Income Tax Rates

The source is Browne’s fevered imagination.

This has proved a somewhat unreliable source over the years, particularily about this time a decade ago, when he was arguing repeatedly in his IT column that Osama Bin Laden couldn’t have had anything to do with 9/11 as he was living in Afghnistan at the time.

More pertinently, Browne has been obsessed for years with the idea that Ireland is a massively unequal society. He repeats it ad nauseum, week in, week out. It isn’t. SILC surveys are published every year, although naturally Browne never cites them. These show that the level of inequality (aka relative poverty) in Ireland has fallen every year since 2001. Back then, Ireland was more unequal than most EU countries, with a relative poverty rate of around 22%, roughly the same as the UK. But, since then it has fallen to around 14%, which is below the EU average for the first time, and massively below the K, which remains at over 20%. The latest SILC survey is linked to below.

http://www.cso.ie/releasespublications/documents/silc/2009/silc_2009.pdf

@Patrick

Most people will take home less than the calculator shows due to employer-related deductions for pension contributions, health insurance, income protections and the like. This might account for the difference.

@John
I would prefer to have a lower consumption and not be in debt rather then a higher consumption high debt lifestyle.
Although you have little freedom when you have no money , a cloud of debt becomes a much more oppressive psycological serfdom.
Anyhow we need to seperate consumption from wealth – they are two very different things albeit related.
Many middle class people have simply defected because the social contract or whatever they call it has been smashed over the last 20 years in particular as the market state has become a dominant force for ill.

I think much of the middle class who are not in debt have become like the remaining Anglo Irish of old although with much less style.
They have simply retreated back into the big house and turned off the heating.

@Joseph Ryan
“However there has been a rush to the ramparts on this thread that could be confused with self interest rather than rational analysis.”

I think you can have self-interest AND rational analysis. I take home 53% of my gross. There are plenty like me, presumably on this thread. This personal insight into how the tax system works makes me understand that VB’s analysis is nonsense. If he wants to expose tax dodging then why doesn’t he focus on the tax dodgers rather than lumping everyone with a high gross income together?

@ Joseph Ryan

“The Irish Revenue tax on these ‘artistic’ contributions to to humanity is of course zero.”

I’m painfully aware of the issue of self-interested posts, but just for the record, the Artists Exemption is now capped at €40k pa. So if Bertie and Bono, about whose affairs I only know what I read in the papers, were to be getting income from works of artistic merit, they should be paying tax on any income over that 40k.

The issue of the tax exemption scheme for income from artistic works being degraded by classification of certain works which your average lady on the Phibsboro omninbus would not recognise as artistic, being used for tax relief, is a problem.

@Karl
Methinks you should send a letter to the editor

also here’s a neat take on tax stats from Ronan Lyons:
http://www.ronanlyons.com/2009/07/28/a-little-quiz-on-irelands-income-tax/

Also to my mind tax analysis needs to include employer’s Prsi, as though the employee paid it. Employer’s Prsi is a sneaky legerdemain to hide the true tax rate.

The top 5.1% paid (not earned)

@Seamus
The only point I was trying to make in my last post is that unless we stick to only using effective rates for comparisons it is very easy to mislead.

The initial post was inferring that VB stats were dodgy.
“It certainly isn’t the last Revenue Commissioners statistical release on tax payments by income distribution, which relate to 2009.”
But they are correct as far as I can see.
Happy to admit I am wrong if I am.
Over to you Karl?

As for income inequality. Its a very hot topic at the moment.

http://www.economonitor.com/nouriel/2011/10/17/full-analysis-the-instability-of-inequality/

Also when the figures come out for 2011 I am positive the effective rates will have increased substantially for the lower and mid range.

The big picture overall however is one that Karl has outlined very well in the past. We need to collect a lot more from everyone.

@ Eamonn

someone paying 0% under the old method vs that person paying 2% now. Thats an infinite increase, and yet they basically still pay almost zero tax. We could play this game all day.

@Hogan
Berlin 1945 maybe – they lost the war because they could not produce fuel – we will lose because we cannot produce money.
Taxes are just a measuring device that also affects behaviour for good or ill.

@ Eamonn,

It’s very hard to see if Browne’s figures are correct. They seem to relate to 2011 tax figures but it is impossible to know these. The deadline for paying 2010 Income Tax hasn’t even passed yet.

Browne uses income brackets that are not available in the Revenue’s Statistical Report such as €80,000 and €140,000. There may be another data source and it would have been useful if we had being given a nod in that direction.

There is a number of mentions of inequality in the article and in this thread. The Income Tax table shows that in 2009 there was around €82 billion of income. This was unequally distributued. Data from the CSO show that the government made €29 billion of transfer payments in 2009. Any analysis of income inequality would have to account for that.

@All

Bond is right the game could be played all day as it has over the posts above but the fact is VB has a serious point – there is a wide gap between the have’s and have nots in Ireland and it seems like a reasonable proposition to close it in the most equitable manner possible.

The tax thing is a side issue – if this was an exercise in tax raising then there are always methods to grab cash off the citizens – but I don’t believe this is VBs main point his point is that there are obvious inequalities and as a society we should be aiming to close them and close them faster than heretofore despite what the SILC surveys may suggest.

Notwithstanding the fact that in a capitalist society the method we have been attuned to in reward recognition is cash based. If someone has a better method then I’m all ears.

