"We must dismantle our culture of dependency"

[Dagny Juel]

Interesting debate. The only way to address the current situation is to cut income tax and thus incentivise work and to cut benefits. I completely agree that there is a culture of entitlement in Ireland. In the US, someone who has done well for themselves is generally respected and it is something that is viewed by the society as commendable - the american self-made man. However, in Ireland if someone has done well, they are automatically viewed as morally suspect and it is perceived as a negative but someone who is struggling deserves everyone's respect because they got 'screwed' by the system. People are generally very resilient and resourceful, look at stories of how people survived wars and other disasters. However, teach them that they are entitled to everything from the State without any effort on their part and suddenly they become completely unable to survive independently.

Every time there is a new budget announced, I'm always raging when I hear comments along the lines of 'they hit the poor hardest while rich haven't been affected etc.' referring to welfare cuts. People don't seem to realise that there is a massive difference between reducing income tax and thus taking away less money that people have earned themselves and reducing free handouts. I always think of this anecdote, which I think is spot on in terms of the current situation in Ireland:

Ten guys went to a pub to have a couple of pints. Their bill was €100. They were debating how to split it, so that it was as fair as possible. After some discussion they decided to approach it in the same manner that income taxation is calculated. Four of the poorest men did not pay anything. The fifth guy paid €1, the sixth €3, the seventh €7, the eight €12, the ninth €18 and the last, richest guy paid €59.

They were coming to the pub on a regular basis and each time their bill was €100, which they always settled in the same manner based on the above formula. One day the barman said that given that they have been such great regular customers, he will give them a €20 discount on their bill. At first they were delighted but then they struggled to figure out how to split the discount. They decided that it was only fair that the four poorest men continue to pay nothing - but what should they do with the remaining amount? Initially they wanted to split the discount equally among the six paying men - it worked out as a €3.33 discount per person. But this would mean that the fifth and the sixth guys would actually make a profit! So the barman suggested that he applies the discount more proportionately. The fifth guy paid nothing, the sixth guy paid €2, the seventh paid €5, the eighth €10, the ninth €14 and the tenth one paid €49.

They settled the bill and left the pub. However, some of them quickly started to do maths in their head. Hang on - said the sixth guy - how come I only got €1 out of that €20 while the tenth guy got €10?! That's true - shouted the fifth guy - I only got €1 as well! It is unfair that the tenth guy got ten times more! Why did he get €10 and I only got €2 - said the seventh - the rich are only getting richer and are taking everything from the poor! Wait a second - the first four exclaimed - We did not get anything! This system is based on taking advantage of the poorest! And they all started to give out to the tenth guy.

Next time they all went drinking the tenth guy did not turn up. It wasn't until it came to paying that they realised that they did not have enough to cover even half of their bill...

 

[TheBigShort]

Interesting debate. The only way to address the current situation is to cut income tax and thus incentivise work and to cut benefits. I completely agree that there is a culture of entitlement in Ireland. In the US, someone who has done well for themselves is generally respected and it is something that is viewed by the society as commendable - the american self-made man. However, in Ireland if someone has done well, they are automatically viewed as morally suspect and it is perceived as a negative but someone who is struggling deserves everyone's respect because they got 'screwed' by the system. People are generally very resilient and resourceful, look at stories of how people survived wars and other disasters. However, teach them that they are entitled to everything from the State without any effort on their part and suddenly they become completely unable to survive independently.

Every time there is a new budget announced, I'm always raging when I hear comments along the lines of 'they hit the poor hardest while rich haven't been affected etc.' referring to welfare cuts. People don't seem to realise that there is a massive difference between reducing income tax and thus taking away less money that people have earned themselves and reducing free handouts. I always think of this anecdote, which I think is spot on in terms of the current situation in Ireland:

Ten guys went to a pub to have a couple of pints. Their bill was €100. They were debating how to split it, so that it was as fair as possible. After some discussion they decided to approach it in the same manner that income taxation is calculated. Four of the poorest men did not pay anything. The fifth guy paid €1, the sixth €3, the seventh €7, the eight €12, the ninth €18 and the last, richest guy paid €59.

They were coming to the pub on a regular basis and each time their bill was €100, which they always settled in the same manner based on the above formula. One day the barman said that given that they have been such great regular customers, he will give them a €20 discount on their bill. At first they were delighted but then they struggled to figure out how to split the discount. They decided that it was only fair that the four poorest men continue to pay nothing - but what should they do with the remaining amount? Initially they wanted to split the discount equally among the six paying men - it worked out as a €3.33 discount per person. But this would mean that the fifth and the sixth guys would actually make a profit! So the barman suggested that he applies the discount more proportionately. The fifth guy paid nothing, the sixth guy paid €2, the seventh paid €5, the eighth €10, the ninth €14 and the tenth one paid €49.

