# Those who earn more ,should pay more



## thedaras (19 Oct 2011)

Or as Vincent Browne put it "if you can pay more,you should pay more".

http://politico.ie/social-issues/7978-if-you-can-pay-more-you-should-pay-more.html
Or by saying those who CAN pay more should pay more,mean that everyone should be means tested and whatever amount they have to spare,should be given to whomever he thinks deserves it more?


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## Purple (19 Oct 2011)

Vincent Browne is an loony-left Socialist/Communist so what he says shouldn’t be taken too seriously. His swings to the left/right seem to correspond with his personal financial position.

The reality is that top earners pay far more income tax, proportionately and actually, than those on lower incomes. The top 5% of earners pays almost 50% of the income tax.


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## Firefly (19 Oct 2011)

Using Deloitte's tax calculator with the default settings, I get the following results:

80,000  gross = 49,533 net which is an effective tax rate of 38%
90,000  gross = 54,333 net which is an effective tax rate of 40%
100,000 gross = 59,133 net which is an effective tax rate of 41%


but Vincent argues that the effective tax rate is 33%. Advocating  another 7% in tax would bring people in this group a lot closer to an  effective tax rate of 50%. The problem with this approach IMO is that  whilst in the short term there would be increased income for the  government, in the longer term, these measures will dampen the incentive  for people to earn more money. What's the point in working overtime  when half of what you earn is taken from you? Emigration will start to  look more attractive also for higher earners who regardless of the  percentage, pay more real money in taxes...better to get a smaller  percentage and a larger actual amount than watch these poeple leave and  get nothing?


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## shnaek (19 Oct 2011)

thedaras said:


> Or as Vincent Browne put it "if you can pay more,you should pay more".


Pay more for what?


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## Shawady (19 Oct 2011)

I'm not  a high earner but I don't buy into this idea that the more you earn, the higher the percentage you should pay. Maybe for the super rich, there could be a similar type tax but I'd rather see one standard rate, for example 15 or 20%.
If everyone paid 20% tax on their income, the higher earners would still be paying more tax.


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## shnaek (19 Oct 2011)

Shawady said:


> I'm not  a high earner but I don't buy into this idea that the more you earn, the higher the percentage you should pay. Maybe for the super rich, there could be a similar type tax but I'd rather see one standard rate, for example 15 or 20%.
> If everyone paid 20% tax on their income, the higher earners would still be paying more tax.



I agree completely. But politicians need every more funding to feed their ever expanding interference - interference which almost always ends badly. Look at Slovakia for an example of how a country can do well with a flat tax. After all, they are being asked to bail the Greeks, and ourselves, out of the mess we're in.


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## flossie (19 Oct 2011)

Shawady said:


> I'm not a high earner but I don't buy into this idea that the more you earn, the higher the percentage you should pay. Maybe for the super rich, there could be a similar type tax but I'd rather see one standard rate, for example 15 or 20%.
> If everyone paid 20% tax on their income, the higher earners would still be paying more tax.


 
Agree completely. I don't think it's fair that we are penalised for earnign more. I am of the belief that we should all contribute the same proportion of our earnings, especially as we can all access the same public services. I work damn hard for my salary, and yet it gets eaten away by taxes.


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## csirl (19 Oct 2011)

As per many previous posts, I've always been a big advocate of the flat rate tax. Shawady's makes a good point that if tax is a flat percentage, higher earners DO pay more. 

The other big advantage of the flat rate tax is that it is very easy for the taxpayer to work out their liability and requires a lot less admin by Revenue.

I've formed an impression over the years that there are a lot of vested interests in having a complex hard to understand tax code. Keeps Revenue officials and tax consultants/accountants in jobs. I always found it strange that the people who the Government generally asks to advise on tax are the aforementioned people who have the vested interest in making it complex.


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## Firefly (19 Oct 2011)

It could be that the flatrate tax percentage needed to bring in the same income as present would be a lot higher that the government would like to admit...


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## shnaek (19 Oct 2011)

Firefly said:


> It could be that the flatrate tax percentage needed to bring in the same income as present would be a lot higher that the government would like to admit...



If kept low it will attract high earning workers to this country just like our corporation tax has attracted the multinationals here. We could really become a knowledge economy, instead of just pretending we are.


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## Protocol (19 Oct 2011)

My anecdotal evidence

Couple, recently retired, the table below shows their gross income and tax paid as per P21.

PRSI, levies, USC, not included.

*P21 gross         **Tax due             **ATR*
*2003 *56,152 11,010               19.61

*2004 *59,843 12,513               20.91

*2005 *64309 12,363                19.22

*2006 *59,336 3825                   6.45

*2007 *56,927 2291                   4.02

*2008 *50,491 1095                    2.17

*2009 *57,552 4893                   8.50


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## Protocol (19 Oct 2011)

See above, under 10% effective tax rates on 50-60k earnings can't continue.


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## callybags (19 Oct 2011)

> See above, under 10% effective tax rates on 50-60k earnings can't continue.


 
This is for a couple.

Do you think 8.5% effective tax rate (before PRSI, Levies and USC) on a gross income of  €28,776 is fair?


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## Firefly (19 Oct 2011)

shnaek said:


> If kept low it will attract high earning workers to this country just like our corporation tax has attracted the multinationals here. We could really become a knowledge economy, instead of just pretending we are.



I totally agree and would be in favour of a flat tax and the lower the better for the reasons you highlight. However, I imagine that if we introduced a flatrate of tax tomorrow to replace our current rates, it would be a lot higher than 10%...


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## csirl (20 Oct 2011)

Protocol said:


> My anecdotal evidence
> 
> Couple, recently retired, the table below shows their gross income and tax paid as per P21.
> 
> ...


 
This is not a good example - retired people get additional tax breaks that workers dont.

I'd guess that a PAYE worker with a similar income is paying c.30%


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## T McGibney (20 Oct 2011)

csirl said:


> I've formed an impression over the years that there are a lot of vested interests in having a complex hard to understand tax code. Keeps Revenue officials and tax consultants/accountants in jobs. I always found it strange that the people who the Government generally asks to advise on tax are the aforementioned people who have the vested interest in making it complex.



I can't speak for Revenue officials but your conspiracy theory is ludicrous in as much as it applies to accountants and tax consultants. 

For a start, accountants and tax consultants don't write the tax code, they merely assist taxpayers on navigating their way through it.  It wasn't accountants or tax consultants who introduced the ridiculously complicated Income Levy & USC, or the already arcane Code of Practice for Revenue Audits that was made even more complicated in 2010.

The Government rarely asks any private-sector accountants or tax consultants to advise on tax policy. The recent  was chaired by an ex-Revenue boss, and had 17 members, only 5 of whom were accountants or tax advisors. The remainder were economists, academics, civil servants, banking industry  representatives and the usual 'social partner' suspects from SIPTU, IBEC and the IFA. Unsurprisingly, their , if ever implemented, will further complicate the tax system rather than simplify it.

The one flat tax we have in this country, Corporation Tax, has created more work for accountants than any of the more complicated areas of the tax system.


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## Complainer (20 Oct 2011)

T McGibney said:


> The one flat tax we have in this country, Corporation Tax, has created more work for accountants than any of the more complicated areas of the tax system.



If you have a few minutes, it would be great if you could expand on this, to enlighten those of us who aren't directly involved in the area.


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## T McGibney (20 Oct 2011)

Complainer said:


> If you have a few minutes, it would be great if you could expand on this, to enlighten those of us who aren't directly involved in the area.



Kind of obvious, I would have thought?  The more profitable companies there are in an economy, the more accountants they engage and employ. Someone has to keep an eye on the numbers.


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## Complainer (20 Oct 2011)

T McGibney said:


> Kind of obvious, I would have thought?  The more profitable companies there are in an economy, the more accountants they engage and employ. Someone has to keep an eye on the numbers.



OK, so it's a numbers thing, rather than a complexity thing. It's a matter of the numbers of companies paying tax, not any complexity issues about the tax itself.