The problem of course with this seemingly fair request from VB is that the middle classes to which VBs radar is pointing to are largely up to their proverbials in debt particularly mortgage debt.

In most well meaning middle class households they understand the VB party line and could afford to pay the additional taxes on the provisio of course that their debt creditors are willing to take a holiday or are willing to take a write down.

Seamus Coffey has indicated on this site before that the mortgage mess is not really so bad because the numbers actually suggest c95% of households are making their monthly repayment. This argument of course is a nonsense. The truth is that the mortgage and related debt payments are indeed being made but quite literally at the expense of everything else – domestic demand is telling you that as is pension contributions, savings generally and entrepreneurial activity – all lower as a result.

VBs middle class tax grab would ensure the numbers making the monthly repayments would continue to fall and suddenly Seamus’ stats would suddenly remind him of the film title ‘What Lies Beneath’ – and beneath the surface many thousands are just hanging on.

So there’s the dilemma – tax those who supposedly on the face of it can pay more but almost guarantee the mortgage debacle worsens. The choice is yours.

@ John The Optimist

Do you have the latets figures for Germany with regard to poverty levels?

@Yields
You have hit another nail in the head.
I have been saying for some time now that mortgages are functioning as a tax does in a modern state i.e they are controlling inflation.
However they are private in nature – the sacrifice is not spent back into the economy for real productive investment.
This is what the ECB means by systemic risk in my opinion.
Bank credit deposits such as Bank bonds are functioning almost like Goverment bonds did in the past – especially in the euro system which has so little goverment debt relative to credit.

A complete repudiation of all mortgage paper and subsequent raising of tax would create a much more efficient system that would facilitate rational commerce & movement of people to appropriate areas for work , eduacation , lesiure etc.

At the moment the most productive are trapped in debt prisons – unable to live full , efficient lives.
As Jean Claude says in the interests of stability – but stability for who ?
The Euro has only maintained its purchasing power by eroding wages – This wage deflation / entropy must stop.

There are Lies, Damned Lies and VB’s Statistics. His usually are fixed like his rants to match his argument. The Revenue Stats are for ” 2009 Income Tax”. In 2009 we also had a Income Levy at the margin of 6%, PRSI on earnings up to €75,036 @ 4% and Health Levy at the margin of 5% over €75,036. If VB thinks anyone is going to bust their gut and probably their health to pay currently 52% (41 + 7 + 4) and 55% (41 + 10 + 4), if you happen to be selfemployed , to a State that wastes money everyday ,that it has not got, well VB should also realise that not everybody is allowed to run businesses into the ground leaving creditors to pick up the pieces . I continue to be amazed that the Irish Times gives up valuable space to these rantings which most people now realise are just pie in his sky.

@Eamonn

They are not ” property” Directors but Proprietary Directors and one of the reasons effective “income tax ” rates on these people can be lower is that they invest in themselves and their families which the State quite handily ignores i.e. Health Insurance and medical expenses, Income Protection Insurance, Education expenses and some are paying their pension contributions from their Gross Salaries. If you dont have access to free medical,PAY Related Social Insurance, free Education and cheap Unfunded Guaranteed defined benefit pensions well you have to try protect yourself and your family to survive in this State which treats the Self Employed and Proprietary Directors of Private Companies abysmally.

Tried to combine the 2008 tax take from the CSO report with the estimated USC and PSRI levies at various income levels to get a better measure of the total income tax burden.

http://www.politics.ie/forum/economy/169192-income-distribution-tax-take.html

Also tried to combine that with the VAT burden from this ESRI report to get a better picture of the total tax take at various income levels.

http://www.esr.ie/vol42_2/06%20Tol%20article_ESRI%20Vol%2042-2.pdf

Again the curve is far flatter than you would first imagine, ranging from 19% to those earning below €10k to 42% for those earning over €200k

https://docs.google.com/spreadsheet/ccc?key=0AutgOtkznKxIdG05dXYtTGdOYkVpTmktTlZZNHo5dXc&hl=en_US&pli=1#gid=4

@ JTO

Thanks. I thought that this was the case. Ireland is on a par with Germany in the poverty stakes. The really significant point, however, is that while Ireland’s percentages have been improving, those of Germany have been deteriorating.

http://www.dw-world.de/dw/article/0,,5259373,00.html

This is a reflection of what happens in the “mercantilist core” so ably described by Martin Wolf in the FT and discussed on another thread.

How come VB has to show his figures, but neither the banks nor the government have to show theirs.

Out of context: In their latest monthly Bulletin the ECB discussed the TARGET2 payment system.(page 35- 40)
LINK http://www.ecb.int/home/html/index.en.html
The ECB makes the following statement: “There is no single database grouping together the TARGET2 balances of all NCBs, but
an imperfect proxy can be calculated on the basis of the IMF’s International Financial Statistics” (Footnote 5 on page 36)
I think that is really an astonishing sentence!!!
I did an internet search of the TARGET2 data via the national central banks websites.

Here are the TARGET2 data for Greece:
http://www.bankofgreece.gr/Pages/en/Publications/FinStat.aspx?Filter_By=9

The TARGET2 data for Italy made a big jump in August and September:
http://www.bancaditalia.it/statistiche/SDDS/stat_fin/Aggregati_riserve
Other liabilities within the Eurosystem (net)
may 2011 + 13,866 bn Euro
June 2011 + 5,997 bn Euro
July 2011 – 16,312 bn Euro
August 2011 – 57,469 bn Euro
September 2011 – 103,511 bn Euro
As late as May and June 2011 Italy had TARGET2 claims. It looks like capital flight.

