A 20 Percent Tax Rate for Higher Earners?

On Tuesday night near the end of his TV3 show, Vincent Browne returned to one his favourite themes, the taxation of those on higher incomes. He put the following statement to Fianna Fail TD, Timmy Dooley

In June of last year, the Department of Finance showed that in spite of efforts to close off tax loopholes in the 2007 and 2008 budgets, people earning over a half a million still pay only 20 percent of their income in tax. Now why weren’t they targeted rather than people on social welfare?

Dooley told Browne that the budget had seen an increase in the effective tax rate for these individuals to 30 percent, to which Mister Browne responded, “Not true, It’s just not true.” Later, after Mister Dooley discussed other steps taken to stabilise the public finances, Browne asserted that “You could have achieved the same thing by targeting people earning half a million and you didn’t bother.”

On the same theme, in his column in Wednesday’s Irish Times, Browne stated

How come there was no crisis when a report by the Department of Finance last June disclosed that, in spite of the alleged attempt to close tax loopholes, the average effective tax rate for people earning over €500,000 was just 20 per cent?

I’d like to address three aspects of the TV exchange and this column.

The 20 Percent Figure

Browne’s statements about the average effective tax rate for those earning over half a million are not correct. This is the document to which he is referring. As I’ve explained before on this site, the document refers to 214 specific people who, prior to the introduction of a minimum effective tax rate of 20 percent, earned over half a million but paid tax rates below 20 percent. The report merely confirms that these specific 214 people now pay a tax rate of 20 percent. In other words, the new effective tax rate (the “alleged attempt” to close loopholes) achieved its goal.

It turns out that these 214 people are not at all representative of those who earn over half a million. Figures from the Revenue Commissioners show that in 2008, Ireland had 5393 households with incomes of over half a million and their average tax rate was 32 percent. The source for these figures is this handy table published in the Irish Times last year accompanying an article by Colm Keena.

Most likely, rather than deliberately misleading, Vincent has simply misunderstood the document he’s quoting. And to be fair to him, the document from Finance is poorly written and open to misunderstanding. As he clearly doesn’t read this blog(!) I will try to forward this material to him. I think it is best if misleading statements of this type didn’t keep getting aired by a highly influential media figure.

Targeting of the Rich in the 2010 Budget

In relation to the raising of the effective tax rate in the current budget, I’m afraid that Mister Dooley is right and Mister Browne is not.  Here‘s an extract from the Minister for Finance’s budget speech:

But the Government wants high earners availing of tax incentive schemes to contribute more in the current difficult circumstances. Accordingly, for the tax year 2010, the effective rate of income tax for those benefiting from reliefs will increase from 20 per cent to 30 per cent on top of which they will also pay PRSI and levies. This represents a significant tightening of the restriction which will yield approximately €55 million in a full year. The entry point to the restriction will now occur at adjusted income levels of €125,000 with the full restriction applying at €400,000.

So it really is true that the government has raised the minimum tax rate applying to high earners.

How Much From Taxing the Rich?

My final comments relate to whether indeed, as Vincent Browne asserts, the budget could have achieved its goal of stabilising the budget deficit by targeting people earning over half a million.

Here’s a link to a post I wrote before Christmas that examined how much money could be raised by a new marginal tax rate of an additional ten percentage points levied on incomes above various threshold levels, a move that would raise the combined marginal tax rate (including PRSI and levies) to 64%.

Based on 2006 figures, the spreadsheet showed that an additional ten percent tax levied on those earning over €275,000 a year would raise €430 million annually. One would raise less from targeting those earning over half a million. In the context of a budget deficit of over €20 billion, it should be clear that targeting those earning over half a million can only make a limited contribution.

None of this is to say that we shouldn’t look to raise more money in tax revenue from the better off and, in my opinion, the move to raise the minimum tax rate for higher earners is a good one. However, as I’ve noted before, I would question how much we would actually raise in extra revenue if marginal tax rates start to go over sixty percent and whether tax evasion and avoidance would not make this approach counterproductive.

Update, Thursday Feb 25th: To his credit, on tonight’s show, Vincent kinda sorta acknowledged that he may have been incorrect on this issue.  He said “I know there’s a blog on the Irish Economy.ie website saying that I’m wrong on this but the reality still is according to the Revenue Commissioners, rich people, people earning over 160k a year still pay a very very small proportion of their income in tax something like 26 or 27 percent of their income.”