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## T McGibney (20 Oct 2011)

Indeed, but as complexity increases, productivity and real output decreases.


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## Purple (20 Oct 2011)

T McGibney said:


> Indeed, but as complexity increases, productivity and real output decreases.



That must mean it's a good thing; a simple tax increases productivity and real output so more accountants are employed by these profitable cmpanies making simple tax returns.

Is that what you are saying?


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## T McGibney (20 Oct 2011)

Purple said:


> That must mean it's a good thing; a simple tax increases productivity and real output so more accountants are employed by these profitable companies making simple tax returns.
> 
> Is that what you are saying?



Exactly, that's what I'm saying.  The problem in this country is that nobody in authority seems to agree and that the relentless trend, both in terms of tax policy and regulation generally, is in the direction of more complexity.


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## Sunny (20 Oct 2011)

Introducing a flat rate of tax is an attractive idea and it well worth examining but in reality, it is very difficult to implement. The UK looked into this a few years ago and found that there would be a something like a £50 billion shortfall in income tax in year one that would have to be found somewhere. By adjusting the rate and tax free allowances, they found that middle income earners ended up losing out at the expense of lower and higher income earners. Countries would love to move towards this system but the implementation is very complicated.


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## Chris (21 Oct 2011)

shnaek said:


> If kept low it will attract high earning workers to this country just like our corporation tax has attracted the multinationals here. We could really become a knowledge economy, instead of just pretending we are.


Absolutely right. Even the more left leaning parties like Labour, SF and even the SDLP were out in the last 12 months saying how terrible it would be if Ireland were "forced" to increase it's corporate tax rate. I even heard Vincent Brown talk about how the low tax rate attracted and retained corporations of all sizes. What has always baffled me is that the same people are then out advocating an increase in taxation on "the rich", as if it would not have the same affect as increasing corporation tax. Perfect example of Einstein's definition of insanity.

There is always talk about getting "the rich" to pay their "fair share", but pretty much none of the advocates allow themselves to be pinned down to define "rich" and "fair share". As already mentioned 5% of income tax payers are responsible for 50% of income tax revenue. I, for one, am extremely grateful for the amount of tax these people are already paying; if any high income earners are reading this: THANK YOU!

Also, nobody mentions what would happen if "the rich" paid more taxes. Rich people do not hoard their money in secret rooms in their mansions. They either deposit it in a bank or directly invest it. If the government were to take this money away from them then there would be less capital available, and with less capital there will be less business investment and therefore less jobs. Taxing the rich more will have exactly the opposite effect on the economy.




Sunny said:


> Introducing a flat rate of tax is an attractive idea and it well worth examining but in reality, it is very difficult to implement. The UK looked into this a few years ago and found that there would be a something like a £50 billion shortfall in income tax in year one that would have to be found somewhere. By adjusting the rate and tax free allowances, they found that middle income earners ended up losing out at the expense of lower and higher income earners. Countries would love to move towards this system but the implementation is very complicated.


This is very true. In order for a flat tax rate to be successfully introduced it would have reduce the tax liability of all those currently paying taxes. Unfortunately there are a huge number of low income earners in this country that do not pay tax, but they have to be brought in to the tax net.
The reasons why politicians do not like the ideas and come out with reports that show how "unworkable" it is, is because in the short term a flat tax rate would also mean reducing government spending (not a bad thing). But of course politicians hate having to reduce spending as it doesn't allow them to buy more votes.


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## ice (22 Oct 2011)

If 'the rich' or those in well paid jobs have to pay more to cover those on lower salaries where is the incentive to take on additional study, to apply for promotion, to start your own business?. Why bother when it will all be eaten up in tax?. We would need a total rehaul of society for this kind of thing to work. I don't think it works in a capitalist society. And then you have to break it down..some are 'rich' by sheer hard work, long hours building up a buisness etc, some are 'rich' by inheritance. Some are 'not so rich' due to circumstances, not being given opportunities and some are 'not so rich' due to laziness and an expectation that society should provide for them. Its hard to lump everyone into broad catagories and say A must fund B. Like another poster said - what is the definition of rich? A couple with a joint income of 100K+ ? what about if they have a huge mortgage? Then you open up the 'well they have a nice house, they didn't have to buy it' can of worms


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## Protocol (22 Oct 2011)

csirl said:


> This is not a good example - retired people get additional tax breaks that workers dont.
> 
> I'd guess that a PAYE worker with a similar income is paying c.30%


 
Just an extra tax credit of 650 pa.

More to the point, should 65+ pay less income tax?

I don't think so.


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## Complainer (22 Oct 2011)

Chris said:


> This is very true. In order for a flat tax rate to be successfully introduced it would have reduce the tax liability of all those currently paying taxes. Unfortunately there are a huge number of low income earners in this country that do not pay tax, but they have to be brought in to the tax net.


You seem to forget that income tax is just one of the many taxes in place in Ireland today. VAT brings in more to the Govt than income tax. Everybody pays tax.


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## orka (23 Oct 2011)

Complainer said:


> You seem to forget that income tax is just one of the many taxes in place in Ireland today. VAT brings in more to the Govt than income tax. Everybody pays tax.


As soon as I saw that Chris had referred to people paying 'no tax', it was inevitable that you would swoop in (again...) with your 'income tax isn't the only tax' soundbite.  VB's article was about more income tax for 'the rich' - do you think it was unclear to ANYBODY (yourself included) that what Chris was talking about (and this whole thread was about...) was income tax?  Does your comment add anything to the topic of this thread?


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## Complainer (23 Oct 2011)

Sorry for letting an inconvenient fact get in the way of a good rant. I withdraw everything.


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## Purple (23 Oct 2011)

Complainer said:


> Sorry for letting an inconvenient fact get in the way of a good rant. I withdraw everything.



Fair play to you. It's nice to see a poster admit they were wrong to ignoring the fact that the discussion is about income tax so that they could have a rant.


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## oldnick (23 Oct 2011)

Regarding Orka's rather impolite remarks about Complainer's mention of VAT..

Mentioning other taxes that everyone pays may indeed "add something to the topic of this thread" . Discussing income-tax rates without reference to other taxes makes for a rather narrow debate . 
Even if one thinks the topic should have concentrated exclusively on income tax, with no mention of any other tax allowed, there is no  reason for such an ill-tempered rebuke.


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## DerKaiser (23 Oct 2011)

Complainer said:


> VAT brings in more to the Govt than income tax.



A good point, but a recently obsolete point. The budget last December has significantly shifted the landscape. 

Income taxes & levies (excluding PRSI) are up 26% whilst VAT is down 2% year on year to 30/09/2011.

http://www.finance.gov.ie/documents/exchequerstatements/2011/analtaxsept.pdf


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## Firefly (24 Oct 2011)

removed


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## Firefly (24 Oct 2011)

Complainer said:


> You seem to forget that income tax is just one of the many taxes in place in Ireland today. VAT brings in more to the Govt than income tax. Everybody pays tax.



Yes, everyone pays VAT and that's fair....do you think that it's fair that some people do not pay income tax whilst others do?


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## Purple (24 Oct 2011)

oldnick said:


> Regarding Orka's rather impolite remarks about Complainer's mention of VAT..
> 
> Mentioning other taxes that everyone pays may indeed "add something to the topic of this thread" . Discussing income-tax rates without reference to other taxes makes for a rather narrow debate .
> Even if one thinks the topic should have concentrated exclusively on income tax, with no mention of any other tax allowed, there is no  reason for such an ill-tempered rebuke.




There is a history with Complainer; making the same point repeatedly about non payroll taxes in discussions about income tax. There are many occasions when stating the obvious is helpful but doing so repeatedly within the same discussion is rarely constructive.

This is a discussion about income tax. Who pays what VAT is a different point. It would be interesting to see how VAT receipts are broken down; how much come from essentials and how much comes from luxury items, but that’s for another thread.


