger link between PRSI conts and benefits.

Make SI benefits substantially higher than social assistance [SA].

Establish in popular culture that SI is something good, people should be happy to pay PRSI, they should see the benefits.

They should see that SA is less generous.
 
There needs to be a much bigger differentiation set out between the contributory and non-contributory pension rates. With introduction flagged 10 years in advance or something long-term like that.
 
The problem is Brendan and Protocol private sector workers were paying the merged rates all along I was paying 10.75% PRSI and so was every other private sector worker until the day Usc came in. It is hard to understand how little understanding Brendan has on prsi in the private sector .Usc was the best thing that ever happened for the people who were paying it all along the people on PRSI A1 .So Varadker need to start looking after the people who were paying high PRSI A1 for years ,
 
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Brendan Burgess said:
But there needs to be a clear link between what you pay in social insurance and what you get out. If you contribute for years you should get a lot more than someone who makes no contribution at all.
Click to expand...

That's not how insurance works. I might drive and pay car insurance for 40+ years and never make a claim. Same with social insurance: I might work for 40+ years and never get sick or go on maternity leave, never have a period of unemployment. See http://www.msnbc.com/rachel-maddow-show/paul-ryan-flubs-the-basic-idea-behind-insurance for an example of similar thinking.

I can see what you say makes sense to the extent that retirement benefits (over a basic minimum amount) be linked to amounts paid in, but as a general concept it doesn't make sense.
 
The point is that if you do need it you should get a higher level of benefits than someone who has never bothered to work a day in their life. At the moment the opposite is the case.
 
Brendan said USC is associated with the financial crisis and you get nothing for it.I say USC was always paid by people on PRSI class A1 in the financial crisis the Government extended it to everyone. Varadker wants to put PRSI Class A1 back up where it was 10.75% and take it off everyone who do not pay PRSI Class A1 insurance
 

This is off-topic, but here are some past PRSI rates.

http://www.welfare.ie/en/Pages/SW14-Archive.aspx

2003: main ee PRSI rate = 4% up to a ceiling, Health Levy = 2% on all income

2008: main ee PRSI rate = 4% up to a ceiling, Health Levy = 2%/2.5%

I have been working since 1995 approx, and never paid 10.75% ee PRSI.
 
Protctor The problem is lots of people were paying a lot less and you must have being one of them.I don't have a problem with that But I do have a problem allowing the same thing happening again.My PRSI went down from 10.75% The lowered my prsi and added in the USC Proctor/Brendan can you post a link for PRSI class A1 the year USC came in and the year before.You will see what i am on about .
 
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Are you an employee?

Are you class A?

In what exact year did you pay 10.75% employees PRSI?
 
The short-lived Income Levy was introduced on 1 Jan 2009 at 1% up to 100k, higher rates after that.

From 1 January 2010
Income levy rates were as follows:
  • 2% on income up to €75,036
  • 4% on income from €75,037 to €174,980
  • 6% on income above €174,980.
If your income was greater than the minimum threshold of €15,028 per year or €289 per week, you paid the levy on the full amount of your income. (If you were aged 65 or over the minimum threshold was €20,000 per year for a single person and €40,000 per year for a couple).
 
So during 2010, an average worker paid 4% PRSI, 2% Income Levy and 4% Health Levy, with lots of allowances, exemption / bands / ceilings, etc.
 
Purple said:
The point is that if you do need it you should get a higher level of benefits than someone who has never bothered to work a day in their life. At the moment the opposite is the case.
Click to expand...

....and my point is that what you describe is not an insurance scheme: it's more like a restricted savings scheme. Fair enough, if that's what you want to argue for, but the basic model is very different and cannot be presented as social (or indeed any other type of) insurance. In the Paul Ryan example I referenced he fails to grasp that at a very basic level it's the healthy people who pay for the sick people. In social insurance, it's the people who can pay their way who fund those who can't. I suspect your ire is aimed more at those who won't pay their way, but that's a separate argument, and a problem you'll likely have regardless of what system you have in place.
 
You are getting at an interesting point.

How much should a PRSI scheme be insurance, and how much of it should be saving?
 
My point is simple: the insured worker should receive a pension well in excess of the citizen with much fewer, or no PRSI contributions.
 
If I lose my job I get an income from the State while I am looking for a new job. That's insurance.
If I live long enough I get a pension but if I die young there is no pension fund available for me to leave in my will. Therefore it is not saving. There are of course other things funded by PRSI which are not insurance but just because I pay for other people through my taxes it doesn't mean that it is not insurance.
 
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Thanks for posting the link Protocol.
I was wrong the year before the Usc came in PRSI Class A1 was 8% on all of my wages over 127 euro.First 127e @4% (20!0)
The following year when the USC came in The Government dropped PRSI Class A1 to 4% on all of my wages + the USC .Varadker is pushing to do away with USC and put up PRSI again Brendan and others are sleep walking behind him.If Vardker was really interested in change he would increasing the benefit t to the people who were paying the high PRSI Class A1 stamp all of there working life.I would have expected Brendan to point this out. PRSI class A1 was 4% higher than is should have being before USC time for payback.
 
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