67 thoughts on “A 20 Percent Tax Rate for Higher Earners?”

  1. I heard VB’s debate with Timmy Dooley and I thought it typical that VB will flatly contradict an answer he doesn’t want to hear i.e. the job of a guest is to affirm VB’s beliefs.

    VB has made the same point a number of times and I would be very interested to hear his reaction to your clarifications.

    The point about evasion and avoidance remains a crucial caveat. There were almost 1.5M households in this country in 2006. Those earning over 500K would be considered the wealthiest but it is not credible that only 0.3% of households were in that category in 2008. Perhaps this is the result of treating capital gains as distinct from income?

  2. Funny how taxing the less-well-off doesn’t have these drawbacks, isn’t it? The Laffer Curve only applies where needed. You need to tax and cut the holy hell out of those scrounging public-sector lower-middle-class folks in the interests of fiscal probity and our national image, etc., but don’t consider touching the wealthy, because then it’ll be counterproductive and they’ll use their powers of cleverness to defeat the Revenue. The rich have got away with it in advance again!

    I think Fintan O’Toole’s recent “No Pots of Gold” article targets this mentality very well. What’s sad, though, is how solidly middle-class academics are so eager to carry water for the ultra-rich. You know, Karl, no multi-millionaire crooked property developer is ever going to do you a favour, no matter how dreamy you think he is.

  3. @Ben
    But the sad reality is there isn’t a pot of gold from taxing the rich. I still think it should be done but as KW has pointed out we would be lucky to get €0.5bn from any new measures.

  4. @ Karl

    “Most likely, rather than deliberately misleading, Vincent has simply misunderstood the document he’s quoting.”

    You’re a far more believing man than i would be…

    re Ben comments and your retort – welcome to the darkside! 😀

  5. @Pat Donnelly
    “You know I want to have Dreaded_Estate’s baby, usually I agree with everything he says, but I think that actually taxing those who are wealthy makes sense in a strange non-economic way.”

    Eh???

  6. @Eoin,

    I hope you are not accusing Vinny Brawn of cynically misleading his audience. As the Taoiseach would say that allegation is “beneath contempt”.

  7. I think the debate is about the little difference between the high pay tax take and the low pay tax take.

    So the top 5000 or so people earning €500,000 pay tax at 32%. Wow.

    I employ a single person on €13 an hour. Gross wages €585 a week. After PAYE, Income levy and PRSI he takes home €475. Effective tax rate 17%. €20 or €30 a week makes a big difference to this person.

  8. @ Danny

    I think there are lots of interesting debates to be had about the tax system — I’d like to see a progressive tax system that raises more money than the current one and I’m not sure there’s much room there to cut your employee’s tax rate (which is still pretty low relative to other European countries).

    That said, my point in this particular post is that useful debate requires real facts not invented ones.

  9. @ Danny

    a married person earning €585 a week would probably pay almost zero in tax.

    I’m single, am by absolutely no means “wealthy”, and pay effective tax of around 33%.

    As i have continually said on this, lower middle class families pay very very little, if anything, in tax. The gap between single and married lower-to-middle class tax rates is the real gap that needs to be looked at.

  10. @Karl,
    Quibbling over numbers aside, the real question is: Are the rich paying their fair share? Are they paying in percentage terms the same amount of tax I pay as a PAYE schmuck?
    If the answer is NO, then ol’ Vinnie is on the right side of the argument.

  11. @Eoin,
    I am no fan of the “marriage penalty” either. However, if VAT, charges, levies, TV licences, etc., are included, my guess is that you are paying more than 33%.

  12. @ JPM

    “Are they paying in percentage terms the same amount of tax I pay as a PAYE schmuck?”

    The answer is that are paying more. Not less. Not the same. We have a progressive tax system.

    Look at this spreadsheet with data from the Revenue Commissioners
    http://www.karlwhelan.com/IrishEconomy/IncomeTaxCalcs.xls

    And in relation to Vincent, my only point is that whatever argument about improving our tax system he (or anybody else) wants to make, it’s best to start from facts or there’s no point in having a debate.

