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Irish Labour Party leader Ivana Bacik’s comments re the recent Economic and Social Research Institute report on the disparity in home-ownership figures between old and young misses the point – and veers towards ageism.
While she is right in blaming the Irish Govt for its failure to address the housing crisis, she is ignoring one glaring reason why the over-40-year-old “have-lots” (as she puts it) cannot share the wealth with the younger “have nots”: Capital Acquisitions Tax.
The Irish tax system actively discriminates against parents and grandparents who wish to pass on their family homes to the younger generations.
Until 2017, it was possible to pass on a house to a family member without also “gifting” them a tax burden, if the house happened to be their home. But in 2017 the universal “Dwelling House Exemption” was abolished except for farmers, business people (who can, for example, declare the family home a business premises) and the severely disabled.
With the price of even a modest house in ordinary working-class suburbs inflated to well above the “Lifetime Tax-Free Threshold” (€335k), the only way a person living in certain suburbs of Dublin or Cork can receive the family home from their parents, without paying punitive tax, is for the old folks to die (or indeed for their children to be struck down with some terrible illness).
With Assisted Suicide legislation on the horizon and a pervasive public narrative that the elderly are a burden on the State and their familes (media and politicians right across the spectrum persistently warn that our “ageing” population, who built this State, cannot expect today’s taxpayers to make sacrifices for them), it is extremely disturbing that vulnerable old people are incentivised to think about dying in order to save their children a punitive tax bill.
And the fact that our tax laws are set up to ensure that only the very rich can afford to receive a gift from a living parent should be of great concern to a socialist such as Deputy Bacik.
BTW, I raised this matter with various public representatives from economically centrist parties in the belief that they might have the interests of the “squeezed middle” and Dubliners in particular at heart. The response I got from one TD is sobering.
Pointing out that Ireland is not unique in having such punitive tax laws, and that the purpose of “gift tax” is “in order to ensure that transfers of wealth within families and between generations are appropriately taxed”, the (wealthy) TD added that such “gifts” are regarded as “unearned wealth” for the recipient, “and therefore like all other forms of income or capital should be subject to an appropriate level of tax as part of the process of ensuring as fair a society as possible.”
Regarding the decision to abolish the Dwelling-House Exemption for the healthy children of living parents, the TD said this exemption, which was initially only intended to protect bereaved heirs from the trauma of having to sell their family home shortly after the death of their loved one, moved “more into the realm of gifting which caused an unintended consequence in that it was costing the Exchequer a significant amount of revenue.”
I asked the TD to advocate for the reversal of this decision on the grounds that it discriminates against struggling people in our cities, due to the inflation of house prices and the fact that we cannot avail of the Farmhouse Exemption.
The TD replied they would not have the support of their colleagues “in even suggesting it in advance of Budget 2024”.
While this might, on the surface, look like a First World problem (and I appreciate the distressing fact that some people will never be home-owners), it would make sense to reinstate the Dwelling-House Exemption if only to save the “squeezed middle” from sliding into poverty, adding to the HAP queue – and costing the Exchequer even more.
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