Would this work.Same tax portion for everyone?

[thedaras]

Probably not one of my better ideas ,however...here goes.
I was listening to Liveline(Joe Duffy ) yesterday,and a man was on complaining about how much tax the government had taken off him.

It struck me that those who get help from the tax payers,actually get more help from some than others.

There are also a lot of "lower paid" workers now complaining about how much the government is taking from their pay packets.

This got me thinking about those who are calling for even more tax to be paid by higher income earners.

Im glad to see that they are now realising that its not the most pleasant thing in the world to work hard and give half of your income to the government for next to nothing in return,and then to hear some people want you to give even more.

Would it make sense if everyone gave half of their income,not just those of us who earn a certain amount..

Is it a bit rich for those who only give a portion of their taxes to demand others pay a bigger portion,so why not let everyone give half ?

In other words what we earn ,and the incentive to be educated further(paid for by taxpayers) the incentive to move up the ladder would be greater?
Communism in reverse..sort of..

 

[shnaek]

This is the only way to go, but 50% is too high. We need to encourage the best people to come here so we should use our income tax rate they way we use our corporate tax rate. A rate of 20-25% for all.
Alas it will never happen. This election and the next one will only cement our position - which is the same position our country has held for the last 100 years. We are about as likely to do something radical as we are likely to become the Scandanavia of the west. Instead we will continue to sink by our own hands - and people will continue to leave in the hundreds of thousands.

 

[DB74]

There was a thread about this on AAM around the time of the budget but I can't find it now.

Anyway I disagree that a flat-rate tax is the fairest method of taxation.

As things stand, a flat rate would benefit the higher earner more than the low earner

 

[shnaek]

As things stand, a flat rate would benefit the higher earner more than the low earner

This is the sort of thinking we need to get away from. Flat rate, across the board, means everyone pays the same portion, but the wealthy pay a lot more because a percentage of their income is going to be a lot more money. The discincentive to work here is getting higher and the incentive to move abroad is getting higher. Frankly our higher rate of tax kicking in a little above 30k is just ludicrous, no matter what financial state we are in. Knowledge economy? Idiot economy more like.

 

[DB74]

This is the sort of thinking we need to get away from.

So you dispute my statement then that a flat rate of tax would benefit the higher earner more than the lower earner?

 

[orka]

It's the 'we are where we are' sort of thinking that needs to be got away from. If we have a broken system, should we not fix it because some will 'benefit' (ie perhaps have unfairnesses in the system reversed) more than others in the fixing?

It's like those 'lucky' people earning between 26K and 30K who actually saw an increase in net pay after the budget - they benefited from the budget while everyone else suffered - was that unfair? Looking at the before and after, it looks unfair - until you realise that there was an anomaly in the system and the 26K to 30K people were previously paying disproportionately too much. By your reasoning, should the 26K to 30K people have been left paying disproportionately higher tax because to fix things would have benefited them vs people earning 15K or 20K?

We need to look at what would be a fair system and work towards getting our system around to that, even if it takes a long time so that no-one is hit too hard too fast.

 

[shnaek]

It's the 'we are where we are' sort of thinking that needs to be got away from. If we have a broken system, should we not fix it because some will 'benefit' (ie perhaps have unfairnesses in the system reversed) more than others in the fixing?

Precisely.

 

[DB74]

The discincentive to work here is getting higher and the incentive to move abroad is getting higher.

So you suggest that we should tax somebody on €25K more than they are currently taxed and that this extra tax will encourage more people on social welfare to work.

People on low wages are already struggling to make ends meet and you think that we should take money out of their pockets to give to someone on say €100K?

 

[DB74]

It's the 'we are where we are' sort of thinking that needs to be got away from. If we have a broken system, should we not fix it because some will 'benefit' (ie perhaps have unfairnesses in the system reversed) more than others in the fixing?

It's like those 'lucky' people earning between 26K and 30K who actually saw an increase in net pay after the budget - they benefited from the budget while everyone else suffered - was that unfair? Looking at the before and after, it looks unfair - until you realise that there was an anomaly in the system and the 26K to 30K people were previously paying disproportionately too much. By your reasoning, should the 26K to 30K people have been left paying disproportionately higher tax because to fix things would have benefited them vs people earning 15K or 20K?