  13. it’s best to start from facts or there’s no point in having a debate

    Karl, VB prefers to start and end every debate with self-righteous outrage. He doesn’t so much debate as emote. Facts just get in the way.

  14. Same old communist drivel from VB. Ronan Lyons had a good post on his blog about this a few months back. The biggest problem is that a large proportion of the workforce pay little or no tax. This is not the case in most European countries and it signifcantly undermines our tax base. A lot of it was engineered by McCreevy was fun while it lasted but doesn’t promote a stable tax base. There’s billions of euro of fat in the administrative layer of the public service and the almost 1,000 quangos. We tried the 60%+ tax rates in the 80s – they don’t work. Do we ever learn in this country ?

  15. @ JPM

    you’re getting into a far more philosophical debate over the entire tax system. The simple point is that VB was referring very very erroneously to the income tax system. Your greater point, over whether indirect spending taxes should also be more ‘effectively’ progressive in nature is a very different one, and one which would also have to include VRT, stamp duty, CAT, CGT etc in its considerations. It would also have to ackowledge that in reality, as opposed to theorethically, a rich person paying 100k in total annual tax (ie incl VAT etc) is contributing more to the tax base on almost any metric than a poorer person paying 1k is, even if the “% of income going back in tax” would dispute this.

  16. Anyone who is earning a million a year and is paying 20 percent tax is obviously availing of some tax break or other. The tax breaks are a form of economic stimulus. The thinking seems to be that wealthy people will be better able to invest capital to maximise return than the State would. It also means that individuals, rather than the State take on the debt burden. As government thinking goes in this country, this is some of the better, more reasoned stuff.

    We need some sort of stimulus in this economy. The government is already very stretched for cash. We are going to end up with more tax breaks for the rich in this country going forward, not fewer. I am not saying that that is palatable, just that it is reality.

  17. Antoin

    If providing tax breaks for the rich to invest is effective, why is the fall in investment (GFCF) by far the biggest fall in any component of growth -52.5%, and at €30bn, actually exceeds the aggregate decline in GNP?

    It’s the failure of the private sector to invest, whether they can’t or won’t, which is the cause of the slump. Only government can in invest, and thankfully, it can make a least as great a return on that investment as the privateers usually benefit from.

  18. When does taxation become confiscation?

    In my view, it is at a marginal tax rate of 50% or over. At high levels of taxation, tax avoidance and tax evasion become the norm.

    Those with the ear of government lobby for tax exemptions for activities in which they are involved. This leads to a situation which so incenses Vincent Browne and others where high income individuals have so many write-offs that they pay little tax.

    The ‘little people’ who cannot avail of write-offs have a high incentive to become tax evaders – paying in cash for services, setting up non-resident accounts, etc. Normally law abiding citizens become law breakers because of the perceived unfairness of the tax code.

    This leads to a negative spiral – high tax rates lead to avoidance/evasion which lead to more avoidance/evasion leading to low tax take, requiring higher tax rates if tax revenue is to be maintained.

    The solution is a simpler tax system, with few tax avoidence schemes, and a culture of tax compliance.

    Not easy to get there from here …

  19. @ Margaret

    “Not easy to get there from here …”

    True but the Minister’s budget speech already promised a pretty radical change in the form of the “new universal social contribution”. So now is a good time to press for a radically simpler system. Not letting a good crisis go to waste and all that.

  20. @KW

    in your view?

    what/who is a high earner?

    €100,000 p.a. as per the bearded Jack or some higher threshold!

    was there not a proposal some time back whereby all taxpayers could avail pro rata of the tax breaks normally reserved for the higher earners

    e.g film scheme relief?

  21. Karl & Eoin:
    While I agree with both of you regarding VB’s debating style and his loose way with facts, I would also say that the facts KW presents are very much out of date. The tax structure for low and middle income earners has changed radically since 2006. While I suspect the tax rates are still progressive, they are probably not nearly as much as they used to be. Eoin, keep in mind that the zero effective tax for low income families was due to child benefit and ECS in large part. These have been reduced significantly and cut altogether so the “no-child penalty” is much much less. Moreover, raising children is expensive and most countries recognize that. Even the US has a Earned Income Credit to lower effective tax rates on people with children.