I did find the following on the Central bank of Ireland homepage:
http://www.centralbank.ie/polstats/stats/cmab/Pages/Money%20and%20Banking.aspx
30/09/2011 Table A.2 Financial Statement of the Central Bank of Ireland
Is the “Other liabilities” item in this statement the TARGET2 liability of the Irish central bank vis-a-vis the ECB?

Remember that kid in sixth sense who saw debt people !!

Well I see cars……. cars in driveways depreciating , one person in car , cars going to school , cars becoming the last refuge of middleclass decadence.
TAX PRIVARE CARS NOT INCOME
Give people a choice to become more efficient – do not bludgeon them with a further reduction of their take home pay which could possibly affect basic life support.

@Livonian

perverted neo-liberal experiments of examining how far society is prepared to let an individual fall.

Just watched Euronews. That experiment is now reaching a conclusion in Greece.
The Greek army must be itching to make a contribution to the experiment. Imagine the fiscal incentive that the top army brass would have to take over the experiment. Last time was 1974?

@All

The ‘intellectual nature’ of this particular thread must seem a little removed from reality from the point of view of Aviva workers this evening.

Eight contributions from the Dork. Did anyone understand any of them?

Anyone have opinions on how this kind of thing affects the site’s usefulness?

@ Ahura,

I think the NB incremental mortgage payments are wrong. Thanks for the prompt.

@all

‘… A further €2.75 billion in increased income taxes, which could be a combination of closing off loopholes, tax increases and, ideally, an increase of a few percentage points on people earning over €50,000? It would go a long way to meeting the €3.6 billion target.’

Well – is Browne correct on the substantive point that further taxation on the upper end has the potential to ameliorate some of the draconian measures on the underclass, the disabled, and those who generally do not vote? Local burden sharing in other words, local solidarity etc ….. The Irish welfare state is essentially a middle class construct – and the middle classes benefit disproportionately compared to the working class and underclass …. and this has been the general picture for 50 yrs at least.

I wont’ mention the upper_echelon gougers …. these, of course, remain untouchable and sacrocanct in this kleptocracy … and illusions of accountability from Moriarity through Mahon and others are billed to the bleed1n serfs and trousered by the legal ferengi … and nothing ever happens.

@Karl Whelan

Useful thread …

@ David O’Donnell

Yes, there is potential for higher income taxes and Europe’s knowledge economy, Denmark, has the highest taxes and highest average earnings.

The social security system is funded from taxation. So there are no big penalties on hiring staff or disincentives from cutting staff, as there is in France.

This year to encourage the immigration of researchers, there was a special tax regime introduced for the first 5 years of residence.

Workers retire on almost 90% of their earnings.

The problem with having Ireland as a high tax country is that public services will remain mediocre and the insiders will continue to scrounge what they can get away with. So it’s unlikely that reasonable people would ever conclude that tax euros are being prudently spent.

Despite much higher taxes, the standard pay of a Danish MP is almost €80,000; the equivalent TD earns €92,000.

A Dublin TD can claim €12,000 a year for travel to Leinster House without receipts; the maximum paid to Danish MPs for housing/travel from Zealand is €13,000 and two-thirds of it is payable subject to proof of spending.

The idea annual expense claims of giving some TDs tax-free gifts of over €200,000 would be considered an outrage in real democracies.

@ Livonian

IMHO apart from the Scandinavian countries it seems to me that Ireland is one of very few European countries which does not indulge in the perverted neo-liberal experiments of examining how far society is prepared to let an individual fall.

So France and Germany force employers to pay treble the social security costs of Irish counterparts for what?

Beyond your horizons, are a majority of private sector workers with no occupational pension and the contributory old age pension is about 33% of average earnings.

What level pension do most non-public sector workers retire on in France, Germany or Austria?

You also seem to be unaware of the German Kurzarbeit system.

And under your nose, there’s a two-tier workforce about to develop beyond just temps and contractors, four decades after the campaign for equal work for equal pay for women began – – and we are all for a fair society too as long as it impacts someone else.

@ Aidan

“Finally, you are right, Irish people will not be happy giving up their low tax regime and shift toward a Danish system. But, this is not because of public sector ‘insiders’ but because it will go to pay the bad debt of reckless banks in the private sector.”

No, actually its cos i think the government typically spends our taxes incredibly poorly no matter where it goes. What was Bertie Ahern saying in that interview he gave/was released this week, that we increased spending on healthcare by 400% and we still had a poor health service?

The important point is not, to my mind, the precise figures for this or that tax, about which you can get tangled up in all sorts of knots. It is about whether or not Ireland is a very unequal society.

The Big Lie, repeated ad nauseum by Vincent Browne, Fintan O’Toole, Gene Kerrigan and virtually all of the Dublin 4 media, is that under the rapacious evil right-wing FF-led government, who were out only to screw the poor and give all the country’s money to their developer friends, Ireland became a much more unequal society and the poor were trampled into the ground. In contrast to the progressive and saintly Labour-led government before it, which looked after the poor in a proper and caring manner.

As with everything you read in the Dublin 4 media, it is hogwash of course.

The following are the figures for the proportion of the population living below the poverty line (60% median) from 1994 to 2009. The figures come from the ESRI Living in Ireland Surveys up to 2001, and the CSO Suvey of Incomes and Living Conditions series when they took over the function from 2003 on. But, as I far as I know, their methodology is identical.

