Free Market Fundamentalist Opinion

Ireland Taxing Private Retirement Savings

Ireland raids pension funds in another step away from self-sufficiency toward dependence on the state.

Ireland is one of several European nations that has begun seizing private retirement savings to mend its budget deficit. For all the talk of “austerity,” this is one of the most blatantly socialistic measures enacted in Ireland today — it is immoral and could make the nation’s fiscal problems worse.

Under the Irish plan, a “temporary” 0.6 percent tax will be levied against private pensions to fund a stimulus package. The government promises that it won’t be around for more than four years but as Sam Bowman of Britain’s libertarian Adam Smith Institute points out, “temporary taxes have habit of sticking around and growing.”

Even if the tax is tiny, it has broken the good faith in which Irish pension holders invested their money, according to Bowman, and undermining their ability to provide for themselves in their old age — “yet another step away from self-sufficiency toward dependence on the state.”

Unless Ireland indeed repeals the measure soon and makes clear that it won’t ever be repeated, the country risks getting caught up in a deadly cycle of government interventionism that Ludwig von Mises warned against in “Deception of Government Intervention,” Christian Economics (February 4, 1964). If the Irish don’t believe that their savings are secure, why would they save for retirement at all? The state is then compelled to provide more generous public pension provisions, for which it has to tax more, which makes people even less self reliant.

“In this way,” wrote Von Mises, “the government is forced to add to its first intervention more and more decrees of interference until it has actually eliminated any influence of the market factors — entrepreneurs, capitalists and employees as well as consumers — upon the determination of the ways of production and consumption.” That would be a sad fate for Ireland which currently ranks among the economically freest nations in the world.