    Also, it should be kept in mind that the pension levy is a tax for at least some categories of public servants who are on temporary contracts and not eligible for pensions.

  22. PS: And a lot of countries that do not provide tax credits for parents have health and childcare systems that actually work and are more or less free for children.

  23. @ Karl Whelan,

    For the Universal social contribution, my guess would be in the first 10 to 11% of a persons salary will be ringfenced for this. But we will have to wait and see.

    @ Margaret Hurley,

    “Normally law abiding citizens become law breakers because of the perceived unfairness of the tax code.”

    While you make a number of valid points I would not tend to agree with the one above. I don’t know anybody who avoided taxation because others did it. Most people when faced with a opportunity to reduce their tax bill will take it. Not because others are getting away with it but because it saves them money. In addition with the increased computerisation of records, mandatory reporting by bank staff / accountants etc it is getting harder and harder to carry out tax avoidance. In addtion there has been a number of high profile schemes uncovered in the last number of years, and the penalties which can be imposed are high. I believe we will see less tax avoidance in the future. Note also the recommendation in the Commission of taxation report to discourage the use of cash, and encourage a move to a more recordable system of ATM cards etc.

    But I do believe we will see increased emigration to other countries, personal taxation here is high when compared to other european countries, in addition for the level of tax paid, quality of service provided by the state is low. Waiting 16 to 20 hours in a A&E dept for stitches is third world.

    @ Antoin O’Lachtnain,

    Interesting point about the country needing wealthy people to invest as the state is broke and struggling to provide quality services. However this idea would get in the way of the begrudgers, and we cannot have that now can we!!

  24. @Sporthog – you seem to mix up tax avoidance and tax evasion. Avoidance is legal, via the many exemptions and ways by which you can write off income, while evasion is illegal. Evasion appears to have become more difficult for the reasons you mention, while avoidance is still very easy for high earners.

    Surely the big issue is whether the exemptions etc. have a higher social return than if the taxes were collected. The social return on tax exempting stallion fees might be questionable, but what about tax incentives for pensions?

    In addition how likely is it that those super high earners that VB would like go after would end up paying any tax in this country if some kind of minimum tax is imposed on them?

  25. Surely tax take has to include PRSI- effectively a tax? I don’t know if including PRSI in the tax take makes Irish taxes more progressive of not; but would not including it give a ‘real’ picture of the tax take?

  26. @ Garo

    “The tax structure for low and middle income earners has changed radically since 2006. While I suspect the tax rates are still progressive, they are probably not nearly as much as they used to be.”

    It’s also changed pretty radically for high earners. The major changes since 2006 is the introduction of the levies, which are progressive — two percent up to 75k, four percent between 75k and 175k and six percent on incomes above.

    This has contributed towards making the tax system more progressive than it was in 2006.

  27. @ Garo

    “The tax structure for low and middle income earners has changed radically since 2006.”

    Given that the income and health levys are based off gross pay and so completely unavoidable, hasn’t the tax structure changed just as much, if not more so, for higher income earners? And even more so with the closure of many tax loopholes? Are you suggesting that the gap has actually increased between higher and lower earners??? I find this extremely hard to believe from the examples and commentary on this that i have seen.

  28. @Karl,

    I wish I could agree that a crisis is a good time for a major overhaul of the tax system, but I cannot.

    Forecasting tax take from a set of tax rates is never exact, even when the changes made are small.

    If the system was to be radically different, the variance of the forecast error would increase. In good times, this could be managed by putting some money aside, say in the pension reserve fund, in case the take tax was under forecast. We can’t afford that now (one other thing that could have been done in boom times).

    Imagine the MoF standing up on budget day and saying ‘The budget deficit will be between 8% and 14%, depending on how the new tax system generates revenue’. The last thing we need at the moment is an increase in uncertainty.

    @Sporthog

    I believe that there can be a culture of it been considered normal to pay for all or part of services in cash, and equally, if it is well understood that tax evasion by some means higher tax rates for all, for there to be a culture of tax compliance.

    My point was that the culture of tax compliance can be damaged by tax rates that are so high as to be perceived to be unfair.

    I agree that the tax collection system is much better than in the past, and tax evasion is more difficult, as it should be.