LIIS 1994 15.5%
LIIS 1997 18.2%
LIIS 1998 20.0%
LIIS 2000 20.9%
LIIS 2001 21.9%
SILC 2003 19.7%
SILC 2004 19.4%
SILC 2005 18.5%
SILC 2006 17.0%
SILC 2007 16.5%
SILC 2008 14.4%
SILC 2009 14.1%

What the figures show is that relative poverty and inequality increased quite dramatically when the saintly Labour Party was last in government between 1994 and 1997 (and the saintly Michael D Higgins was a member of that government), but decreased during the lifetime of the evil FF government (which the evil Sean Gallagher was not a member of, but probably voted for, which is clearly enough to disqualify him from the Presidency). As Michael Caine would say: “Not a lot of people know that”. Hands up, how many readers of this site know it or have ever seen these figures? However, given the media we have, their ignorance is excused. But, nice to see that, during the Presidential campaign, the Dublin 4 media haven’t lost their touch for demonising one side and elevating to sainthood the other side.

@JtO
You are 100% correct, FF made the country more equal especially in their latter years. And yet you never hear them talk about it. Their formula of reducing median incomes through economic devastation and increasing social welfare payments to unsustainable levels is strangely unappreciated – even by themselves.

@Michael Hennigan

Yes – I’m a fan of the Danish system – as pointed out a few times on this site. How to distinguish Ireland from Denmark …. hmmmm lets try Governance ….

‘@Bond …. on effectively and efficiently using such revenue.

@John TheOptimist

I hear Bertie has signed on Sean_een Gallachoir as an adviser (hope you are not too put out, what with dat €5k dosh up an all) – The Bowel Bertie wants to figure out how to give a director’s loan to himself before the Mahon stuff bites the dust – but he cannot remember if he has a company or not, who he might or might not have appointed to its board, and he still cannot find dat bleed1n bank account. A true social_ist … WesLife Yah … dats da name. He surely must be in line for Whinger of The Year, probably the decade, after dat DCU interview.

p.s. Blind Biddy says Hi.

@The Dork

Lieveremont wants to know if you might turn out on the blind_side this weekend to further confuse the poor all blacks?

@ Eamonn

“After your colourful oxymoron “ridiculously progressive” I am guessing you will be punting for tax reductions at that time?”

no, i actually won’t, i accept that the more affluent people will always have to make the biggest contribution. I believe, at a very base level at least, in a progressive tax system (although i think that it should be simplified massively via a simple flat tax + a TFA).

However the more affluent earners already do make a massive contribution, so i just think that to keep asking them for more and more and more (effective AND marginal rates for high earners have increased hugely already – per the DoF website, a single high earner like me is paying around 7.3% more in tax than in 2008, a low earner is paying around 3-5% more) is neither just nor sensible when taken in isolation.

As examples of how much people pay in tax (income tax, PRSI and USC, and personal, standard employee and home carer tax credits), here’s some examples per the DoF Budget website:

“Single, full PRSI” category, 2008 vs 2011, average tax rates:

15k income – 0% vs 2.7%
25k income – 8.3% vs 14.0%
40k income – 18.6% vs 24.2%
120k income – 35.4% vs 42.7%

“Married, full PRSI, one income, two children” (does not include child ben):

15k income – 0% vs 2.7%
25k income – 2.9% vs 7.2%
40k income – 10.4% vs 14.2%
120k income – 31.6% vs 39.1%

“Married, full PRSI, two income, two children” (does not include child ben):

15k income – 0% vs 2.0%
25k income – 0% vs 2.5%
40k income – 3.6% vs 9.2%
120k income – 27.2% vs 33.4%

The same Budget document also shows that 37.9% of income earners still pay 0% in income tax. We live in a ridiculously progressive tax system, and its not simply “colourful” to claim that.

@Johnny Foreigner

You are totally 100 per cent wrong.

Try backing your arguments up with facts occasionally.

In anticipation that someone would post along the lines you did, I had allready calculated the figures for median incomes over the period. These are the figures. As you will see, median incomes increased continuously during the period, exactly the opposite of what you claim.

(1) 60% median poverty line in current euros:

LIIS 1994 €4,161
LIIS 1997 €5,468
LIIS 1998 €6,135
LIIS 2000 €7,663
LIIS 2001 €8,796
SILC 2003 €9,171
SILC 2004 €9,680
SILC 2005 €10,057
SILC 2006 €10,566
SILC 2007 €11,890
SILC 2008 €12,455
SILC 2009 €12,064

(2) 60% median poverty line in euros adjusted to base 1994=100.0:

LIIS 1994 100.0
LIIS 1997 131.4
LIIS 1998 147.4
LIIS 2000 184.2
LIIS 2001 211.4
SILC 2003 220.4
SILC 2004 232.6
SILC 2005 241.7
SILC 2006 253.9
SILC 2007 257.9
SILC 2008 299.3
SILC 2009 289.9

(3) consumer price index adjusted to base 1994=100.0:

LIIS 1994 100.0
LIIS 1997 105.8
LIIS 1998 108.3
LIIS 2000 116.3
LIIS 2001 121.8
SILC 2003 131.9
SILC 2004 134.9
SILC 2005 138.1
SILC 2006 143.6
SILC 2007 150.6
SILC 2008 156.7
SILC 2009 149.8

(4) 60% median poverty line adjusted for inflation to base 1994=100.0:

LIIS 1994 100.0
LIIS 1997 124.2
LIIS 1998 136.1
LIIS 2000 158.4
LIIS 2001 173.5
SILC 2003 167.1
SILC 2004 172.5
SILC 2005 175.0
SILC 2006 176.8
SILC 2007 189.7
SILC 2008 191.0
SILC 2009 193.6

The bottom line is that the median poverty line was 93.6% higher in REAL (ie inflation-adjusted) terms in 2009 than in 1994, but fewer people were below it in 2009 than in 1994 (15.5% in 1994, 14.1% in 2009). It was also 55.9% higher in 2009 than in 1997 (when MDH left office), but far fewer people were below it (14.1% in 2009, 18.2% in 1997).

