# What taxes do low earners and middle earners pay in Ireland?



## Brendan Burgess (10 Oct 2016)

*Total taxes on a single person *





*Despite paying less tax and National Insurance than their UK counterparts, Irish people get twice the dole!*





*Total taxes on a married couple with one earning and 2 children *


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## Brendan Burgess (10 Oct 2016)

Conclusions 


We have extremely low tax rates for low and average earners who are married with children 

We have low tax rates on low and average earners who are single 

Despite having lower taxes, we have much higher social welfare 

Whatever might be squeezing the middle, it is not income taxes, USC or PRSI


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## phileasfogg (10 Oct 2016)

Do we know the average wage in UK compared to Ireland.  Also we are expected to pay for GP and school books etc, are there other differences in what UK get for their taxes or are we similar?


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## phileasfogg (10 Oct 2016)

We have extremely low tax rates for low and average earners who are married with children
There are no tax reliefs for married people with children.  Only in the UK. It seems to be a common misconception.


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## phileasfogg (10 Oct 2016)

Are there tax relief for children that I am unaware of?


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## Brendan Burgess (10 Oct 2016)

phileasfogg said:


> Do we know the average wage in UK compared to Ireland.  Also we are expected to pay for GP and school books etc, are there other differences in what UK get for their taxes or are we similar?



Hi Phileas

You can make it as complicated as you like. 

You would have to take in Council Tax in the UK which is around £1,000 a year on a £200,000 house.  And water charges of around £350 a year. 

You would see an awful lot of GPs for the money saved on these in Ireland. 

Brendan


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## Brendan Burgess (10 Oct 2016)

phileasfogg said:


> We have extremely low tax rates for low and average earners who are married with children
> There are no tax reliefs for married people with children.  Only in the UK. It seems to be a common misconception.



A married person with one income gets a married tax credit and a €42,800 20% tax band,  compared to a €33,800 tax band for a single person.

If they have children, so they get the Home Carer Tax Credit?

They get €1,680 per child in Child Benefit. 

You can see from the first post
A single person on €25,000 contributes €3,368 to the Exchequer
A married person with one income on the same salary gets a net €1,642 from the Exchequer. 


Brendan


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## phileasfogg (10 Oct 2016)

But I think it is complicated.  We have low taxes but high non direct taxation and less services- this is just what has been sold to us.  I am wondering if this is indeed true, do the taxes we pay on cars, vrt etc and the services we pay for like gp etc even the playing field or can we easily compare just income tax alone? Also, i still am not sure if tax reliefs exist in ireland for children? I don't think they do, or at least i have never claimed any.


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## phileasfogg (10 Oct 2016)

Yes the home carer tax credit of 1000 euro a year is granted when one parent stays home to care for children.  My interpretation of squeezed middle is 2 income family.


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## Daffodils (10 Oct 2016)

From the citizens advice website:


Youcannot claim the Standard Rate Cut-Off Point for dual income couples *and *the Home Carer’s Tax Credit*.*Your local tax office will help you to determine which is better for you*.*


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## Gordon Gekko (10 Oct 2016)

Daffodils said:


> From the citizens advice website:
> 
> 
> Youcannot claim the Standard Rate Cut-Off Point for dual income couples *and *the Home Carer’s Tax Credit*.*Your local tax office will help you to determine which is better for you*.*



That just means you can't have SRCOP of €44k yourself plus €25k for your spouse (i.e. you can't have €25k to cover his/her income).


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## Marion (10 Oct 2016)

*Squeezed middle single earner:*

*"Top Rate of Tax*
The evidence is that the top rate of tax in Ireland at 52 % (55% for self-employed) is not out of line with other EU and OECD countries.

What is unusual is that it applies at a low level of income by international standards.

For example, a single person on average earnings in Ireland has a marginal tax rate of 52 per cent which is the third highest in the OECD (after Belgium 54.9 per cent and Germany 52.1 per cent) and significantly above the OECD average of 36 per cent.

For a single person at 167 per cent of average earnings, Ireland’s marginal tax rate at 52 per cent is the 5th highest in OECD and compares to an OECD average of 40 per cent."

*Public policy.ie*

*Marion*


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## Brendan Burgess (10 Oct 2016)

Marion said:


> *"Top Rate of Tax*
> The evidence is that the top rate of tax in Ireland at 52 % (55% for self-employed) is not out of line with other EU and OECD countries.
> 
> What is unusual is that it applies at a low level of income by international standards.