  29. The existence of a ceiling on PRSI presumably means it would make the tax system less progressive at the top.

  30. @ Danny

    Agreed including PRSI would be better for a full picture — the Revenue Statistics just don’t include them.

    As of today, including PRSI wouldn’t make much difference. On the one hand, there’s a limit on the 75k on regular PRSI. On the other hand, that’s exactly when the higher rate for the income levy kicks in, so

    Other studies that include social insurance contributions, such as the OECD’s Taxing Wages publication, show that we have very progressive tax system with its most notable feature being very low income tax burdens for middle and low earners.

  31. @Sporthog
    ‘I don’t know anybody who avoided taxation ‘

    If you mean that there is little evidence of widespread, ordinary man-in-the street evasion (as opposed to avoidance), you should reflect on the evidence of the four tax amnesties over the last 20 years or so. The number of people who availed of the amensty (and the amounts they coughed up) provide abundent evidence that a sufficiently penal tax code will criminalise an otherwise law abiding population. Anyone who could evade, did. Not least by setting up non-resident accounts (hundreds of thousands of people).
    And, of course, amnesties only revealed the tip of the iceberg.

  32. @KW
    “Agreed including PRSI would be better for a full picture — the Revenue Statistics just don’t include them. As of today, including PRSI wouldn’t make much difference. On the one hand, there’s a limit on the 75k on regular PRSI. On the other hand, that’s exactly when the higher rate for the income levy kicks in, so ”

    This chart shows the effective and marginal tax rates (combining income tax, the 2 levies and PRSI) for taxable incomes from zero to a million in 10k jumps for 2009. The only credits taken into account related to marital status so the rates depicted at every income level are maximums.

    http://www.planware.org/briansblog/resources/taxratechart.pdf

    Notable features include:
    – the erratic growth in the overall marginal rate before it settles down at 52%.
    – the rapidity of the increase in overall effective rate from €20k up to €80k. The overall rate tapers off thereafter and effectively flatlines at about €500k.
    – the difference in effective rates for singles, married (one income) and married (dual income) particularly at low incomes.

    Note that the overall rates takes account of the mix of single and married income tax payers at each income step based on Revenue data for 2005 – this wouldn’t have changed much since then.

  33. @Karl:
    I agree that PRSI and health levies should be included in any calculation as should pension levies for the reasons I outlined above. I really would like to see some hard numbers from 2009 on this. I don’t have the time for this but perhaps you could get one of your postgrads …

    BTW, if you recall Ronan Lyon’s analysis which showed a 4% effective tax rate for median earners in Ireland, it included the CB and ECS offsets. These have been reduced substantially and I haven’t seen any analysis that takes that into account.

    Also, a high VAT rate and high excise duties on liquor and tobacco are not exactly progressive either. There are good reasons for the latter but that is a hidden non-progressive cost. And I’m sure you are familiar with the research literature on the hidden financial costs for lower income groups – can’t buy economy size packs and so on.

  34. Vincent Browne simply doesn’t deserve to be taken seriously. Not only has he been using his TV program and newspaper columns to advocate policies that are practically Stalinist in nature, but he has even been writing article that aren’t far short of excusing the Communist East. (see http://www.irishtimes.com/newspaper/opinion/2009/1111/1224258551855.html).

    As for his constant harping on about “fairness and equality” neither he nor most of the people on the left would recognize them if they leaped up and hit him in the chops.

    Running some quick (and crude) calculations suggests that something like a 20% flat tax across the board would yield enough to run the country, with only exemptions for people on actually low incomes. Vincent would just hate that kind of fairness and equality, whereas many of the ex-communist countries started with flat tax systems once they became free.

  35. @ Edgar Morganroth,

    Point taken, avoidance is legal, evasion is illegal etc. My apologies for my mix up of words etc.

    Your second point about “Social Returns” on exemptions being higher thant actual tax paid is a more complex issue but still a very important one. There is a danger that Irish society will throw the baby out with the bathwater etc. We can’t get into a situation where all tax avoidance schemes are bad / evil with out a proper study of all tax emptions etc. It is possible that some exemptions have a higher social return than others, no doubt there will be a review of all avoidance measures, perhaps a weighting factor applied.

    Tax avoidance is a cat and mouse game, but the Revenue are slowly getting the upper hand, it just takes time.