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## Firefly (24 Oct 2011)

Purple said:


> There is a history with Complainer; making the same point repeatedly about non payroll taxes in discussions about income tax.



Sticky?


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## Deiseblue (24 Oct 2011)

Firefly said:


> Yes, everyone pays VAT and that's fair....do you think that it's fair that some people do not pay income tax whilst others do?



Under the current progressive tax system - yes , I think it's fair that those on low incomes pay little or no income tax .

The Universal Social charge ( which is of course a tax on income )has moved the goalposts in that it catches everyone earning over €4,004 per annum.


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## Sunny (24 Oct 2011)

Even under a flat system you would have to have a certain tax free allowance so this isn't about getting all the lower paid workers into the tax net.


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## Complainer (24 Oct 2011)

DerKaiser said:


> A good point, but a recently obsolete point. The budget last December has significantly shifted the landscape.
> 
> Income taxes & levies (excluding PRSI) are up 26% whilst VAT is down 2% year on year to 30/09/2011.
> 
> http://www.finance.gov.ie/documents/exchequerstatements/2011/analtaxsept.pdf


Thanks for the update on the numbers. I wasn't aware that income tax had crept back up ahead of VAT. However, the substantive point still applies - that income tax is not the ONLY tax. It is less than half of our total tax take. Lots of people who don't pay income tax do pay other taxes. Any discussions around the equity or fairness of our income tax system are looking at less than half of the big picture.

PS Did anyone else have a giggle at the name of that PDF file?


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## Latrade (24 Oct 2011)

Complainer said:


> Thanks for the update on the numbers. I wasn't aware that income tax had crept back up ahead of VAT. However, the substantive point still applies - that income tax is not the ONLY tax. It is less than half of our total tax take. Lots of people who don't pay income tax do pay other taxes. Any discussions around the equity or fairness of our income tax system are looking at less than half of the big picture.
> 
> PS Did anyone else have a giggle at the name of that PDF file?


 
To play Devil's Advocate then; if we include VAT, then can we break that down on who is also contributing to the VAT take? 

Proportionally do higher earners also spend more/buy higher value goods and so therefore contribute more to the VAT intake?


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## Complainer (24 Oct 2011)

Latrade said:


> To play Devil's Advocate then; if we include VAT, then can we break that down on who is also contributing to the VAT take?
> 
> Proportionally do higher earners also spend more/buy higher value goods and so therefore contribute more to the VAT intake?



It would be very interesting to see a proper analysis of this, all right. Lower earners do tend to spend most/all of their income, so as a proportion of their income, they may well be paying more VAT. They are less likely to be buying Spanish/Bulgarian property or NASDAQ shares too.


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## thedaras (24 Oct 2011)

Are some posters suggesting that those who earn more should not only pay more tax,but also they should pay a higher VAT?

Actually I thought that those who earn more,do already contribute more,More tax,more USC etc..


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## Sunny (24 Oct 2011)

Complainer said:


> It would be very interesting to see a proper analysis of this, all right. Lower earners do tend to spend most/all of their income, so as a proportion of their income, they may well be paying more VAT. They are less likely to be buying Spanish/Bulgarian property or NASDAQ shares too.


 
I would guess they are also more likely to spend that income on 0% or lower VAT rate products.


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## DerKaiser (24 Oct 2011)

I actually agree that you can't just look at income tax and say who's paying their fair share (that said, however, income tax needs to be considered in its own right in terms of the balance between incentives to work and the ability to collect enough of income tax aggregate to help balance the books - you can't go much beyond marginal rates of 50% without discouraging effort and you can't exclude large swathes of income from the tax net if you need to pay for decent public services).

You need to include other taxes also.

Then you need to look at what kind of benefits people are getting in terms of social welfare, healthcare, etc.

You can then come to the conclusion that a single guy earning €100k per annum is a patriot whilst a widow with a special needs kid is a drain on society.

Is there any purpose to such an analysis? I think not. 

The guy on €100k needs to respect people in less fortunate cirumstances, but equally (or more importantly) people in less fortunate circumstances need to respect that some people are giving up half their incomes to provide them with a safety net.


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## Latrade (24 Oct 2011)

Complainer said:


> It would be very interesting to see a proper analysis of this, all right. Lower earners do tend to spend most/all of their income, so as a proportion of their income, they may well be paying more VAT. They are less likely to be buying Spanish/Bulgarian property or NASDAQ shares too.


 
But if there's no quantitive analysis, how do we know? We can suppose all we want, but until then the only real proportional and actual analysis of tax paid and earnings is income tax.


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## shnaek (24 Oct 2011)

DerKaiser said:


> The guy on €100k needs to respect people in less fortunate cirumstances, but equally (or more importantly) people in less fortunate circumstances need to respect that some people are giving up half their incomes to provide them with a safety net.


Very good point. But 'The Rich' are always to blame, because they are such a blurry easy target. Truth is, you can never take enough from 'The Rich'.


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## Firefly (24 Oct 2011)

shnaek said:


> Very good point. But 'The Rich' are always to blame, because they are such a blurry easy target. Truth is, you can never take enough from 'The Rich'.



I think it was Chris who posted this originally and worth a look. 
http://www.youtube.com/watch?v=661pi6K-8WQ


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## Chris (24 Oct 2011)

Complainer said:


> You seem to forget that income tax is just one of the many taxes in place in Ireland today. VAT brings in more to the Govt than income tax. Everybody pays tax.


This thread was about VBs comment on income tax. But I would still fathom a guess that "the rich" contribute more in VAT than less well off. I bought a new car a few years ago, and I think that the total tax bill was €7,500. A neighbour of mine bought a very nice Mercedes CLS and I think his total tax bill was €40,000. Big difference for the same amount of road usage.
Anyway, I would rather have a progressive sales tax than a progressive income tax, as the former encourages saving and investment while the latter discourages earning. Topic for a whole new thread though.



Sunny said:


> Even under a flat system you would have to have a certain tax free allowance so this isn't about getting all the lower paid workers into the tax net.



I would disagree with this, I think that everybody should contribute, and that laws, including tax laws should apply to everybody equally. Nobody would argue that some people should be exempt from laws that protect against burglary. Why should people be exempt from certain tax laws?



Complainer said:


> PS Did anyone else have a giggle at the name of that PDF file?


Yeah, in a very juvinile and satisfying way!



DerKaiser said:


> The guy on €100k needs to respect people in less fortunate cirumstances, but equally (or more importantly) people in less fortunate circumstances need to respect that some people are giving up half their incomes to provide them with a safety net.



The problem is that when the redistribution is by force, then those contributing more than they receive don't feel like they are being "charitable" and those receiving more than they contribute don't feel like a tangible person is being kind enough to help out. It all come down to two views (1) government is taking too much of my money and (2) I am entitled to a certain amount of money from government. When people voluntarily give up their time or money to a charity this is different. Those in receipt are grateful to those that give, and those that give can see the good their deeds are doing. 




shnaek said:


> Very good point. But 'The Rich' are always to blame, because they are such a blurry easy target. Truth is, you can never take enough from 'The Rich'.


Always easy to scape goat a small group people.


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## shnaek (25 Oct 2011)

Chris said:


> Anyway, I would rather have a progressive sales tax than a progressive income tax, as the former encourages saving and investment while the latter discourages earning. Topic for a whole new thread though.


I object to it being called 'progressive'. 'Progressive' is the name given to this form of taxation by some very smart robber. So everyone associates this type of taxation with being forward looking, advancing, broad minded etc just because of word association.


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## csirl (25 Oct 2011)

shnaek said:


> I object to it being called 'progressive'. 'Progressive' is the name given to this form of taxation by some very smart robber. So everyone associates this type of taxation with being forward looking, advancing, broad minded etc just because of word association.


 
Agree. From the taxpayers point of view, its regressive as earning more lowers your % takehome pay.


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## Firefly (25 Oct 2011)

shnaek said:


> I object to it being called 'progressive'. 'Progressive' is the name given to this form of taxation by some very smart robber. So everyone associates this type of taxation with being forward looking, advancing, broad minded etc just because of word association.