They settled the bill and left the pub. However, some of them quickly started to do maths in their head. Hang on - said the sixth guy - how come I only got €1 out of that €20 while the tenth guy got €10?! That's true - shouted the fifth guy - I only got €1 as well! It is unfair that the tenth guy got ten times more! Why did he get €10 and I only got €2 - said the seventh - the rich are only getting richer and are taking everything from the poor! Wait a second - the first four exclaimed - We did not get anything! This system is based on taking advantage of the poorest! And they all started to give out to the tenth guy.

Next time they all went drinking the tenth guy did not turn up. It wasn't until it came to paying that they realised that they did not have enough to cover even half of their bill...

Load of nonsense from start to finish.

The emphasis here is 'look how much the rich guy pays in tax compared to the poorest guys'...but without comparing the earnings between each.

Because here, nobody pays income tax on their first €20,000, regardless of how much you earn.
So 3 guys walk into a bar and discuss how much tax they pay. The guy on €100,000 salary says he pays 52%, the guy on €60,000 says he pays 30% and the guy on €20,000 says he pays 0%. The rich guy thinks, this is not fair, im pay so this guys kids can go to school. The middle guy thinks, this is not fair, im paying so he can see a GP if he needs one. The poor guy thinks, if its so bad for you guys, take a PAY CUT!

You see, nobody actually pays anymore tax than anybody else at a given rate of pay. The rich guy and the middle guy do not pay any tax on the first €20,000 of their incomes, exactly the same for the poor guy. And as the poor guy doesnt earn anymore then his liability will be 0% - exactly the same for the other two on their first €20,000.
But as the other two earn more, the government starts to impose a tax of 20%. Between the middle guy and the rich guy they both pay exactly 20% on the next income bracket. The poorest guy is discounted as he no longer earns an income.
Then they both start paying 41% after the next threshold, and, amazingly, the amount of tax each pay is exactly the same, 41%.

Where differences kick in is with different levels of income and if you ignore the tax thresholds as if they didnt exist. And in order to protray a statistical bias in favour of wealthy people paying too much tax, you have to ignore the different thresholds.

But if you think you are carrying to heavy a tax burden, rather than cutting taxes, why not take a pay cut? That way you can reduce your tax liability whilst making yourself more competitive. A win-win.

 

[Jim2007]

[broken link removed]

Switzerland - 26% of gdp on welfare
Ireland - 14%

Well I don't know what point you are trying to make... but those figures are from 2001! And there have been considerable reforms in the mean time and the 2014 figures are:

Switzerland - 19%
Ireland - 21%

Also, it is worth keeping in mind:
- Welfare is not a federal cost, it is a Kanton (County) cost and so in low income Kantons the cost could be much higher and vice verse
- Since we do not have a public healthcare system one of the biggest welfare costs is the payment of annual healthcare insurance for low income families.

 

[Dagny Juel]

Load of nonsense from start to finish.

The emphasis here is 'look how much the rich guy pays in tax compared to the poorest guys'...but without comparing the earnings between each.

Because here, nobody pays income tax on their first €20,000, regardless of how much you earn.
So 3 guys walk into a bar and discuss how much tax they pay. The guy on €100,000 salary says he pays 52%, the guy on €60,000 says he pays 30% and the guy on €20,000 says he pays 0%. The rich guy thinks, this is not fair, im pay so this guys kids can go to school. The middle guy thinks, this is not fair, im paying so he can see a GP if he needs one. The poor guy thinks, if its so bad for you guys, take a PAY CUT!

You see, nobody actually pays anymore tax than anybody else at a given rate of pay. The rich guy and the middle guy do not pay any tax on the first €20,000 of their incomes, exactly the same for the poor guy. And as the poor guy doesnt earn anymore then his liability will be 0% - exactly the same for the other two on their first €20,000.
But as the other two earn more, the government starts to impose a tax of 20%. Between the middle guy and the rich guy they both pay exactly 20% on the next income bracket. The poorest guy is discounted as he no longer earns an income.
Then they both start paying 41% after the next threshold, and, amazingly, the amount of tax each pay is exactly the same, 41%.

Where differences kick in is with different levels of income and if you ignore the tax thresholds as if they didnt exist. And in order to protray a statistical bias in favour of wealthy people paying too much tax, you have to ignore the different thresholds.