    In relation to tax relief on pension contribution. I would not view tax relief on pension contributions as avoidance. I would view it as tax deferrment. When you draw down your pension, you still have to pay tax on it. Instead of paying tax now, you pay it in 20 years time etc.

    In addition there is a benefit to the state, as the state does not have to support you in your old age as you have a private pension fund which supports yourself. I am open to correction, but if my memory is right the state is legally bound to support its citizens with regard to pensions. Even if you have not made any contributions, either private or public.

    @ Margaret Hurley,

    Indeed there was a time not too long ago when tax evasion was something to be proud of and encouraged etc. But that atmosphere has changed over the last 10 to 15 years.

    Technically I would agree with you in getting down to “brass tax”, if everybody is compliant then the tax rates should come down etc etc.

    But we both know that is not the case. There has to be efficient spending of tax payers money. That is where the real nub of the matter lies.

    How many times have we witnessed several scandals, in which little or know accountability / responsibility was shown. For example if I was a doctor or a Garda, where in the course of my work I was incompetant corrupt or just a sick butcher. Eventually after 10 years my incompetance becomes public and I am forced to resign. Despite the fact that I was paid by the state to do a job (which I did not do), I recieve a pension by the state for the job done (which was not done well) and a golden handshake. In addition the state has to payout compensation for the mess that I made. Where is the justice in that? We are only encouraging people to be incompetant, not to be competant.

    The state must take its responsibility of spending its taxpayers money wisely. Unfortunately it needs to up its game in that regard.

    @ Simpleton,

    If you read my statement at the end of it I said “because others did it”.

    Joe and Joan don’t open a non resident account because Jack and Jill up the road have one. People tend to try and minimise their taxes because it would improve their standard of living at a later date, i.e. personal reasons more than group herd mentality etc.

    But I take your point that in the past tax evasion was more common.

    Perhaps with the total abolition of cash in a society will we truly overcome tax evasion. That day may be coming sooner than we think.

  36. Anybody that takes the Vincent Browne show seriously has a problem. I accept that he gets good airtime 5 times a week but most nights I turn him off after a few minutes of his rant on something or other. KW is right that he needs to be brought to book as he just goes “on and on” on his pet topics show after show portraying untruths or half truths. I would just bring one other thought to this topic that the figures produced by Revenue are distorted for example in their book a self employed person paying max pensions who is availing of this relief is almost a Tax Evader but a Civil Servant who gets a substantially free generous indexed pension is not an evader. The Tax statistics for the income of the self employed needs to be adjusted for a number of these basic reliefs and then the percentages for High(Gross) Earners will change dramatically.

  37. TRP: Do you seriously think that a young 30-something civil servant is going to get the pension they currently expect. I seriously doubt it. Either Ireland will declare bankruptcy long before then or the entitlements will be drastically cut – either explicitly or implicitly through high inflation. So yes high pensions are a problem but remember it is a Ponzi scheme and most of those contributing today are going to get very little in the end. So I wouldn’t use the civil servant pension as a big stick.

  38. @ Hugh Sheehy,

    In general Fundamentalist opinionated cranks who love the sound of their own voice are best avoided. A fundamentalist cannot be reconciled with the truth.

  39. @Brian Flanagan

    Your chart would seem to suggest that the ‘progressive’ nature of taxes taper off at the €80-100k mark. Surely a progressive tax system continues to tax people more as a % of their income as their income increases.

    I revert to my first point; paying 17% on 500+ a week is a lot tougher than paying 32% on €5000 a week.

    That said, I do think up to date figures with PRSI and the new levies included need to be sought before any real conclusion can be made.

  40. @Danny H

    On your three points:
    1. Exactly. If you follow the red line, the system is extremely progressive at lower income levels (especially for singles and married with one spouse working). Progressivicity falls off at higher incomes.
    2. Agreed. Net pay of 415 a week is a lot less than net 3,400 a week.
    3. The chart includes PRSI and levies.

  41. “I think it is best if misleading statements of this type didn’t keep getting aired by a highly influential media figure.”

    Vinnie B also had a member of the socialist party of Ireland on a recent show. While I respect free speech I wonder if he will have other extremists on his show too, perhaps right wing fascists and racists so there will be a balance of extremist views!