LOL...the harder you work the more you lose...progressive innit?


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## Purple (25 Oct 2011)

It called progressive because the harder you work the amount by which you are screwed progressively increases.


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## Firefly (25 Oct 2011)

progressively regressive? (I'll get my coat)


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## Purple (25 Oct 2011)

Firefly said:


> progressively regressive? (I'll get my coat)



Something like that.
It's like calling it a bunnies, apple pie and nice things taxation system; who could be against that?


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## Firefly (25 Oct 2011)

Purple said:


> Something like that.
> It's like calling it a bunnies, apple pie and nice things taxation system; who could be against that?



Rabbits?


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## Sunny (25 Oct 2011)

I have no problem at all with the idea of an progressive tax system. The marginal value of money declines the more you earn. For example, the last €50 earned for someone on €20,000 is a lot more important than the last €50 for someone earning a €100,000. That doesn't mean you should screw higher earners with more taxation but it is an important fact to remember when discussing tax systems. It's all very well saying everyone should pay the same tax on every cent they earn but the reality is different. It's why no Country that I am aware of has managed it. Any of the Baltic countries that I know of with a flat rate have tax free allowances and other structures in place to protect the lower paid.


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## Purple (25 Oct 2011)

Sunny said:


> I have no problem at all with the idea of an progressive tax system. The marginal value of money declines the more you earn. For example, the last €50 earned for someone on €20,000 is a lot more important than the last €50 for someone earning a €100,000. That doesn't mean you should screw higher earners with more taxation but it is an important fact to remember when discussing tax systems. It's all very well saying everyone should pay the same tax on every cent they earn but the reality is different. It's why no Country that I am aware of has managed it. Any of the Baltic countries that I know of with a flat rate have tax free allowances and other structures in place to protect the lower paid.



The person on €20’000 gets to keep around €39 of their last €50 earned.
The person on €100’000 gets to keep around €22 of their last €50 earned.

It may be worth less to the person on €100’000 but is it worth half as much?

I find it strange that there is such resentment against the so-called super rich. If someone pay a million Euro a year in income tax (plus all that VAT) maybe they've paid enough? Maybe there should be a cap after which we say "you've paid your share, keep the rest".


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## Sunny (25 Oct 2011)

Purple said:


> The person on €20’000 gets to keep around €39 of their last €50 earned.
> The person on €100’000 gets to keep around €22 of their last €50 earned.
> 
> It may be worth less to the person on €100’000 but is it worth half as much?
> ...


 
I have no resentment against the super rich. I have already pointed out on other threads the stupidity of pay caps and the idea of someone paying a higher rate of tax just because they earn over 100k.

I am also not saying that the current system is right. I am simply pointing out that the idea of saying that someone on the minimum wage should pay the same tax on every cent they earn as a person who earns a €1m is as absurd as penalising people for earning more and being successful like people in Labour seem keen on. Like it not, money does have a different value when you are on the poverty line.


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## Shawady (25 Oct 2011)

But Sunny, how many people earn 1 million a year? I said on my first post that there could be some type of wealth tax on the super rich. However, I am not a high earner yet if I got a pay rise tomorrow, the government would see approx 60% of it. This does not make sense to me. 
Your point re: the tax system in Baltic countries is interesting in that if we had a flat rate of tax here, maybe it could be balanced for the low paid by means testing things like child benefit, state pensions etc.
In other words, every pays the same rate of income tax but lower paid earners get help in areas like health and children through the welfare system.


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## Sunny (25 Oct 2011)

Shawady said:


> But Sunny, how many people earn 1 million a year? I said on my first post that there could be some type of wealth tax on the super rich. However, I am not a high earner yet if I got a pay rise tomorrow, the government would see approx 60% of it. This does not make sense to me.
> Your point re: the tax system in Baltic countries is interesting in that if we had a flat rate of tax here, maybe it could be balanced for the low paid by means testing things like child benefit, state pensions etc.
> In other words, every pays the same rate of income tax but lower paid earners get help in areas like health and children through the welfare system.


 
Something could be done along those lines. Just in reality, probably very difficult to adminisitor but I am not an expert.

I earn a good salary (Not huge I should poaint out!) and pay the higher rate of tax and all the levies. I still have enough to go out every month for a few meals and take a couple of holidays a year. The Government raising my tax by another 1c although unfair, wouldn't ruin me. If I was struggling to feed my kids, the situation is different. I know these are extreme cases but the idea of a progressive tax isn't wrong. The implementation of it is what is flawed in many ways.


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## shnaek (25 Oct 2011)

Sunny said:


> but the idea of a progressive tax isn't wrong.


It's the naming of the tax that bugs me. Lets just call it a 'disincentive tax', which is what it is. Why all the sneaking around? Call a spade a spade.


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## Sunny (25 Oct 2011)

shnaek said:


> It's the naming of the tax that bugs me. Lets just call it a 'disincentive tax', which is what it is. Why all the sneaking around? Call a spade a spade.


 
I agree that the system has many flaws especially with regard to middle income earners (who get screwed the most everytime!) but if someone told me that if I earned 500k a year, I would have to pay 55% tax, I would still take the money!


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## Firefly (25 Oct 2011)

Sunny said:


> I agree that the system has many flaws especially with regard to middle income earners (who get screwed the most everytime!) but if someone told me that if I earned 500k a year, I would have to pay 55% tax, I would still take the money!



But you would more than likely have the services of a good tax accountant employed so you wouldn't be paying anything near 55% in the first place...


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## orka (25 Oct 2011)

Sunny said:


> I agree that the system has many flaws especially with regard to middle income earners (who get screwed the most everytime!)


How are middle income earners screwed more than (compliant, non-tax-relief-scheme-using) higher income earners?



Sunny said:


> if someone told me that if I earned 500k a year, I would have to pay 55% tax, I would still take the money!


Doesn't look so great if you already earned 480K and paid 50K tax...  It's very easy for someone on 30K to say 'if I earned 75K, I wouldn't mind the tax I would have to pay' and for someone on 60K to say 'if I earned 100K I wouldn't mind the tax I would have to pay' etc.  But that's not really the point; very few people go from low to massive in one step and if every step of the way you are hit with more and more demands on your income, you can't help but feel a bit aggrieved with putting in lots of work to earn more and more money only to see it whittled away by 'progressive' taxation.


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## Purple (25 Oct 2011)

orka said:


> How are middle income earners screwed more than (compliant, non-tax-relief-scheme-using) higher income earners?


 Simple; they aren't.



orka said:


> Doesn't look so great if you already earned 480K and paid 50K tax...  It's very easy for someone on 30K to say 'if I earned 75K, I wouldn't mind the tax I would have to pay' and for someone on 60K to say 'if I earned 100K I wouldn't mind the tax I would have to pay' etc.  But that's not really the point; very few people go from low to massive in one step and if every step of the way you are hit with more and more demands on your income, you can't help but feel a bit aggrieved with putting in lots of work to earn more and more money only to see it whittled away by 'progressive' taxation.


That’s the point though, isn’t it; to move from a middle income to a high income required that you work harder, usually much longer and take on more responsibility and stress. Drive around an industrial estate on a Sunday morning and you’ll see that it’s the expensive cars parked outside the premises. Why should someone work harder and longer so that well over 50% of what they earn gets taken away from them. It is a disincentive for wealth creators to create wealth.


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## Sunny (25 Oct 2011)

orka said:


> How are middle income earners screwed more than (compliant, non-tax-relief-scheme-using) higher income earners?
> 
> Doesn't look so great if you already earned 480K and paid 50K tax... It's very easy for someone on 30K to say 'if I earned 75K, I wouldn't mind the tax I would have to pay' and for someone on 60K to say 'if I earned 100K I wouldn't mind the tax I would have to pay' etc. But that's not really the point; very few people go from low to massive in one step and if every step of the way you are hit with more and more demands on your income, you can't help but feel a bit aggrieved with putting in lots of work to earn more and more money only to see it whittled away by 'progressive' taxation.