But if you think you are carrying to heavy a tax burden, rather than cutting taxes, why not take a pay cut? That way you can reduce your tax liability whilst making yourself more competitive. A win-win.

What you wrote a is complete nonsense. First of all, you are completely wrong that the first €20k is tax free, no idea how you came up with this! Do you mean tax credits? Tax credits for a single person are €1,650, so you would not pay any income tax if you were earning €8,250.

Anyway, the point is that people who earn more money generally are capable, most likely well educated and might have made a lot of sacrifices to get to where they are. Why should they be punished for this by having more than half of their income taken away so that it can be given to someone who perhaps does not even work? The highest earning 6% pay 43% of all income and USC taxes while 38% of income earners pay no tax.


Your suggestion that they just take a pay cut is ludicrous! Socialism is built on this very idea - everyone should be the same and earn the same average amount. Except that if everyone thought that, you would end up in the scenario from my anecdote - the rich guy did not come to the pub (or decided to take a pay cut and was no longer rich) and suddenly there is not enough to pay the bill. Great thinking, let's just all stop striving to better ourselves, let's let go of any ambition and drive, let's kill any sense of entrepreneurship, so that we don't pay higher taxes. Where will we end up as a society?

 

[TheBigShort]

http://www.revenue.ie/en/tax/it/leaflets/it1.html#section3

I dont mean to be disrespectful but you trotting out the same old nonsense that the top 6% of earners pay 43% blah, blah, blah,....so what?
What do the top 10% of earners pay?
What about the top 50% of earners?
What about the top 99% of earners? I bet they contribute close to 100% of the tax, which is more than DOUBLE what the top 6% pay.

So I dont get why you, and others, place such emphasis on the top earners.
Going back to your pub, what if the richest guy paid 50% tax and the other nine paid the other 50% between.
But what if the combined income of the 9 was €180,000 and the income of the richest guy was €300,000? But because of tax avoidence schemes accessible to those with €120,000 to 'invest', he only pays tax on €180,000
Do you think that that would be fair?

Until you tell us how much the top 6% actually earn, it cannot be determined if they pay too much or not.

I never said that everyone should be paid the same. Its just annoying to hear about someone on €120,000 complaining about paying 41% in the euro when someone on €40,000 has to do so aswell.
The figures are deliberately skewed to ignore the different thresholds so as to give the impression that a wealthy person is unduly burdened with tax, whilst a minimum wage worker is somehow getting off scott free.

Ive nothing against anyone earning as much as they can, but I am against them whinging about it or that they carry the tax burden for the rest of us.
If they are unhappy about how much tax they pay, they can reduce it by lowering their pay
.

A lot of people who are well educated made no more sacrifices than anyone else. A lot of people gave up the chance for an education in order to go work to put food on the table for their families.

 

[TheBigShort]

Well I don't know what point you are trying to make... but those figures are from 2001! And there have been considerable reforms in the mean time and the 2014 figures are:

Switzerland - 19%
Ireland - 21%

Also, it is worth keeping in mind:
- Welfare is not a federal cost, it is a Kanton (County) cost and so in low income Kantons the cost could be much higher and vice verse
- Since we do not have a public healthcare system one of the biggest welfare costs is the payment of annual healthcare insurance for low income families.

Apologies for the out of date figures. But the point is Switzerland, it federal government and its cantons pay a larger proportion of its GDP on welfare benefits than Ireland does. Just because its in the form of vouchers instead of cash does not mean that taxpayers arent forking out.

And as pointed out in an earlier link, it doesnt stop some Swiss alleging that it creates a system of 'free loaders' , and weighs too heavy on the taxpayer - where have we heard that before?

 

[ppmeath]

So some parts of Dublin are high, some parts are not so high, for third level education.

My point was that it was my understanding that school leaver participation in third level education or equivalent ( FAS courses and apprenticeships or employment) was high in this country (not in randomly selected areas).

So again....what point are you trying to make?

They are not random areas, they are unemployment blackspots, deprived areas.

Have a look at the map of Ireland, but for Dublin it provides a breakdown, area by area.

"After Dublin 17 and Dublin 10, the areas with the lowest rate of progression to third level among 17-19 years old are Dublin 1 (28 per cent), Dublin 22 (31 per cent), Dublin 2 (31 per cent), Dublin 8 (33 per cent), Dublin 11 (28 per cent) and Dublin 24 (29 per cent)."

Tally these figures through unemployment figures, long term unemployed, low paying jobs, alcoholism, premature death, drug addiction - smoking... The list is endless.