Hi Marion 

That is misleading. 

The reason we have the top tax rate so early on is that there is such a high tax free allowance - €16,500 for single people and higher again for married people where one is earning. 

Brendan


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## TheBigShort (10 Oct 2016)

It would actually be interesting to see some proposals as to how to redress the perceived imbalances. Rather than open another thread on the same subject, why not open a thread with some possible solutions?


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## TheBigShort (10 Oct 2016)

Brendan Burgess said:


> Hi Marion
> 
> That is misleading.
> 
> ...



Dont high earners receive these allowances and personal tax credits as low earners?
That is where your perceived imbalances are being derived from.
As a person's income rises the proportion of their income, in percentage terms, keeps increasing, even though the same rate of tax is applied.
I showed you a simple example of two workers, one earning €50,000, the other earning €10,000 with a 50% tax rate on all income. Both pay 50% (€25,000+€5,000 respectively). Total tax take is €30,000. But in % terms the high earner pay 83% of the tax, the low earner 17%. Add a personal tax credit of €2,000 each and the total tax take falls (23,000+3,000) €26,000 in total. But now the high earners % proportion of tax is 88.5%! 
So despite paying less tax, the perception when looking at % proportions, increases the tax contribution.


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## Brendan Burgess (11 Oct 2016)

I have amended the tables in the first post to include a salary of €60,000 and classified it has high average.  

A married couple with kids on that salary pays a net contribution of €12,000 after child benefit.  

Brendan


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## Purple (11 Oct 2016)

TheBigShort said:


> Dont high earners receive these allowances and personal tax credits as low earners?
> That is where your perceived imbalances are being derived from.
> As a person's income rises the proportion of their income, in percentage terms, keeps increasing, even though the same rate of tax is applied.
> I showed you a simple example of two workers, one earning €50,000, the other earning €10,000 with a 50% tax rate on all income. Both pay 50% (€25,000+€5,000 respectively). Total tax take is €30,000. But in % terms the high earner pay 83% of the tax, the low earner 17%. Add a personal tax credit of €2,000 each and the total tax take falls (23,000+3,000) €26,000 in total. But now the high earners % proportion of tax is 88.5%!
> So despite paying less tax, the perception when looking at % proportions, increases the tax contribution.


That's the point; allowances mean a lower effective tax rate. If the allowance was €9000 with 50% tax on the balance then both parties pay 50% but the effective tax rate on the lower earner is down to 5%.


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## TheBigShort (11 Oct 2016)

Purple said:


> That's the point; allowances mean a lower effective tax rate. If the allowance was €9000 with 50% tax on the balance then both parties pay 50% but the effective tax rate on the lower earner is down to 5%.



And what is wrong with having lower effective rates? It's what's in people's pockets is what counts. The allowances simply distort the allocation of income taxes. Each worker pays 50%, each worker gets €9,000 personal allowance. What is the issue? 
Are we to re-allocate the tax burden on the basis that some people don't earn nearly as much as others? Because one worker only earns €10,000, that therefore he should start paying perhaps a 60% tax on his €1,000 taxable income? While perhaps reducing the higher earners tax rate to 40% on his €41,000 taxable income? Is that what is being proposed?


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## Purple (11 Oct 2016)

TheBigShort said:


> And what is wrong with having lower effective rates? It's what's in people's pockets is what counts. The allowances simply distort the allocation of income taxes. Each worker pays 50%, each worker gets €9,000 personal allowance. What is the issue?
> Are we to re-allocate the tax burden on the basis that some people don't earn nearly as much as others? Because one worker only earns €10,000, that therefore he should start paying perhaps a 60% tax on his €1,000 taxable income? While perhaps reducing the higher earners tax rate to 40% on his €41,000 taxable income? Is that what is being proposed?


Yes.


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## TheBigShort (11 Oct 2016)

Purple said:


> Yes.



Todays budget must be hurting you so. More transfers for welfare recipients and pensions and childcare. Only a token cut in USC.
What hope do the top 20% have now? How will they cope with only 50% of the income between them?


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## Purple (11 Oct 2016)

TheBigShort said:


> Todays budget must be hurting you so. More transfers for welfare recipients and pensions and childcare. Only a token cut in USC.
> What hope do the top 20% have now? How will they cope with only 50% of the income between them?