We need to look at what would be a fair system and work towards getting our system around to that, even if it takes a long time so that no-one is hit too hard too fast.

The problem is more to do with the social welfare system, not the tax system, although the low level at which the top tax rate kicks in is very low.

A flat rate of tax is NOT a fair system, it merely pushes more and more people below the poverty line.

Let me ask you something (and you too shnaek), if a flat rate of tax of 20% were brought in would you be better or worse off than you are now?

 

[csirl]

I'm a big fan of the flat rate tax. It's the only way to tax fairly. Having everyone pay different percentages is an absurdity that we've unfortunately got used to. Could you imagine if someone proposed that people on differing incomes paid different VAT rates?

 

[DB74]

So someone on €15K a year should have to pay €3,000 over in tax leaving them with less than €250 a week to live on while someone on €115K a year should have to pay €23K in tax leaving them with €1,769 per wek to live on.

Is this fair?

Some people are cleverer than others (eg Caveat ) and/or have better opportunities than others. Not everyone has a chance to get a better job. Why should we punish those who have lower paid jobs.

The tax system is fine. 20% rate up to a certain point and then higher taxes after that.

 

[shnaek]

Let me ask you something (and you too shnaek), if a flat rate of tax of 20% were brought in would you be better or worse off than you are now?

And let me ask you something, are you better off if we leave things the way they are?
There's no point in making this personal. I am talking about making a better future for our country, because however you look at it the current system is a failure. Lets do something radical. Just like the corporation tax. I am talking about encouraging the best brains from all over the world to move here. How can that harm us? What have we got to lose? We're already screwed, and everyday Irish thinking just isn't going to get us out of this. We got to lose the begrudgery and encourage instead of going after anyone who is trying to better themselves and trying to mug them.

I'm a big fan of the flat rate tax. It's the only way to tax fairly. Having everyone pay different percentages is an absurdity that we've unfortunately got used to. Could you imagine if someone proposed that people on differing incomes paid different VAT rates?

I agree completely. Lets give it a go! If it doesn't work we can always return to this rubbish state of affairs. Surely it can't be worse?

 

[shnaek]

Why should we punish those who have lower paid jobs.

Why should we punish those who are clever? Doesn't have to be either/or. We can achieve both with a bit of thinking.

The tax system is fine. 20% rate up to a certain point and then higher taxes after that.

It isn't fine. It is far from fine. It is a total disincentive. 20% and then "higher taxes after that" - how much higher? 1980's higher?

 

[DB74]

It isn't fine. It is far from fine. It is a total disincentive. 20% and then "higher taxes after that" - how much higher? 1980's higher?

I don't disagree that the rates of tax are high or the level at which the high rate kicks in.

But a drop to a 20% flat rate is NOT the way to go IMO

It pushes lower paid further towards making social welfare more attractive and puts more money into the pockets of those on higher wages.

Whatever way you look at it that is not a fair tax system.

Everyone needs a level of income at which to live. Above that level is the level where conspicuous consumption kicks in. I have no problem with a higher rate of tax being levied on what is effectively luxury spending.

 

[DerKaiser]

http://en.wikipedia.org/wiki/Progressive_tax

There are plenty of debates on this site in relation to this.

There are some limiting conditions that make sense but anything in between can be reasonably justified.

Limiting condition 1: 50% marginal tax rate
As you push beyond the point where you keep less than half of the extra reward you get for extra effort you begin to question why you are putting in that effort.

Limiting Condition 2: Minimum cost of living/social welfare
Social welfare and the minimum amount needed to reasonably get by should be the same amount. If you work and earn up to this level you should not be taxed as it completely removes the incentive to work.

We are currently in a situation where a single person can benefit from just under €300 p.w. between rent allowance and social welfare. Throw in a medical card and other benefits and we're talking €20k p.a. for every unemployed person.

This leaves us very little scope for much taxation below €20k.

The higher rate of taxation (52%) kicks in close to €30k. This leaves us very little scope to do anything above €30k.