@ Aidan

you are aware that FF and the unions were completely in bed with each other throughout the boom years, right, and that it was their cost agreements which saw so much of the public expenditure wasted? Unless you want to kick the unions, and so most of the public sector, out of the “left leaning” camp, which would be refreshingly honest from a left leaning supporter like yourself?

“It should come as no surprise that all of the countries mentioned that are successful have had a long history of left leaning social democratic parties in government.”

You should also be aware that its a very right of centre government in Sweden in recent years that has steered its economy almost untouched through the crisis.

Also, have you ever heard of the UK Labour Party, the Greek PASOK party, the Spanish Socialist Party (PSOE), the Portuguese Socialist Party etc, who were all in power in the lead up to the financial crisis, or in PASOK’s case for most of the twenty years beforehand when they ran up huge debts and fudged accounts, right? To say that left-leaning governments lead to better governance is one of the more insanely generalistic comments posted on this site lately.

@Bond/Eamonn

The progression in the income tax is not very progressive.
For single person (excl USC/PRSI)
From €0 to €16500 0%
From €16500 to €32800 20%
From €32800 to €infinity 41%

It seems to me that whatever ‘progression’ there is (to 41%) , is cutting in at a very low level and not increasing thereafter.

I would remind those of a younger generation that in the 1980s, the following was the case for even very modest income earners.

Income tax 65%
PRSI 7.5%.
‘At the margin’ 72.5% Versus today approx 52%

Presumably the same percentage of those funds as today went to education etc. No doubt some of todays better earners were beneficiaries of that tax funded education spend in the 1980s.

@Michael Hennigan

I’m in the over 40 camp and also in the not so small mortgage camp (albeit being fully serviced) so making general statements about age and debt dynamics as you do, may be misleading.

Many older folk with liitle of no debt mortgages used (or more correctly our beloved banks allowed them) the equity in the homes as collateral to start businesses or become guarantors on their childrens not so small mortgages – many of said guarantees are, sadly, likely to come home to roost.

So be extremely careful in making assumptions regarding debt overhangs in any Irish age cohort – best to assume its all bad.

@Joseph Ryan

And equally remember the significant outcome of a high tax strategy was – TWO tax amnesties to counter the black (real) economy for most of the 1980s and early 1990s and the birth of a self assessment tax system to place the onus back on the taxpayer to pay rather than on the Revenue to go around chasing citizens for cash.

I say no thanks to a high tax economy – giving more cash to a Govt (any Western Govt it seems) is always a bad investment choice – they always find a knack of making a balls of seemingly the simple things and the ‘investment’ often ends up as a ‘liability’ – recent examples include delights such as the nationalsation of Anglo, recent ‘investments’ in the other ‘banks’ , Benchmarking x2, Terminal 2 etc etc I could go on but you get the idea.

None too cleaver and in most cases all highlighted before the event as daft ideas whose returns were at best questionable and in their worst case disastorous.

I appreciate there is a happy medium of State involvement required but we’ve consistently failed to find that watermark.

@ Aidan

I favoured a mandatory pension system during the boom and the Pensions Board was on a similar track but the Minister for Finance’s rep vetoed the issue.

The said minister is now drawing an annual pension of about €140k at the age of 51.

Lord Adair Turner then chairman of the UK Commission on Pensions said in Dublin in 2006 that a “a purely voluntary system was not going to work….employers won’t provide adequate pensions for employees and individuals won’t go out and buy pensions themselves.”

Demanding high pay and conditions now when apart from the number that face high longterm unemployment, there are likely many companies on the brink, is not realistic.

It is true that in this clientist system, without collective power, the impression of individual access to power is an illusion.

Contrast the way taxi drivers were treated post deregulation compared with with farmers?

The private sector (outside of the fee cartels) has to operate differently to the public sector or should everyone be guaranteed employment?

The Aviva job cuts which Richard Bruton termed a ‘legacy issue’ because of the fall in sales contrast with the absence of big cuts in the state controlled financial firms.

Anglo, a bank on a wind-down and not in the business of acquiring customers still has about 1,000 staff.

What realistically does it need: maybe 150 with a small management team?

But who is paying for this big payroll including several mangers costing over €200 pa including pensions?

It’s not directly seen and it’s part of the grubby till with many hands adding to the grease – – where would the sheltered private sector be without this cash cow?

As for the Germans, since 1973, they have been mainly paying for a scheme that has prevented depopulation of the Irish countryside – – subsidising 94% of average farm income – – yes, 94%

@ Yields or Bust

About 40% of Irish owner occupied homes have no mortgage compared with less than 10% in the Netherlands.

