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.
This is a little scarier than what happened in Argentina. We expect Argentina to be an economic catastrophe. Ireland is not Argentina. They have reigned in spending and have maintained one of the lowest corporate tax rates in Europe. The Irish government did bail out their banks even more extensively than ours did. But this seems a short-sighted move to “create jobs”, especially as Ireland is currently projected for positive growth in 2011.
Of course, the reason this is news in this country is because of persistent fears that our government will tax or seize our retirement funds. Neal Boortz, in particular, has been ringing this bell for 20 years. And every now and then some pinhead with a degree in socialism will give some dumb speech before Congress that will get blown up into Congress “planning” to seize pensions.
I still don’t think that’s going to happen. The shock to US and world markets would be dramatic. And far too many Americans have retirement funds to make seizing them politically feasible. Congress can’t even muster the courage to bring us back to Clinton-level taxation, least of all raid our 401k’s.
I do agree with McArdle however that there is a very strong possibility that our government will break its promise on Roth IRAs. The amount of money that could be pulled in by even a modest tax is far too tempting and the issues too easy to demagogue. This is why I’ve limited my investments in Roths. I simply don’t trust promises the government makes four decades in advance.