So the argument reduces to why not tax income in the €20k to €30k at the full marginal rate of 52%?

I personally believe that a lower marginal taxation at the lower end of the wage spectrum is actually more beneficial to incentivising effort than a slightly reduced full marginal rate applied from very low wages.

 

[DB74]

It isn't fine. It is far from fine. It is a total disincentive. 20% and then "higher taxes after that" - how much higher? 1980's higher?

Disincentive to who exactly? People at the high end of the wage market?

Do you think that the dole is an attractive option to someone on €80K a year because they don't like paying 50% taxes on their earnings over €35K?

 

[DerKaiser]

Disincentive to who exactly? People at the high end of the wage market?

Do you think that the dole is an attractive option to someone on €80K a year because they don't like paying 50% taxes on their earnings over €35K?

Your tone almost implies that you believe we are a closed economy with a fixed number of people of similar ability and a fixed number of of jobs paying €80k and if one person is not happy to pay 60% marginal tax on such a wage then someone else would happily do so.

My view is that you don't get to €80k without being particularly good at what you do and that working harder can be mutually beneficial to you, your employer and society e.g. Ireland is chosen as a centre of excellence creating hundreds of extra jobs by a large multinational beacuse of its capable and hardworking employees.

If we as a country tax capable and hardworking employees to the the point of disincentive we will not be a particularly attractive place for any multinational to base its operations in.

 

[csirl]

Limiting Condition 2: Minimum cost of living/social welfare
Social welfare and the minimum amount needed to reasonably get by should be the same amount. If you work and earn up to this level you should not be taxed as it completely removes the incentive to work.

This is a social welfare policy problem rather than a taxation problem. The max rate of non-contrib SW for unemployed should always be lower than the net take home pay (i.e. after taxes/levies etc) of someone on minimum wage. Contributory SW should also be treated differently to non-contrib i.e. be self funding via PRSI and should be paid as a % of previous years taxable income. Our SW problem is that non-contrib and contrib rates are too similar, so no incentive to work and pay PRSI/tax. Also there is a one size fits all approach to contributory SW rather than having benefits proportionate to the money someone has paid into the fund.

 

[shnaek]

Disincentive to who exactly? People at the high end of the wage market? Do you think that the dole is an attractive option to someone on €80K a year because they don't like paying 50% taxes on their earnings over €35K?

I think getting the heck out of here is an attractive option if you're paying taxes over 50% on earnings over €34k. The choice is not just between the dole and work. The choice that tens of thousands of people are making is between staying in Ireland or going. When you look at the future, if you are a smart thinking person, you look to see whether things are going to get better or not. You look at it this way whether you are on the dole or a high earner. If you see that things aren't going to get better, or things are going to get worse, then you look at your options. That is what smart people do.

As a country we need to make a choice. Rhetoric about a 'smart economy' only goes so far. Smart people make smart choices, and you can't have a 'smart economy' without smart people. Do we want to keep the smart people we have? Do we want to attract the smart people of the world here? Or do we want to return to lower wages for all, forget about R&D and go back to manufacturing?

Time to make the hard choices, or face the fact that the next 100 years are going to be just like the last 100 years.

 

[DerKaiser]

This is a social welfare policy problem rather than a taxation problem. The max rate of non-contrib SW for unemployed should always be lower than the net take home pay (i.e. after taxes/levies etc) of someone on minimum wage. Contributory SW should also be treated differently to non-contrib i.e. be self funding via PRSI and should be paid as a % of previous years taxable income. Our SW problem is that non-contrib and contrib rates are too similar, so no incentive to work and pay PRSI/tax. Also there is a one size fits all approach to contributory SW rather than having benefits proportionate to the money someone has paid into the fund.

100% agree with all of that.

Those needing the biggest incentives (and incentivising one thing can be done by disincentivising another!) are the longer term unemployed (including those who have never worked) and those on entry level wages.

So it is important to:
1) Make longer term unemployment less attractive relative to shorter term
2) Have lower marginal rates of taxation for lower level wages to embed in people the benefit of working harder from an early stage