 

[ppmeath]

The emphasis here is 'look how much the rich guy pays in tax compared to the poorest guys'...but without comparing the earnings between each.

The emphasis there was on who pays the bill - you really didn't understand it at all. You should read it again.

 

[TheBigShort]

They are not random areas, they are unemployment blackspots, deprived areas.

Have a look at the map of Ireland, but for Dublin it provides a breakdown, area by area.

"After Dublin 17 and Dublin 10, the areas with the lowest rate of progression to third level among 17-19 years old are Dublin 1 (28 per cent), Dublin 22 (31 per cent), Dublin 2 (31 per cent), Dublin 8 (33 per cent), Dublin 11 (28 per cent) and Dublin 24 (29 per cent)."

Tally these figures through unemployment figures, long term unemployed, low paying jobs, alcoholism, premature death, drug addiction - smoking... The list is endless.

I will have to improvise here.

Your point is that in these deprived areas there is a culture of welfare dependency? And that it is this culture of welfare dependency that needs to be dismantled?
And you have a proposal to dismantle this welfare dependency that will encourage employment and training and upskilling. That in turn will, if not obliterate, but assist in making in-roads to banish, the dependency on welfare and its associated consequences such as long term unemployment, low paying jobs, alcoholism, premature death, drug taking etc?
Is this what you are trying to say? If so, im all ears.

 

[TheBigShort]

The emphasis there was on who pays the bill - you really didn't understand it at all. You should read it again.

Its quite simple really, a worker on low pay with a family cannot afford the rent or the electricity. The state tops up his wage with FIS to help him and his family get by. But as his wage is so low, he pays no tax. That is so unfair on high income earners who pay so much tax. So, instead the low pay worker now has to pay his share of tax. But that reduces his income further and now he cant afford the rent or pay the electricity, so the state tops him up further, but that increases taxes on the high earners. That is so unfair on high income earners who pay so much tax. So, instead taxes are increased on the low paid worker, but that reduces his income....oh dear.

His employer, in the meantime, getting away with paying him a crap wage, heads off on a nice sun holiday with proceeds of his labour.

 

[ppmeath]

What you wrote a is complete nonsense. First of all, you are completely wrong that the first €20k is tax free, no idea how you came up with this! Do you mean tax credits? Tax credits for a single person are €1,650, so you would not pay any income tax if you were earning €8,250.

Anyway, the point is that people who earn more money generally are capable, most likely well educated and might have made a lot of sacrifices to get to where they are. Why should they be punished for this by having more than half of their income taken away so that it can be given to someone who perhaps does not even work? The highest earning 6% pay 43% of all income and USC taxes while 38% of income earners pay no tax.


Your suggestion that they just take a pay cut is ludicrous! Socialism is built on this very idea - everyone should be the same and earn the same average amount. Except that if everyone thought that, you would end up in the scenario from my anecdote - the rich guy did not come to the pub (or decided to take a pay cut and was no longer rich) and suddenly there is not enough to pay the bill. Great thinking, let's just all stop striving to better ourselves, let's let go of any ambition and drive, let's kill any sense of entrepreneurship, so that we don't pay higher taxes. Where will we end up as a society?

Because someone has to pay for Johnny and we have to pay for him, because if we don't he will turn to crime and we will have to pay more. The best solution, according to some, is to just let him be, buy him a big TV and he'll be grand.

Simple.

 

[TheBigShort]

Because someone has to pay for Johnny and we have to pay for him, because if we don't he will turn to crime and we will have to pay more. The best solution, according to some, is to just let him be, buy him a big TV and he'll be grand.

Simple.

I never said that was a solution. What I said was that cutting his welfare will most probably cost the state more in the provision of other public services.
That it would be cheaper in the long run to let him live as is, rather than cut his welfare and in the absence of concrete proposals to do otherwise.

Other proposals, they are pretty thin on the ground around here.

 

[Jim2007]

Until you tell us how much the top 6% actually earn, it cannot be determined if they pay too much or not.

Irish effective tax rates are perhaps a bit higher that than average, so nothing to get excited about.

 

[Duke of Marmalade]

Dagny I broadly buy into your parable. But it is a tad simplistic. I happen to know the 10 people you are talking about. Here is a rough pen picture.