 
When I say middle income earners, I mean people who don't have the incentive to earn more because they will jump into the higher tax bracket. They also tend not so benefit from the same social schemes that lower income earners do and yet still don't earn the high salaries of high earners but are treated as such. 

As for the 480 to 500k, of course it is not nice to pay more tax but I would still take the pay rise and extra repsonsibility and extra work if offered. It simply career progression and a desire to push myself. Tax is not going to stop me doing this or disincentivise me as much as I might give out.  You could use your argument to support people who decide they are better off staying in mcdonalds flipping burgers rather than take a job with career prospects simply because they would be paying more tax. (Not slagging McDonalds)


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## Shawady (25 Oct 2011)

One other option is a staggered rate of tax but everyone pays something.
For example, everyone pays 10% on the first 20K, 12% on 20-40K, 14% on 40-80K, 16% on 80-100K, 18% over 100K etc.

Therefore everyone is contributed and higher earners are paying more. However if someone moves to a higher salary if for example promoted, they are not being penalised as much.


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## Sunny (25 Oct 2011)

Purple said:


> That’s the point though, isn’t it; to move from a middle income to a high income required that you work harder, usually much longer and take on more responsibility and stress. Drive around an industrial estate on a Sunday morning and you’ll see that it’s the expensive cars parked outside the premises. Why should someone work harder and longer so that well over 50% of what they earn gets taken away from them. It is a disincentive for wealth creators to create wealth.


 
Paying more tax is not a disincentive by itself. It all depends on the individual. The majority of people would not allow the thought of paying more tax stop them from progressing in their career or trying to become wealthy.

It only comes a problem when other considerations such as family committments, work/life balance etc come into play. If these things are so important to an individual, telling them that they won't pay any more tax on their increased salary probably won't make a difference to them. They simply won't take the job and that is fair enough. No-one is financially poorer from getting a pay rise especially at higher salaries. 

This is not an argument for saying that high income taxes are right or fair. I don't think anyone should pay over 50% of their income on taxes no matter how much they earn.


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## Purple (25 Oct 2011)

Sunny said:


> No-one is financially poorer from getting a pay rise especially at higher salaries.



They are if they have additional childcare costs etc.
The work-life balance issue is also impacted by the net pay rise gained for more hours/stress etc worked, e.g. if you can bring the family on a nice holiday but don't get to see the kids a few evenings a week.


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## Sunny (25 Oct 2011)

Purple said:


> They are if they have additional childcare costs etc.
> The work-life balance issue is also impacted by the net pay rise gained for more hours/stress etc worked, e.g. if you can bring the family on a nice holiday but don't get to see the kids a few evenings a week.



But you don't need to get a payrise for these things to become an issue. High income taxes make it more expensive for companies to hire people and they are bad for employment but I really don't buy that there are loads of people out there that could be earning more if the tax rate was lowered and they incentivised to work harder. I get a bonus every year that I work damn hard for but end up paying most of it in tax despite making plenty of personal sacrifices  Yet, every year I still work to get that bonus. If the government suddenly announced that my bonus was tax free, I would be delighted but it wouldn't change anything with regard my incentive to earn the bonus in the first place.


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## Chris (25 Oct 2011)

shnaek said:


> I object to it being called 'progressive'. 'Progressive' is the name given to this form of taxation by some very smart robber. So everyone associates this type of taxation with being forward looking, advancing, broad minded etc just because of word association.





csirl said:


> Agree. From the taxpayers point of view, its regressive as earning more lowers your % takehome pay.





shnaek said:


> It's the naming of the tax that bugs me. Lets just call it a 'disincentive tax', which is what it is. Why all the sneaking around? Call a spade a spade.


Yes, I would agree as well, and I love the "disincentive tax" name.



Purple said:


> I find it strange that there is such resentment against the so-called super rich. If someone pay a million Euro a year in income tax (plus all that VAT) maybe they've paid enough? Maybe there should be a cap after which we say "you've paid your share, keep the rest".


I like this idea, why not have Ireland compete with Monaco, Hong Kong and Switzerland as a tax haven?




Sunny said:


> I agree that the system has many flaws especially with regard to middle income earners (who get screwed the most everytime!) but if someone told me that if I earned 500k a year, I would have to pay 55% tax, I would still take the money!



But would you still do so if you were told that you would have to work 70 hours a week, work lots of weekends, do a lot of traveling, receive phone calls at home when you want to spend time with your family, may have to cancel family holidays last minute? What about if you were a business owner, and you would have to do all this while at the same time not knowing whether you would be able to pay yourself at all this year and next? I saw all of the this first hand when I was growing up and rarely saw my dad. 

The one thing I think most people, who call for taxing the rich, do not appreciate is how much work and risk is involved for the majority of high income earners. 



Sunny said:


> Paying more tax is not a disincentive by itself. It all depends on the individual. The majority of people would not allow the thought of paying more tax stop them from progressing in their career or trying to become wealthy.
> 
> It only comes a problem when other considerations such as family committments, work/life balance etc come into play. If these things are so important to an individual, telling them that they won't pay any more tax on their increased salary probably won't make a difference to them. They simply won't take the job and that is fair enough. No-one is financially poorer from getting a pay rise especially at higher salaries.



I disagree, taxation is a huge disincentive to work. What we are talking about here is raising taxes on "the rich". They are the ones that least need the extra €100,000 or €500,000; as you mentioned their subjective valuation of this extra money is less than a similar relative increase would be to someone earning €20,000. But if earning an extra €100,000 means more late nights, more weekends at work and less time with your family, then that "rich" person will likely say "forget it, I'll go home."

A friend of mine is a self employed accountant and tax advisor and in 2008 he earned €350,000, which I imagine many people would classify as "rich". For this he travelled 50% of the year, took 2 weeks holidays, and worked an average of 65 hours a week. Since all the new taxes have come in he has reduced his working hours to 45 hours a week, has taken 6 weeks holidays so far this year and will probably have an income of about €200,000 this year. His reason was that he could not justify the extra 4 weeks work and 20 hours a week to see less than 50% of the €150,000. He doesn't need the extra money, but has to work extremely hard to get it. The result is less revenue for the government, and I would fathom a guess that if there is a "rich tax" introduced, then he will simply pack up and go somewhere with lower taxes.



Sunny said:


> This is not an argument for saying that high income taxes are right or fair. I don't think anyone should pay over 50% of their income on taxes no matter how much they earn.


I 100% agree!


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## Sunny (25 Oct 2011)

Hang on Chris. I like your posts but you are ideologically driven. I am going to make an assumption that you come from the Austrian school of economics judging by some of your comments but could be wrong. Nothing wrong with that as long as long you recognise that you are not coming from a neutral bias just like me. Again nothing with that but we have to remember this is the real world with people and not some academic exercise. 

The story of your friend is great but why not substitute it for someone that lives on the poverty line and explain to them why earning that extra euro just isn't worth their while because they will have to pay more tax. I work in investment banking, I believe in capitalism, I believe in the Market, I believe in earning money is good and I believe in striving to work as hard as you bloody can. What I don't believe is that the tax system is some academic exercise that doesn't have severe consequences for many genuinely struggling people. I earn a good salary. Have no problem paying tax to help the less fortunate. I just don't want people to take the **** out of me!


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## Sunny (25 Oct 2011)

Also this assumption that only people who earn high wages work hard and sacrifice family life is rubbish and is snobbish. There are people working multiple low paid jobs to make ends meet. There are people doing minimum wage night work where they sacrifice family life. There are people earning average salaries who sacrifce family life every day. That is not the taxmans fault.


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## Purple (26 Oct 2011)

Sunny, the point is that when the guy on €350’000 decides to not earn that extra €150’000 then that money disappears from the economy. The state gets 55% of nothing. Those that the tax system helps lose out. There are no winners.
I agree with your views on taxation and I don’t mind paying tax either. I just think that very high rates of marginal income tax are counterproductive and that’s why I am against them. They reduce economic activity and damage the economic position of the state.