@DOCM,

Guilty as charged 🙂

But the more subtle point I was trying to get across in the earlier part of my comment is that the efforts to reduce the income tax liability of more and more people (and eliminating it for increasing numbers) were accompanied by implicit taxes in higher charges for services that are far more regressive and inefficient than the charges levied under an efficient tax/borrow and invest or privatised regime. The revenue to finance service provision has to come from somewhere.

It simply baffles me that so few people recognise the damage this is doing to consumers, the economy and the process of democratic governance. But, for governments, it is a very clever ruse. Citizens can vote out of office those who levy explicit taxes – and vote to re-elect those who reduce them, but they can’t vote to eject those in the quangos or parastatal bodies who levy these charges.

In fact we’re doomed to see even more of this with the Government’s NewERA contraption. The key problem is that, at independence, Irish citizens ‘took possession of’, rather than ‘secured ownership of’, an existing model of democratic governance. The distinction is subtle, but extremely significant. A key implication is that the day-to-day functioning of the system is not employed to impose effective democratic governance on native power elites; it fact it is operated to allow then to do more or less what they like – subject to any constitutional restraints that might be activated – between general elections.

But there is no widespread popular demand for any change. So we are where we are.

@Yield
“I appreciate there is a happy medium of State involvement required but we’ve consistently failed to find that watermark.”

I accept the point that there is a medium, whether happy or not!.

Nevertheless, it is crystal clear that high income earners in both PS and private sectors were huge beneficiaries of the failure of the State to burn the bondholders and force private debts where they belonged.

Such a course of action by the State would have involved severe cuts in PS and most likely private payroll as the State was forced to adjust rapidly to the ECB carrying out the treats it promised on foot of such action. I do not think it would have involved the necessity to immediately balance the budget as argued by many people given that the IMF was clearly in favour of ‘burden sharing’ in the case of the banks.

But there have been very clear winners in the course of action pursued by the State.
The winners it seems want to keep their winnings without too much cost.

@Paul Hunt

‘… we are where we are.’

Oh Dear – Paul … you have been assimilated – all that copious and trenchant resistance has been futile …. I’m sending 7_of_Nine toute suite …..

& Colonel Gadaffy has been killed in Sirte.

@Joseph Ryan
‘Nevertheless, it is crystal clear that high income earners in both PS and private sectors were huge beneficiaries of the failure of the State to burn the bondholders and force private debts where they belonged.

YES. Ergo, they can afford a percentage point or so …. which can save lives at the nether end of the human spectrum. A modest land tax would not go astray either – nor would a substantial VAT increase on state invoices to the legal and other professional ferengi – but perhaps the salary_breaking_advisors to FG/LP will veto such moves to upset their colleagues in the upper_echelon gouger fraternity. So Bruton the landed younger may continue to re-create his two-tier society ….

@ Paul Hunt

Again, I agree completely with this view and had it in mind to comment on it in the context of VAT levels which hit the poor disproportionately.

But I know that your point is a different one. I do not know, for example, of any other country in the world that would consider income from parking at its hospitals as a legitimate source of income. An example of the skewed thinking that results can be found in the activities of the company contracted by the HSE to run its “parking facility”. It applies, under instruction from the HSE, the same rules to handicapped parking in its private hospital carparks as would apply on the public road. Without a certificate of permanent handicap, it is “illegal” to use them, subject to a hefty fine, even if they are outside the front door of an orthopaedic hospital! This is the explanation for the spectacle one often sees of relatives pushing patients around in wheelchairs in parking lots at a great distance from the hospital entrance. Various other elements of the health service, such as the ambulance service, have been set up as separate entities with their own lines of command. The net result is that there is nobody actually in charge in our major hospitals.

This is not a criticism of the excellent care of the front-line medical staff who have not lost sight of the fact that the patient is, and should remain, to sole focus of a good health service.

@ Disgruntled Ob

i was speaking in a very theoretical way. Simply, taxing me more won’t pay you more.

@ All

Off topic, but still…

GERMAN GOVT DOES NOT RULE OUT POSTPONEMENT OF EU SUMMIT,
QUOTING GOVT AND COALITION SORUCES- GERMAN NEWSPAPER DIE WELT

Looks like we have a high stakes game of poker going on.

@ Hogan,

“You are confusing income distribution with transfers.”

Eh, no I’m not.

“By your argument the current system of taxation would see nobody in the higher tax bracket because companies wouldn’t pay them that much.”

That’s precisely what happens in the Scandinavian economies. Ever heard of a Scandinavian Director earning the absurd amounts the Goldman Sachs crowd pay themselves.

“My guess is that companies would pay huge amounts to offset that taxation or find other ways to game the system to the same effect.”

That’s what the UK banks threatened to do when they wanted to bring in a 50% tax on bonuses. What they should have done was taxed them as normal income. Put in a top tax rate of 90% as Mr Bond suggested and see if they take that tack. Considering how much of their profits go on salaries, they’d go bust even faster than the last time.

As for gaming it. They’re already doing that. It should be a law enforcement issue.

@David O’Donnell,

Not assimilated; just being realistic. When one of the most vocal and forceful TDs on matters of democratic governance, John McGuinness, the Chairman of the PAC, does not recognise that he and his colleagues in the Dail have all the power and authority they require to establish procedures to hold the goverment (and the machine behind it) to account and believes he has to plead with the Minister for Public Expenditure and Reform to secure permission to behave as a proper public representative and legislator, then the game is up for all of us who have long clamoured for reform of democratic governance.