Yep, another populist budget which narrowed the tax base, will feed an overheating property market, increased welfare to the richest demographic in the country and increased spending in a country which will borrow a further €600 for every man woman and child in the country this year... back to Bertie-nomics... you must be thrilled!


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## TheBigShort (11 Oct 2016)

Purple said:


> Yep, another populist budget which narrowed the tax base, will feed an overheating property market, increased welfare to the richest demographic in the country and increased spending in a country which will borrow a further €600 for every man woman and child in the country this year... back to Bertie-nomics... you must be thrilled!



Not really, I agree with a lot of what you said. I would have left welfare rates alone, along with pensions. I think the child care support is a good thing, but thats about it. Cutting the USC was mere tinkering and would have been better to leave it alone.
I agree with you on the intervention in the property market. I do think it is already in bubble territory, in Dublin anyway, and that prices need to fall to what they are really worth.
I would have liked to see more for capital infrastructure investments. Most of what was announced was simply reaffirming what is already in train.
Thankfully, they didnt increase taxes on low income earners to facilitate tax breaks for higher earners.


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## Protocol (12 Oct 2016)

The title of this thread should refer to *income *taxes.


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## Purple (12 Oct 2016)

Protocol said:


> The title of this thread should refer to *income *taxes.


Given that the title talks about earners it's obvious that it's about taxes on earnings.


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## newtothis (12 Oct 2016)

Brendan Burgess said:


> Conclusions
> 
> 
> We have low tax rates on low and average earners who are single
> ...



I’m amazed that nobody has pointed out just how spurious this juxtaposition (“despite having…”) actually is: the two are not connected. You may as well say “The VAT rate on fish tanks in country A is lower than country B, yet country A spends three times as much on paperclips!!!”. You are comparing one element of taxation in one country with one element of expenditure. People may get higher social welfare (really?) than in the UK, but they don’t get a national health service, nor do they benefit from free education that is actually free.

It’s essentially taking some fairly random pieces of information to make an ideological point.

One explanation for the higher social welfare rates might just be so people can afford to pay the assorted other charges they are faced with without actually starving.

If you want to reduce the burden on that famous squeezed middle, I’d suggest it’s more fruitful going after those with the funds rather than those without.


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## Brendan Burgess (13 Oct 2016)

newtothis said:


> I’m amazed that nobody has pointed out just how spurious this juxtaposition (“despite having…”) actually is: the two are not connected.



They are very much connected.

One is a payment of money from citizens to the state. The other is a payment from the state to citizens.
In particular, some of that money, PRSI, goes into a Social Insurance Fund which pays out the welfare.
One would expect high social welfare in high tax countries and low social welfare in low tax countries.
In Ireland we have high social welfare and low tax. And this is funded by taxes on the higher paid, artificially high corporation tax receipts and borrowing.

Brendan


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## newtothis (13 Oct 2016)

Brendan Burgess said:


> They are very much connected.
> 
> One is a payment of money from citizens to the state. The other is a payment from the state to citizens.
> In particular, some of that money, PRSI, goes into a Social Insurance Fund which pays out the welfare.
> ...



This simply isn't true. The connection is illusory: it would only be true if particular sources of tax were used to fund particular programs of expenditure (e.g. income tax funding social welfare, as you are trying to imply). This isn't the case: there's just one big pot tax flows into and funding out of. It’s not even the case for things like car tax; if motoring taxes were all spent on road infrastructure, we’d probably have the best roads in the world.

You could equally ponder why direct supports to business are high, when corporate tax rates are low, but presumably that doesn’t fit the agenda.


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## Purple (13 Oct 2016)

newtothis said:


> This simply isn't true. The connection is illusory: it would only be true if particular sources of tax were used to fund particular programs of expenditure (e.g. income tax funding social welfare, as you are trying to imply). This isn't the case: there's just one big pot tax flows into and funding out of. It’s not even the case for things like car tax; if motoring taxes were all spent on road infrastructure, we’d probably have the best roads in the world.
> 
> You could equally ponder why direct supports to business are high, when corporate tax rates are low, but presumably that doesn’t fit the agenda.


So you are saying there should be no link between *Pay Related* Social Insurance and Welfare.


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## newtothis (13 Oct 2016)

Purple said:


> So you are saying there should be no link between *Pay Related* Social Insurance and Welfare.



Where did I say or imply that? I'm simply pointing out the fact of how government income and expenditure works, not commenting on whether it is correct or not.


