Matt Murphy, the man who married his buddy to avoid inheritance tax

As its St. Patrick’s Day, we go to Ireland for another example of the ‘cosmopolitanism‘ of economic theory.

Incentives in action

There, the Irish Times recently reported the death of Matt Murphy at the age of 84. Mr. Murphy made headlines in Ireland when he married his heterosexual friend of 30 years, Michael O’Sullivan, to help him avoid paying inheritance tax on his home.

“As I said to Joe [Duffy] on the radio, it was a business arrangement, nothing more, which it was,” O’Sullivan recalled.

Former minister for justice and attorney general Michael McDowell told The Irish Times last year that their marriage was “perfectly lawful”.

The Irish Sun quotes Mr. O’Sullivan,

“I know Matt 29 years, the same age as my own daughter, he lives in the same area as I grew up in Stoneybatter and he’s one of the nicest people you’ll ever meet in your life.

“What happened was, Matt said to me, ‘Look, I’m going to leave you the house’, and I said it was a nice idea but because of tax reasons I’d have to pay half of that to the Government.

“So in this case I’m a spouse and if one dies the house automatically goes to the partner.

As I’ve written before, taxes are incentives and if you change the incentives you change behavior. Any forecast of tax revenues which doesn’t take this into account is worthless. The story of Michael Murphy and Michael O’Sullivan shows how far people will go to avoid taxes they deem unfair.

The sense of the Irish

In 1988, The Economist magazine ran an article on Ireland titled ‘The poorest of the rich’. But, when The Economist next came to write about Ireland’s economy in 1997, they called it ‘The Celtic Tiger: Europe’s shining light’. The Irish hadn’t found the mysterious pot of gold. They had simply embraced sound fiscal and monetary policies.

Such is the Irish embrace of low taxes, that Mr. Murphy and Mr. O’Sullivan’s marriage – explicitly intended to avoid taxation – drew widespread support in the country.

RTÉ broadcaster Joe Duffy sent them limited edition copy of James Joyce’s Ulysses as a wedding present while poet Thomas Kinsella sent a signed copy of a book of his poetry. They were also invited to an event in the Mansion House last May, held to mark Kinsella’s 90th birthday.

All reaction to the marriage was positive, except for newspaper columnist David Quinn. “He’s a very staunch conservative Catholic. He said that he predicted this. That was the only one. Only the other night there was this man at Lidl who said ‘Jesus I saw ye last year, well done again.’”

President Higgins arrived and “made a speech and then he went on a walkabout. I had Matt sitting outside one of the cafes and I said ‘Come on. He’s coming’.

“So we went over and had our photograph taken with him. But as he’s walking away one of his aides said to him ‘They are the two lads who got married for tax reasons’. He turned round and he put his arms around Matt. He gave him a hug and said ‘Congratulations’.”

As you may have guessed from my surname, I’m from an Irish family myself. I’ve always been somewhat offended by ‘stupid Irishmen’ jokes. As this story shows, the folks of the Emerald Isle have plenty more sense than most.

For today, lá fhéile Pádraig sona dhuit!