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## Sunny (26 Oct 2011)

Purple said:


> Sunny, the point is that when the guy on €350’000 decides to not earn that extra €150’000 then that money disappears from the economy. The state gets 55% of nothing. Those that the tax system helps lose out. There are no winners.
> I agree with your views on taxation and I don’t mind paying tax either. I just think that very high rates of marginal income tax are counterproductive and that’s why I am against them. They reduce economic activity and damage the economic position of the state.


 
I totally agree with you on high rates of income tax. Like I say, no-one should pay over 50% of their income no matter what they earn.

I was simply arguing against the principle that we introduce a flat rate of tax and everyone pays it on every cent they earn and then call it fair. I know I would rather be a poisiton where I can choose not to earn more because it is not worth my while than being in a position where I don't have a choice but to try and earn more even if it means paying more tax.


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## T McGibney (26 Oct 2011)

Sunny said:


> I was simply arguing against the principle that we introduce a flat rate of tax and everyone pays it on every cent they earn and then call it fair.



But people are already paying significant amounts of taxes on every cent they earn, through a combination of direct taxes like USC, PRSI, employer PRSI, indirect taxes like VAT and excise, and a whole array of stealth taxes. People throw their hands up in horror saying that 'we can't tax people earning €5k per year' but it is already happening. 

A properly calibrated flat tax could involve some element of rebalancing of the existing tax burden (not just income tax) so that low earners aren't paying any more tax in overall terms than they already do.


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## csirl (26 Oct 2011)

Its middle income earners who are disincentivised from working hard. Most of them are paying 50+% on some of their income. There are many who will not bother to better themselves - maybe learn a new skill, take on more responsibility or simply do some overtime because most of the extra 5-10k per annum they might earn will be taken by Revenue.

Many companies in Ireland have difficulties because of this - a high proportion of their employees are incentivised to stay put doing the same job because its not worth bothering for tax reasons. It creates a glut of plodders and a shortage of go getters. There are many jobs in which the career structure and the companies needs dictate that you work your way up through the ranks and when a high proportion of people opt out of this for tax reasons, then the company gets into difficulties.


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## Sunny (26 Oct 2011)

T McGibney said:


> But people are already paying significant amounts of taxes on every cent they earn, through a combination of direct taxes like USC, PRSI, employer PRSI, indirect taxes like VAT and excise, and a whole array of stealth taxes. People throw their hands up in horror saying that 'we can't tax people earning €5k per year' but it is already happening.
> 
> A properly calibrated flat tax could involve some element of rebalancing of the existing tax burden (not just income tax) so that low earners aren't paying any more tax in overall terms than they already do.


 
I am not saying you can't tax anyone. I do believe everyone should contribute something to the running of the State if they are earning. I am simply saying that asking someone to pay the same tax rate on every cent they earn as someone who earns a multiple of their salary is unfair. 

If you start talking about protecting low earners, chances are that middle and higher income earners will have to pay for it. Like I said miles back, a flat tax is a good idea in theory but it is very difficult to implement.


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## T McGibney (26 Oct 2011)

Sunny said:


> I am simply saying that asking someone to pay the same tax rate on every cent they earn as someone who earns a multiple of their salary is unfair.



Why? We're talking here about rates, not amounts. This principle already applies to almost all other taxes.


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## T McGibney (26 Oct 2011)

csirl said:


> Many companies in Ireland have difficulties because of this - a high proportion of their employees are incentivised to stay put doing the same job because its not worth bothering for tax reasons. It creates a glut of plodders and a shortage of go getters. There are many jobs in which the career structure and the companies needs dictate that you work your way up through the ranks and when a high proportion of people opt out of this for tax reasons, then the company gets into difficulties.



Its also a massive problem in the civil and public service. High marginal tax rates mean that there is damn all incentive for middle-managers with family and commuting commitments to apply for more senior posts, with the likelihood of higher stress/ overtime/ energy drain.


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## Sunny (26 Oct 2011)

T McGibney said:


> Why? We're talking here about rates, not amounts. This principle already applies to almost all other taxes.


 
You either believe the marginal value of income declines the more you earn or you don't. 

A true flat tax assumes no credits, allowances, deductions etc and taxes everyone the same rate on every cent they earn. Now, I am all for lower taxes but I also recognise asking someone on €15,000 to pay 40% on all their income is not the same as asking me to pay 40% on my income. Every cent of their €15k probably goes towards essential costs of living. Mine doesn't. 

That's not a justification for taxing me to the hilt. It's just I recognise the fairness of a progressive system despite it's flaws.  

This debate is going on in the US at the moment. Will be interesting to follow.


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## T McGibney (26 Oct 2011)

Except that nobody is paying 40% of their entire income in income taxes. Yet everyone (including the person earning €15k) is probably paying 40% (or damn near it) of their income in taxes, when indirect and stealth taxes are included.  

The various tax collection systems are so complex, opaque and multi-faceted that nobody realises just how ridiculous their outcomes are. The opposition to almost any move towards simplification is generally based on the supposition that low-earners don't pay tax. This is patently untrue.

There is no fairness in the poverty and evasion traps inherent in all so-called 'progressive' tax systems.


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## Sunny (26 Oct 2011)

T McGibney said:


> Except that nobody is paying 40% of their entire income in income taxes. Yet everyone (including the person earning €15k) is probably paying damn near 40% of their income in taxes, when indirect and stealth taxes are included.
> 
> The various tax collection systems are so complex, opaque and multi-faceted that nobody realises just how ridiculous their outcomes are. The opposition to almost any move towards simplification is generally based on the supposition that low-earners don't pay tax. This is patently untrue.
> 
> There is no fairness in the poverty and evasion traps inherent in all so-called 'progressive' tax systems.


 
But we are talking about income taxes here and the introduction of a flat rate tax which would mean people a rate (40% or whatever) on all their income.

I agree with you about the amount of indirect and stealth taxes but that's why when people say we should simplify the income tax system, it is very difficult to do.


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## T McGibney (26 Oct 2011)

Sunny said:


> But we are talking about income taxes here and the introduction of a flat rate tax which would mean people a rate (40% or whatever) on all their income.
> 
> I agree with you about the amount of indirect and stealth taxes but that's why when people say we should simplify the income tax system, it is very difficult to do.



But people are already paying the same amount of their income in taxes, they just don't realise it. 

You say that it is difficult to simplify the tax system. I profoundly disagree. There are probably a hundred simplification measures that could be introduced in the morning if there was a political will to do so.


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## csirl (26 Oct 2011)

Sunny said:


> But we are talking about income taxes here and the introduction of a flat rate tax which would mean people a rate (40% or whatever) on all their income.
> 
> I agree with you about the amount of indirect and stealth taxes but that's why when people say we should simplify the income tax system, it is very difficult to do.


 
A flat rate tax would be much lower than people's perception. If there was a flat rate tax in Ireland for 2011 it would be c.17.67%.

Income tax receipts = 11,530m (Book of Estimates)
Average Earnings = 687.24 per week (CSO - Q2 2011).
No. of people employed = 1.821m (CSO - Q2 2011).

This percentage is probably on the high side as it doesnt take income account income tax paid by pensioners, so it could be 1 or 2% lower than my calculations suggest.

I think most people would prefer to pay a flat rate tax in the 16-18% rate than what we currently have.


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## Sunny (26 Oct 2011)

T McGibney said:


> But people are already paying the same amount of their income in taxes, they just don't realise it.
> 
> .


 
How? When so many people don't even pay income tax even if they might pay a levy? This is just about income tax


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## Complainer (26 Oct 2011)

Chris said:


> Yeah, in a very juvinile and satisfying way!


Maybe the file name was meant to be a hint at a proposed new tax - one that would hit Askaboutmoney.com harder than most.