@ Hogan,

Just re-reading my reply to your reply. I knew something didn’t sound right.

You said. “By your argument the current system of taxation would see nobody in the higher tax bracket because companies wouldn’t pay them that much.”

And I replied.

“That’s precisely what happens in the Scandinavian economies.”

Call it tiredness but I missed the “nobody” in your comment. My mistake. However, I stand over the claim that there’s a disincentive to pay high wages with an increasingly high tax rate. It stands to reason. Think of taxes to income as like friction to motion. It’s just logic.

@ALL

On Troika statement (in next thread …)

The Minister said there was nothing in the discussions about increasing income tax and decreasing social welfare payments and said these were matters for the Government to decide at budget time. But he added, the troika had no difficulty with the Government “substituting one fiscal measure for another one of equal value”.

http://www.irishtimes.com/newspaper/breaking/2011/1020/breaking4.html

Is there a latently strategic reason why ‘increasing income tax’ is always bundled by this admin with ‘decreasing social welfare payments’? Who is being spun – and by whom – in whose interests?

@ Hoganmahew,

In fairness, I did review my hastily made comment.

But funnily enough the link you provide proves one of my key points. The Swedish authorities don’t see tax avoidance as a reason to lower their tax rates, but as an enforcement issue that warrants action. Contrast that with what you’re suggesting which in it’s crudest form says (and correct me if I’m wrong), that we shouldn’t have high taxes because they’ll be avoided.

“It is illogical for bank management to destroy their banks, but somehow time and again they manage it.”

Too true. But weren’t the ridiculous bonus schemes fingered as one of the culprits of the crisis? Are they wrong when they say that the best way to rob a bank is to work for one?

“You keep asking for everyone to talk about effective rates, and then supply a lot of maths which has absolutely nothing to do with either average or effective rates.”

yes I know but only because you did the same.

“The same Budget document also shows that 37.9% of income earners still pay 0% in income tax. We live in a ridiculously progressive tax system, and its not simply “colourful” to claim that.”
this contradicted your own figure
“15k income – 2.7%”
Your comments re the dangers of taxing people at the top (120k+) are ridiculous.
even at the current rates of 42% for single and 33% for married with 2 incomes, it is way below what some people are paying in other countries. UKs 50p tax comes to mind.

You also have people like warren buffet in the US telling the government to close tax loopholes and tax him more.

I will agree with you on the point JTO made re FF’s impact in income poverty in the 2000’s. The increases in Social welfare have resulted in a decrease in inequality at a time when America and the UK were going the other way.
This by the way was fairly much single-handedly down to Brian Cowan’s time as minister of Finance.
What I am arguing, along with Roubini (no leftie) is that income equality actually helps growth in an economy and allowing those at the top to not distribute causes the system to eat itself alive.
The clearest example is the US New deal from the 40’s to the 70’s v from the 80’s till now.

@ David O’Donnell

“Is there a latently strategic reason why ‘increasing income tax’ is always bundled by this admin with ‘decreasing social welfare payments’? Who is being spun – and by whom – in whose interests?”

I took it for granted that this is a deal by the coalition partners: no income tax increases FG, no social welfare cuts Lab. I think this is problematic for limiting room to manouvre. Silly actually.

I also reckon that the no social welface cuts looks more get-at-able, by time limiting, or putting terms and conditions on them.

I would support Eamonn Moran in looking for an additional higher band of income tax for higher earners. But it doesn’t look at all likely.

I’m also thinking of Yields or Bust’s remark:

“Notwithstanding the fact that in a capitalist society the method we have been attuned to in reward recognition is cash based. If someone has a better method then I’m all ears.”

And trying to come up with a good answer. Hampers for bankers.

I wonder if a Presidential candidate would care to come up with a citizen’s OBE system. Is there one?

@Gavin Kostock

Yet they are separate issues. Bundling them muddies the waters …. who benefits?

Social welfare spend is decreasing …. thousand little cuts –

No income tax increase. Silly? Yes – there is room for a higher band. Croke Park. Silly? Yes. Unions sold out low paid private sector workers to benefit of upper_echelon PS. Bank Guarantee. Silly? Yes …. where we livin? Silly_Con Valley of the Idiot Citizen_Serfs …

@DOCM

‘reduce’ doesn’t rhyme with ‘increase’ and would upset the dactyllic idyllic hexameter favoured by the troika and the upper_echelon epicurian vichy_regime – The Aesthetic Turn don’t you know!

‘Wrong’ is such a perjorative word. What do you think Bismarck’s motive was? To equalise society or to preserve the existing inequality?

@ hogan

I am no historian, but I’d guess like any other conservative politician of his day, he was taking steps to head off the threat from the the trade unions and socialists. I am sure there were many Prussiasn civil sevants who recogised the economic and social value, as well as the justice of those same payments.

I have great time for your posts, I just thought that one was fired from the hip 🙂

@paul quigley
No, it was actually Bismarck and his sop to innenpolitik that I had in mind. Real incomes are what matter. Real incomes have declined for large parts of the western world in the last twenty or so years.

@ hogan

Of course incomes matter, but I fail to see how one can treat transfer payments as anything other than a variety of income.

@ Hogan

“Far better, I reckon, to address some of the other tax disparities – inheritance, CGT, dividends etc. within the current system to get the effective tax rates up at the top end.”

I’d add corporation tax to that also. This corporation tax issue is ridiculous.