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## Purple (13 Oct 2016)

newtothis said:


> Where did I say or imply that? I'm simply pointing out the fact of how government income and expenditure works, not commenting on whether it is correct or not.


You implied it when you pointed out how government income and expenditure works and in the comparison you made.

By the way, direct supports to business are tiny in this country. They are much better in the UK and Northern Ireland in particular.


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## newtothis (13 Oct 2016)

Purple said:


> You implied it when you pointed out how government income and expenditure works and in the comparison you made.
> 
> By the way, direct supports to business are tiny in this country. They are much better in the UK and Northern Ireland in particular.



Eh? All I did was point out there *is *no link between items of income and expenditure. You magically translated this into me saying that I thought there *should be* no link.

As for direct supports to business, I suggest you take a look at the Enterprise Ireland Web site (in a country with a corporate tax rate of 12.5%) and show it to someone from the USA (federal corporate tax rate of between 15% and 39%) and see what they think. Following Mr. Burgess’s logic, it is shocking that we provide so much assistance to business in comparison to the USA when the corporate tax rate is so much lower. Before you start quoting tax rates and other measures at me I don’t actually agree with the comparison: I’m just using it as an illustration of the absurdity of the original argument.


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## Purple (13 Oct 2016)

newtothis said:


> Eh? All I did was point out there *is *no link between items of income and expenditure. You magically translated this into me saying that I thought there *should be* no link.
> 
> As for direct supports to business, I suggest you take a look at the Enterprise Ireland Web site (in a country with a corporate tax rate of 12.5%) and show it to someone from the USA (federal corporate tax rate of between 15% and 39%) and see what they think. Following Mr. Burgess’s logic, it is shocking that we provide so much assistance to business in comparison to the USA when the corporate tax rate is so much lower. Before you start quoting tax rates and other measures at me I don’t actually agree with the comparison: I’m just using it as an illustration of the absurdity of the original argument.



SME's, the businesses who employ most people, make very little profit. The rate at which it is taxes is not that important. Our effective tax rate is about average by European standards.
I know the EI website very well. I know how little support we get relative to our UK counterparts. The downside of our love-in with US MNC's.


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## newtothis (13 Oct 2016)

Purple said:


> SME's, the businesses who employ most people, make very little profit. The rate at which it is taxes is not that important. Our effective tax rate is about average by European standards.
> I know the EI website very well. I know how little support we get relative to our UK counterparts. The downside of our love-in with US MNC's.



All points which re-enforce my argument: the spuriousness of both examples.

Example 1: taxes on income and social welfare rate comparison between two countries, Ireland and the UK. According to Mr. Burgess the validity of this is based on “One is a payment of money from citizens to the state. The other is a payment from the state to citizens.”

Example 2: government supports for business and corporate tax rate comparison between two countries, Ireland and the USA. I can point out that “One includes payments from the state to companies (either direct or through subsidised services). The other is a payment from companies to the state.”

The logic of the two examples is exactly the same: a complete nonsense.

You may well find other countries with better business supports (what we have here would be seen as inconceivable in the USA), but equally you can probably find another country as a counter example to example 1.


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## Andy836 (13 Oct 2016)

newtothis said:


> Eh? All I did was point out there *is *no link between items of income and expenditure. You magically translated this into me saying that I thought there *should be* no link.
> 
> As for direct supports to business, I suggest you take a look at the Enterprise Ireland Web site (in a country with a corporate tax rate of 12.5%) and show it to someone from the USA (federal corporate tax rate of between 15% and 39%) and see what they think. Following Mr. Burgess’s logic, it is shocking that we provide so much assistance to business in comparison to the USA when the corporate tax rate is so much lower. Before you start quoting tax rates and other measures at me I don’t actually agree with the comparison: I’m just using it as an illustration of the absurdity of the original argument.



To be fair your comment came across as such. Mainly because you didn't distinguish between the two points he made in his post (i) low tax should = low benefits / high tax should = high benefits, and (ii) PRSI funds Social Welfare.

Your point on the fungability of taxes is correct though. While taxes are introduced or increased to fund specific budget items, in practice everything gets lumped in together at the end of the day.


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## Sophrosyne (19 Oct 2016)

According to Revenue statistics for 2014, only 18.18% of taxpayers paid tax at the higher rate.

Total income tax payers 2,224,048
Exempt            857394   38.55%
Marginal Relief 24796      1.11%
Standard Rate  937419  42.15%
Higher Rate     404439  18.18%


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