Latrade said:


> But if there's no quantitive analysis, how do we know? We can suppose all we want, but until then the only real proportional and actual analysis of tax paid and earnings is income tax.


That's a very blinkered view - it's hard to work out the numbers, so we'll just ignore them. That's not the basis for any sound policy.


Sunny said:


> I would guess they are also more likely to spend that income on 0% or lower VAT rate products.


To some extent yes, but if the stereotypes are to be believed, much of the spending would be on products with high customs levies (booze and fags), so that needs to be part of the equation too.


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## T McGibney (26 Oct 2011)

Sunny said:


> This is just about income tax



But you can't have a meaningful discussion of tax policy and confine it merely to income tax, especially since our politicians are seemingly mortally afraid to raise income tax rates and we end up accordingly with USC, PRSI and stealth tax hikes instead of old-style tax increases.  Hence my wishes for a more sensible, honest and simplified system.


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## Sunny (26 Oct 2011)

csirl said:


> A flat rate tax would be much lower than people's perception. If there was a flat rate tax in Ireland for 2011 it would be c.17.67%.
> 
> Income tax receipts = 11,530m (Book of Estimates)
> Average Earnings = 687.24 per week (CSO - Q2 2011).
> ...


 
It's a bit more complicated than that I am afraid. You can't just use the average wage to come up with a rate.


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## Sunny (26 Oct 2011)

T McGibney said:


> But you can't have a meaningful discussion of tax policy and confine it merely to income tax, especially since our politicians are seemingly mortally afraid to raise income tax rates and we end up accordingly with USC, PRSI and stealth tax hikes instead of old-style tax increases. Hence my wishes for a more sensible, honest and simplified system.


 
Grand, but I was never talking about the wider tax system. I was responding to posts about the idea of introducing a flat rate income tax rate and its implications on higher and lower income earners. If you want to broaden the discussion, work away.


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## T McGibney (26 Oct 2011)

Sunny said:


> Grand, but I was never talking about the wider tax system. I was responding to posts about the idea of introducing a flat rate income tax rate and its implications on higher and lower income earners. If you want to broaden the discussion, work away.


But for the nth time, you can't meaningfully discuss the idea of flat-rate income tax, and more particularly your own contention that this would be 'unfair' to low-earners, without considering the existing overall tax burden suffered by low-earners.


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## Sunny (26 Oct 2011)

T McGibney said:


> But for the nth time, you can't meaningfully discuss the idea of flat-rate income tax, and more particularly your own contention that this would be 'unfair' to low-earners, without considering the existing overall tax burden suffered by low-earners.


 
But what is your point about the overall tax burden suffered by low-earners?

You made the point that people are already paying the same amount of their income in taxes without realising it. How do you work that out?


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## T McGibney (26 Oct 2011)

I don't have any particular point to make about the overall tax burden suffered by low-earners. 

I merely queried the following statement, on the grounds that low-earners are already suffering what is for them a significant tax burden. 



Sunny said:


> I was simply arguing against the principle that we  introduce a flat rate of tax and everyone pays it on every cent they  earn and then call it fair.


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## csirl (26 Oct 2011)

Sunny said:


> It's a bit more complicated than that I am afraid. You can't just use the average wage to come up with a rate.


 
It isnt complicated. You just multiply the average wage by the number of people employed to get the total amount of taxable income earned in the country. The amount the Government wants to take in is a percentage of this. It is that simple - which is one of the big advantages of the flat rate tax.


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## DerKaiser (26 Oct 2011)

csirl said:


> A flat rate tax would be much lower than people's perception. If there was a flat rate tax in Ireland for 2011 it would be c.17.67%.
> 
> Income tax receipts = 11,530m (Book of Estimates)
> Average Earnings = 687.24 per week (CSO - Q2 2011).
> ...



Those income tax receipts look more like 2010 numbers, €14bn is targetted for collection in 2011 (http://www.finance.gov.ie/documents/exchequerstatements/2011/analtaxsept.pdf)

This would push up the flat rate to 22%. Also note that the 4% rate of PRSI would need to be added on to give a total flat rate of 26%.

Someone on €100k would gain €15k from this regime, increasing disposable income by 25%.

A married couple on a combined income of €50k would lose €6k or the equivalent of half a mortgage payment on a €200k mortgage each month.

Every single person on an income of less than €40k (and couples with joint incomes below €80k) will be worse off under your proposal. Am I right or wrong?

Most people would be worse off, as many people on lower incomes need to pay more tax to pay for higher tax savings for fewer people on higher incomes.


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## Chris (26 Oct 2011)

Sunny said:


> Hang on Chris. I like your posts but you are ideologically driven. I am going to make an assumption that you come from the Austrian school of economics judging by some of your comments but could be wrong. Nothing wrong with that as long as long you recognise that you are not coming from a neutral bias just like me. Again nothing with that but we have to remember this is the real world with people and not some academic exercise.


Yes indeed, I would class myself as a follower of Austrian Economics. But flat rate taxation is not just an ideology. There was a time when the US had a flat rate of income tax, and that was 0%. Nobody complained about the rich not paying there fair share in the US from 1776 to 1913 when the constitution was amended to introduce a federal income tax. And most of that period was the most prosperous in US history.



Sunny said:


> The story of your friend is great but why not substitute it for someone that lives on the poverty line and explain to them why earning that extra euro just isn't worth their while because they will have to pay more tax. I work in investment banking, I believe in capitalism, I believe in the Market, I believe in earning money is good and I believe in striving to work as hard as you bloody can. What I don't believe is that the tax system is some academic exercise that doesn't have severe consequences for many genuinely struggling people. I earn a good salary. Have no problem paying tax to help the less fortunate. I just don't want people to take the **** out of me!





Sunny said:


> Also this assumption that only people who earn high wages work hard and sacrifice family life is rubbish and is snobbish. There are people working multiple low paid jobs to make ends meet. There are people doing minimum wage night work where they sacrifice family life. There are people earning average salaries who sacrifce family life every day. That is not the taxmans fault.


I absolutely agree that there are people out there working more than one low paying job, or working very hard for their weekly wage, but would they do so if they got less than 50% of the money they earned? I think a lot of people would not. My point was more to highlight the fact that (a) the majority of "the rich" work extremely long hours for many years before they make that money and (b) that they are driven by the possibility to take home that money.
The best motivating factor to work hard is the money you take home at the end of the day; reduce that amount through taxation and people will not work as hard as they otherwise would.



Sunny said:


> But we are talking about income taxes here and the introduction of a flat rate tax which would mean people a rate (40% or whatever) on all their income.
> 
> I agree with you about the amount of indirect and stealth taxes but that's why when people say we should simplify the income tax system, it is very difficult to do.


I think that simplification of the tax system would be a lot simpler than many would assume. First thing to do would be to throw out the old tax code in its entirety and start from scratch. The new system should then be so simple as to require a minimum paper work and as few as possible rates and types of taxes.

I would agree that selling a flat 40% tax rate would be very difficult, but as I said before it should be sold so that the majority of earners pay less. csirl has made a good start with the 17%, but I would go quite a bit lower than that. This would also only be possible if there was some severe cutbacks in what government provides.
Unfortunately this country is in a situation where 50% of earners do not pay income tax, and that is simply unfair on the remainder of the income tax payers; unfortunately this will mean that quite a few people will end up paying more taxes, that would not be avoidable.
Ideally I would like to see a 0% flat income tax rate, which would be easiest to sell on its own. Taxes should then be collected through excise and sales taxes, which could even be progressive. This would result in a huge incentive to work harder with a disincentive to spend. 
As already mentioned though, this would require some serious cutting of government.


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## Firefly (27 Oct 2011)

Chris said:


> Ideally I would like to see a 0% flat income tax rate, which would be easiest to sell on its own. Taxes should then be collected through excise and sales taxes, which could even be progressive. This would result in a huge incentive to work harder with a disincentive to spend.
> As already mentioned though, this would require some serious cutting of government.