“Because they do nothing to change the underlying position – that one section of society is underpaid for its labour versus another.”

Aha. So the question is, presuming you think it’s an issue, how do you fix that problem?

I think you have essentially one of two ways.

1. A radical and revolutionary change in the mode of economics, i.e. abolition of markets on the line of participatory economics.

OR

2. Taxes that progressively climb until there is an effective maximum wage.

@Eamonn Moran
“So are you against a social welfare system?”
Are you a troll?

@ DOCM

Earlier this week, the FT presented an analysis where Ireland has a mean gross disposable household income of €53,500 compared with Germany’s €42,600.

As for CAP, in 2003, Ireland was the leading per capita beneficiary, close to €500 and more than double the No. 2 — Greece.

Recall those signs at road works abut European Union support?

We even got money to support enterprise policy.

So we should expect solidarity but we have made no net contribution to the budget in 38 years.

Now we want radicalism of a kind from forthcoming summits but closer fiscal union would likely involave treaty changes.

What is striking about the development of the EEC/EU is that successive enlargements from 1973 when Ireland was admitted, haveinvolved membership for countries where there has been no strategic interest but just the prospect of a new burden.

The Irish EU haters in recent years demanding referenda, should wonder if the citizens of the original six have been asked to vote on the admission of countries like Ireland?

In 1973, most farm households did not have running water. Eaten bread is of course soon forgotten.

@Eamonn Moran
Then I suggest you look up the meanings of the world “preserve” and “perpetuate”; my dictionaries do not give “increase” as a synonym.

You might also look at the change in income inequality since welfare state came into widespread being post 1945.

As I say, transfer payments cover up income inequality and in doing so perpetuate it. Based on the experience of the last twenty years, you could probably argue that they increase it, although I don’t think this is going to be sustainable – the countries with the greatest increase in inequality have, as far as I can see, decreased taxes on the wealthy more than on the not wealthy – the means of funding transfer payments has been changed.

@Michael Hennigan

Congratulations you managed to provoke me into responding to you which has also probably been assisted by the fact that I have to babysit while the better half of the Livonian parenting experiment is kind enough to explore the delights of Saturday night for both of us:

The Irish state contributory pension (12 K a year) is much higher than 33% of the average single earner “take home pay” in the private sector. In fact the majority of single private sector workers only take home about twice the state contributory pension without the benefit of medical cards, free travel, etc until they are above retirement age.

Then again as I only have limited “horizons” maybe my estimates are wrong (and most average private sector workers are actually”taking home” north of 500 Euro a week in which case I cannot see why you are referring to the emergence of a two tier system in the work force.

You may have noticed a general election in Ireland earlier this year which reintroduced the minimum wage and left Minister Bruton blowing on a solitary bugle even within his own party.

A two tier system (in the private sector)will only fully emerge if the electorate allows it.There are two hopes of that and one of them unfortunately is no longer with us.

The Irish electorate is much more sophisticated than electorates in most
other democracies and a lot more educated than it was 20 years ago when there was also a danger of the emergence of a two tier system in the work force. (I am only speaking about the private sector because the public sector has “tiers” which are currently orbiting the stratosphere and will have to reconcile the “two,or more, tiers” it is introducing)

Is there any possibility your arguments became a little entangled ?

You provide great information and I learn a lot from your information but believe it or not “playing the ball and not the man” is actually quite easy.

Attempting to categorise people is IMHO also a pointless activity because by paying attention to the what another person is saying rather than making presumptions about their “horizons” runs the risk of missing the fact that many of your ideas may actually be resonating with the other person.

Then again you may just like a good old fashioned argument in which case I am afraid I cannot oblige.

There are good reasons why I use a pseudonym and in return for being allowed to use a pseudonym I consider it essential that I try to play the ball and not the man” and only comment when I feel I have something to contribute. Consequently I rarely respond to “comments about my comments” so congratulations on provoking an exception from me.:)

BTW the Kurzarbeit system is not flawless and does not protect everyone from abject poverty. The harsh reality is that “Plat de Jour a la local garbage bin” among unfortunate people is tolerated in Germany (and most other European countries excluding the Scandinavian nations) much more than it is in Ireland.

@Karl re Dork

Personally I do not find Dork annoying although I often scroll over his comments. On occasion he has come up with “gems” in the middle of everything he writes. If he realises he is annoying people I am sure he will take note.

@Karl re : etc

Apart from a “brief bout of emotion” during the summer this excellent site IMHO usually maintains a respectful tone. Some forums range from a cyber version of the “Mad hatters tea party” to the outright vindictive. This site has never delved to such depths and as a result is followed very closely throughout Europe and elsewhere.

Best…L

Any policy policy proposal on taxation in the current crisis (i.e extreme limitation of resources) is pointless in the absence of a discussion on the overall distribution of income and wealth in the economy.

@David @Livonian

Well written . I know what the objectives of the Kurzarbeit system are and agree completely that those objectives make “economic sense”.

I must admit to also being confused about why Michael H felt it was necessary to refer to the Kurzarbeit system when reponding to my comments about comparative poverty levels (and the more frequent incidences of occasionally needing to include “Plat de Jour a la local garbage bin” in one of those countries) in Germany and Ireland.

IMHO “economic sense” and maintaining productive capacity in lean times does not necessitate tolerance of abject poverty among the most vulnerable people in a society. In Ireland we need to do more of the former without abandoning the latter.:)