  42. @ Karl

    Me thinks you will be invited onto his show soon for a right good handbagging!!! I dont know if you would/should accept!!
    But I would definitely watch it.

    @ Ciaran Daly
    I believe the gentleman was a member of the communist party.
    Fair play to Vincent for providing for inclusive views.
    I would love to see a clear articulation of ‘right’ wing views on any show. It seems like the Irish public cant digest such views, nor, most right wingers express themselves like Joe Higgins etc.

    Al

  43. t is silly to call VB a Stalinist when the ordinary person in, and for generations to come must, foot the bill for the Nama debacle, caused by corporate greed, bad government policies and errant regulators. Direct and indirect taxation – which takes account of public service charges – must be factored in to what a person contributes towards the exchequer as a percentage of their annual earnings.

    Since the PD conference in 1994 Mary Harney has called for a low wage economy. But Britain even with its low wage economy has suffered a major crisis because of the influence of the financial sector in political circles. The issue is not just taxation but bad fiscal policies that pretend to be good for the national economy but are not. Wealth needs to be spread fairly.

    Perhaps a taxation rate that factored in how hard an individual worked for their wages would be a truly progessive system. The Irish public service is very unproductive and the pay of higher public officials is very high compared to international standards but that is not being addressed. Some people, usually the rich and influential, believe it is others that should pay tax but not them.

  44. Sorry a minor amendment…

    It is silly to call VB a Stalinist when the ordinary person in, and for generations to come must, foot the bill for the Nama debacle, caused by corporate greed, bad government policies and errant regulators. Direct and indirect taxation – which takes account of public service charges – must be factored in to what a person contributes towards the exchequer as a percentage of their annual earnings.

    Since the PD conference in 1994 Mary Harney has called for a low wage economy. But Britain even with its low wage economy has suffered a major crisis because of the influence of the financial sector in political circles. The issue is not just taxation but bad fiscal policies that pretend to be good for the national economy but are not. Wealth needs to be spread fairly.

    Perhaps a taxation rate that factored in how hard an individual worked for their wages would be a truly progessive system. The Irish public service is very unproductive and the pay of higher public officials is very high compared to international standards but that is not being addressed. Some people, usually the rich and influential, believe it is others that should pay tax but not them.

  45. I preferred Vincent Browne’s ‘cap salaries at €100k’ proposal, which – even if it didn’t bring about the loss of a single high-paying multinational job – would have single-handedly cost the state about €4.5bn in foregone tax revenue.

  46. @all
    I agree that there is no ‘pot of gold’ to be had from taxing the super rich but I certainly think significant revenue could be raised from the ‘rich’.
    It depends of course on the definition of rich. We need to get real about what a good wage is. I am sick of hearing people like union leaders and VB refer to people on 40-60k as ‘relatively modest wages’. They are rich and VB and the union leader are super rich in my book. In any other country in europe 40k is a excellent salary.
    To raise taxes on these very well paid workers however we will need to reduce social welfare in parallel. I am one of those (because I have kids) that would nearly be better off on social welfare yet I earn 13k more than the median wage in eu15 (22k I believe). Taxes on the well paid (25-40k) who harly pay any tax cannot pay before social welfare reform.

  47. I preferred Vincent Browne’s ‘cap salaries at €100k’ proposal, which – even if it didn’t bring about the loss of a single high-paying multinational job – would have single-handedly cost the state about €4.5bn in foregone tax revenue.
    @ronan. Well IF no multinational jobs were lost it would increase profits that would go back into the economy and job creation. Also the government would save a lot from public servants and increase profitability of the semi-states. Of course that is a big IF.

    Perhaps a max salary of 100k on all public servants, semi-states and private companies receiving government support. Or are we really worried that we would lose so much talent that these organisations would be run inefficiently!!

  48. @Sam, profits get repatriated, we might see about 12.5% of it somewhere down the line…

    But I suppose the bigger argument is of course the competitiveness one. Any country where a multinational can’t pay someone more if they wanted to is unlikely to attract much in the way of FDI.

  49. Vincent just mentioned this thread. I hope he will read it objectively. In fairness he is right on pensions IMO. We need a pension system that is equal for all (based on contribution). A fixed top up system with a cap would give lower paid workers some incentive. Equal for all public and private.