Hi Chris,

I would imagine that excise and sales taxes would rise astronomically under this model to bring in funds for the government. Surely this would make us extremely uncompetitive as a country to do business in? In addition, with the advent of the internet and the open border with Northern Ireland raising sales taxes may be counter-productive anyway? Having said that, I'm all for a 0% rate of income tax


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## Chris (28 Oct 2011)

Firefly said:


> Hi Chris,
> 
> I would imagine that excise and sales taxes would rise astronomically under this model to bring in funds for the government. Surely this would make us extremely uncompetitive as a country to do business in? In addition, with the advent of the internet and the open border with Northern Ireland raising sales taxes may be counter-productive anyway? Having said that, I'm all for a 0% rate of income tax



Only if you maintain the current level of government spending, which, as shouldn't come as a surprise to many here, I believe could and should be cut "astronomically". The long term affect would be that many wealthy people would move here, and wealthy people spend quite a bit of money, which would result in increased sales tax revenue. It would also mean that a lot more would be invested here, meaning that there would be a lot more job creation, resulting in less dependence on state welfare.
In the short term of course this is a bit more difficult, and deficit spending should be avoided. Any revenue shortfall should be covered by selling off state assets and drastic spending cuts.
The biggest advantage of having a sales tax is that government is kept in check. If government raises sales taxes too high, then people will spend less resulting in less revenue. With income taxation there is no way of not paying it to voice your objection, the only option is to leave or earn less, neither of which is a desirable outcome.


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## Firefly (28 Oct 2011)

Chris said:


> Only if you maintain the current level of government spending, which, as shouldn't come as a surprise to many here, I believe could and should be cut "astronomically". The long term affect would be that many wealthy people would move here, and wealthy people spend quite a bit of money, which would result in increased sales tax revenue. It would also mean that a lot more would be invested here, meaning that there would be a lot more job creation, resulting in less dependence on state welfare.
> In the short term of course this is a bit more difficult, and deficit spending should be avoided. Any revenue shortfall should be covered by selling off state assets and drastic spending cuts.
> The biggest advantage of having a sales tax is that government is kept in check. If government raises sales taxes too high, then people will spend less resulting in less revenue. With income taxation there is no way of not paying it to voice your objection, the only option is to leave or earn less, neither of which is a desirable outcome.



It would be lovely to wave a magic wand and arrive at this situation, however I'd imagine there would literally be blood on the streets if this was implemented. Given the nature of politics here and the voting system, no political party would even consider it. Finally, if it was implemented, then IMO it would only be a matter of time before the old ways crept back in....a td getting a new road built in his constituency etc etc. 

Sadly, I think that all we can hope for is reduced government spending on a gradual scale, but I have my doubts here too


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## shnaek (28 Oct 2011)

Firefly said:


> if it was implemented, then IMO it would only be a matter of time before the old ways crept back in....a td getting a new road built in his constituency etc etc.
> 
> Sadly, I think that all we can hope for is reduced government spending on a gradual scale, but I have my doubts here too



I think you are very right there. But we can dream


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## Husker (29 Oct 2011)

deleted


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## Husker (29 Oct 2011)

Chris said:


> Only if you maintain the current level of government spending, which, as shouldn't come as a surprise to many here, I believe could and should be cut "astronomically". The long term affect would be that many wealthy people would move here, and wealthy people spend quite a bit of money, which would result in increased sales tax revenue. .


 
Hmmm... so what more public expenditure would you cut exactly?  If it's salaries, don't you think that those public servants not currently availing of Family Income Supplement would so so?  Or would you cut that too?  Wealthy people spend quite a bit of money alright - but less proportionately than those that earn less than them.  Back to the drawing board with that one.


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## Purple (30 Oct 2011)

Husker said:


> Hmmm... so what more public expenditure would you cut exactly?  If it's salaries, don't you think that those public servants not currently availing of Family Income Supplement would so so?  Or would you cut that too?  Wealthy people spend quite a bit of money alright - but less proportionately than those that earn less than them.  Back to the drawing board with that one.


I'm not in favour of a flat rate tax and higher sales taxes but your points above don't make sense.


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## Husker (30 Oct 2011)

The point is that an astronomical reduction in public spending would require further reductions in salaries and/or public programmes (such as FIS).  The replacement of income tax with a sales tax would disproportionately affect those who spend proportionately more of their income on items subject to a sales tax - i.e. the lower paid.


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## orka (30 Oct 2011)

Husker said:


> The replacement of income tax with a sales tax would disproportionately affect those who spend proportionately more of their income on items subject to a sales tax - i.e. the lower paid.


What makes you think it's the lower paid who spend proportionately more of their income on VATable items?  A large proportion of their income must go on items not attracting VAT - accommodation, food, childrens clothes...


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## Husker (30 Oct 2011)

orka said:


> What makes you think it's the lower paid who spend proportionately more of their income on VATable items? A large proportion of their income must go on items not attracting VAT - accommodation, food, childrens clothes...


 
This paper for a start ...

[broken link removed]


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## shnaek (1 Nov 2011)

Husker said:


> This paper for a start ...
> 
> [broken link removed]



Ah, those sages of credibility - the esri - the guys who gave us such doozy's as the 'soft landing' and who predicted in 2008 that we would have 3.75% growth per annum for the next 9 years.


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## Chris (2 Nov 2011)

Firefly said:


> It would be lovely to wave a magic wand and arrive at this situation, however I'd imagine there would literally be blood on the streets if this was implemented. Given the nature of politics here and the voting system, no political party would even consider it. Finally, if it was implemented, then IMO it would only be a matter of time before the old ways crept back in....a td getting a new road built in his constituency etc etc.
> 
> Sadly, I think that all we can hope for is reduced government spending on a gradual scale, but I have my doubts here too


I agree, that it is unlikely to happen from top down. But I believe that if the western world  continues as it has, then the whole system will fall apart and the changes, i.e. massive government spending cuts, will have to be introduced, there will be no choice in the matter.



Husker said:


> Hmmm... so what more public expenditure would you cut exactly?  If it's salaries, don't you think that those public servants not currently availing of Family Income Supplement would so so?  Or would you cut that too?  Wealthy people spend quite a bit of money alright - but less proportionately than those that earn less than them.  Back to the drawing board with that one.


I would start by cutting out entire government departments, there are way too many that at the moment simply cannot be afforded, and even in good times are completely unnecessary; wages and welfare would also be cut.
When more wealthy people are attracted here because of tax reasons then more high level spending will come here which would attract higher VAT revenue, so no need to go back to any drawing board. 



shnaek said:


> Ah, those sages of credibility - the esri - the guys who gave us such doozy's as the 'soft landing' and who predicted in 2008 that we would have 3.75% growth per annum for the next 9 years.


Hahahahahahaha


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## Firefly (3 Nov 2011)

Chris said:


> I agree, that it is unlikely to happen from top down. But I believe that if the western world  continues as it has, then the whole system will fall apart and the changes, i.e. massive government spending cuts, will have to be introduced, there will be no choice in the matter.



I see a war against China before that happens. The West will default 100% on bonds held by the Chinese (only) which would dramatically strenghten their balance sheets...if enough countries came on board then borrowing/lending would resume afterwards with little change. Of course the Chinese would be put back by half a century. Conspiracy theory for sure, but aren't we kinda due a war?


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## Chris (3 Nov 2011)

Firefly said:


> I see a war against China before that happens. The West will default 100% on bonds held by the Chinese (only) which would dramatically strenghten their balance sheets...if enough countries came on board then borrowing/lending would resume afterwards with little change. Of course the Chinese would be put back by half a century. Conspiracy theory for sure, but aren't we kinda due a war?



I don't think that percentage wise China holds enough foreign debt to be able to allow a selective default. China's foreign reserves are somewhere in the region of $3-4tr. While that is a large number it is quite small in comparison to what the EU and US has in outstanding debt. 
If China were forced to write off that debt it wouldn't have much of an impact in the long run, as they have very little debt, they could continue operating as normal, as they do not eed to borrow to finance themselves.


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