Person 1 never had anything going for her, not her fault, simply unemployable.
P2 is also unemployable but if he hadn't spent his schooldays in the bookies he would have a reasonable career now.
P3 made the most of his modest capabilities and is holding down a lowly paid job.
P4 could also get a lowly paid job but says "why bother? sure the pints are free anyway"
P5 had moderate talent, left school early and puts in a 35 hour week for low to mid salary.
P6 was similar to P5 but decided to forego income and train for a qualification so as a result he is actually P5's boss.
P7 is like P5 but he works all the hours god gave him and so earns somewhat more than P5
P8 is in a cushy public service job with no pension worries
P9 is a captain of industry who names his own salary
P10 was lucky to be good at golf

So what is a fair divvy up of the bill?

BTW if in your comment the tenth guy took a pay cut then, assuming a closed economy, the others would all benefit and there would be the same available kitty to pay the bill.

Also a single person with no tax reliefs would need to earn over €625,000 to pay 50% tax.

 

[T McGibney]

But the point is Switzerland, it federal government and its cantons pay a larger proportion of its GDP on welfare benefits than Ireland does.

GDP-based stats are useless in the case of Ireland whose GDP is distorted by measurement criteria and massively inflated by foreign multinational transfer pricing. Irish GDP recently rose by 26% in a single year without much discernible improvement in our economy.

 

[Jim2007]

Apologies for the out of date figures. But the point is Switzerland, it federal government and its cantons pay a larger proportion of its GDP on welfare benefits than Ireland does. Just because its in the form of vouchers instead of cash does not mean that taxpayers arent forking out.

Well as I have already pointed out Swiss welfare payments include health insurance premiums which can run at anything from say €3,000 to €10,000 pa. And of course unlike Irish taxpayers, Swiss taxpayers voted for this, just like we will vote on a proposal to increase state pensions by 10% next month.

On the one had you are complaining that someone needs to pay for Johnny and at the same time your complaining about Switzerland making generous payments to genuine cases, it is not about the money alone with us, it's about people putting something back into the community that supports them.

 

[Purple]

But what if the combined income of the 9 was €180,000 and the income of the richest guy was €300,000? But because of tax avoidence schemes accessible to those with €120,000 to 'invest', he only pays tax on €180,000

Its just annoying to hear about someone on €120,000 complaining about paying 41% in the euro when someone on €40,000 has to do so aswell.

If they are unhappy about how much tax they pay, they can reduce it by lowering their pay

His employer, in the meantime, getting away with paying him a crap wage, heads off on a nice sun holiday with proceeds of his labour.

I'm seeing a trend here. Do you resent people on higher incomes and do you think employers exploit their employees as a matter of course?

The vast majority of people who have high incomes in Ireland have them because they work hard and shoulder more responsibilities and stress then people on low incomes. In the vast majority of cases they sacrifice time with family and friends and work longer and harder than people on lower incomes, at least that's my opinion and since your whole premise on this thread is based on your opinion about the vast majority of people on welfare opinions seem to be just as valid as facts.
See the flip side of a culture of dependency is a culture that punishes hard work and sacrifice and vilifies those people who create jobs and employ people. Employers provide a social good but they, along with landlords are seen as immoral exploiters of "the poor". It is ironic that the middle-class urbanite socialists who hold these views probably don't know any of the exploited poor and certainly don't employ any of them but simply resent the employers who are probably not as well heeled and are a bit crass for their tastes but earn more.

 

[Purple]

Well as I have already pointed out Swiss welfare payments include health insurance premiums which can run at anything from say €3,000 to €10,000 pa. And of course unlike Irish taxpayers, Swiss taxpayers voted for this, just like we will vote on a proposal to increase state pensions by 10% next month.

On the one had you are complaining that someone needs to pay for Johnny and at the same time your complaining about Switzerland making generous payments to genuine cases, it is not about the money alone with us, it's about people putting something back into the community that supports them.

Exactly; it's not about what is spent but spending it in the most socially just way, i.e. rewarding people who are gainful members of society and encouraging others to act likewise.

 

[Firefly]

Johnny is a tosser

Well, we certainly agree on something!

So what do we do about Johnny?

To be fair, I think the first question that should be answered is "What's Johnny going to do about Johnny?" Does he wake up, smell the coffee like the rest of society and do the best with the hand he's been dealt with (like so many who come from tough upbringings) and build a better life for himself within the bounds of our legal system?

You have asked lots of questions over the past few days, and that's fine, it's good to get the opinions of those with whom you are having a discussion. If I am not mistaken, every question you have asked someone, they have answered. Therefore, I do think it is now time that you clarified your position in the interests of fairness.

So, if you would be so kind....

"What do we do about Johnny?"

 

[TheBigShort]

Irish effective tax rates are perhaps a bit higher that than average, so nothing to get excited about.

Thats a complete dodge of the question.