  50. Using the most recent Revenue income tax dist stats for 2006, published in their 2008 Statistical report, the ATR of the 21,182 cases earning over 200k gross income was 27.6%.

    #cases = 21,182
    Average gross income = 463k
    Average tax paid = 128k
    Average ATR = 27.6%

    This excludes PRSI (ceiling was about 50k in 2006) and the Health levy (2%, no ceiling).

    I feel that these ATRs are still too low. If we raised 50k extra tax from these 21,182 cases, that’s 1bn extra revenue.

  51. @ Danny Haskins

    “Surely a progressive tax system continues to tax people more as a % of their income as their income increases.”

    So what, tax Sean Quinn 99% of his income? Or even 99% on the top X% of his income? The tax take has to stop at some stage surely, or are you suggesting a rather scary Marxist paradise?

  52. @ Stephen McNena

    around 50% of the working population (c.700k people) pay less than 10% in effective tax, with a large proportion of these close to zero. Doesn’t this seem obscenly low? The goal has to be to broaden the entire tax base rather than simply try and tax the wealthier and more mobile people in our society.

  53. @eoin Agreed but you can’t do this without social welfare reform
    Otherwise you will further degrade the incentive to work.

    @ronan l. Agreed re MNCs

  54. Bond, I agree.

    Some quick ways to broaden the tax base:

    (1) abolish the PRSI exemption of 352pw
    (2) reduce or abolish the PRSI-free allowance of 127pw
    (3) abolish various small tax reliefs: waster charges, trade union fees
    (4) abolish PRSI and levy relief on pension conts

    Get every earner to pay PRSI on all income, to be seen as solidarity.

  55. @Nigel.
    Having a negative view on many of VB’s fundamental – and fundamentally wrong – opinions is entirely compatible with agreeing with him on some other matters.

    I believe many people would agree with me, and presumably with VB, that having a country run by idiots or kleptocrats (or both) is a bad plan.

    The current government’s proven ability to make a mess of a very promising economic situation makes destructive socialism seem almost attractive in comparison. Almost.

  56. Eoin
    ““Surely a progressive tax system continues to tax people more as a % of their income as their income increases.”

    So what, tax Sean Quinn 99% of his income? Or even 99% on the top X% of his income? ”

    Speaking for Danny, I doubt that Sean Quinn pays anything near 50% on his income. If we have a tax system with a top rate of 50%, we should at least ensure that it is actually applied. That would be fair.

    “around 50% of the working population (c.700k people) pay less than 10% in effective tax, with a large proportion of these close to zero. Doesn’t this seem obscenly low? ”

    Yes indeed. Maybe, we should have a tax system which is highly regressive so that the lowest paid have the highest tax rate. In addition, we should tax the old age pension at the standard rate, or better still, pay it net of tax!!!! The reality is that many people dont pay any/much tax because they have very low incomes.

  57. @ Stephen

    re your point 4 above

    (4) abolish PRSI and levy relief on pension conts

    why abolish PRSI relief on pension conts when we, as a matter of public policy, are trying to get people to fund for themselves in later life?

    Am I not right in saying that the recent levies are on all income?
    (PAYE income that is) and not merely income net of pension conts!

    We will need to encourage more people to put aside more of their money to provide income for themselves in the future.

    The “pay as you go” unfunded public sector pension bill and indeed state pension going forward is unsustainable.

    Do you think your children will pay the taxes to fund your DB pension while only being entitled to a DC one themselves??

    This needs to addressed as a matter of urgency and not put off until it blows up in our faces.

  58. People earning the mininum wage should not be pay tax. Increaasing corporate tax, cutting back on tax incentives for property investments, and taxing those earning above the avaerage wage must be way forward. Also, we must have pension lump sums taxed, and a reduction in state pensiosn for public servanst and politicans. Sitting politicans should receive no pensions. People on SW are on the poverty line so there is no scope to cut back there.

    Irish employers want large profits but in general pay low wages. The Dell workers who helped earned tens of millions in exports have no pensions and were forbidden to join a union. Their taxes paid for political extravagance and waste. We, as a society, are not indignant at government waste, nor indeed at the mess and cost of the politico-banking fiasco. That will haunt is for generations to come.

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