Cut the dole to cut higher tax rates

[TheBigShort]

Unemployment Benefit II (Arbeitslosengeld II) / Social Benefit (Sozialgeld)

All persons capable of work and eligible for benefits can receive unemployment benefit II (Alg II) from the age of 15 years until the legally stipulated age limit between 65 and 67 years. Persons not capable of work can receive social benefit. Alg II and social benefit are benefits to secure a livelihood. Legislation determined to what each individual is entitled to in the so-called "normal requirement" (Regelbedarf).

Normal requirement
The normal requirement globally covers the costs of food, clothing, household energy (without heating and warm watergeneration), personal hygiene, household effects, needs of everyday life, as well as to a reasonable extent also relations to theenvironment and participation in cultural life.

Singles, single parents, as well as adults with a minor partner are entitled to the full amount of normal requirement. Since 1January 2016, this is EUR 404 for all of Germany. The normal requirement for adult partners is EUR 364. Children younger than 6years receive EUR 237. Between 6 and including 13 years of age this is EUR 270. Children and young persons between 14 and 17 years receive EUR 306. For young adults from 15years on and below 25 years who live with their parents or who moved without the positive assertion of the municipal authority, this is EUR 324.

Young adults who are 25 years and older must file their own application for (Alg II), regardless of the fact whether they live in their own flat or with their parents. Persons living in their ownhousehold form a separate benefit community (BG) if they are at least 15 years old.

Social benefit
Persons not capable of work but in need of assistance receive social benefit, if a least one person capable of work but in need of assistance lives in their benefit community.

Accommodation and heating
The costs of accommodation and heating are, if they are reasonable, borne to the amount of the actual expenses.

If you own a house or a flat, the costs of accommodation include the costs connected with it, however, not the amortization payment for credits.

Persons below 25 years who want to move out of their parents' home only receive a refund of the costs of accommodation and heating, if the municipal authority agreed to the move. This agreement can be obtained from the contact persons responsible for your benefits. Agreement needs to be obtained if

• the persons concerned cannot live with their parents for "severe social reasons",
• the move is necessary for the integration in the labour market or
• another severe reason exists.

Non-recurring benefits
Beyond the normal requirement you can receive non-recurring benefits as credit, cash or non-cash benefit for

• initial equipment of the flat including household devices,
• initial equipment for clothing (also for pregnancy and birth) and
• the acquisition and repair of medical devices and renting of therapeutical devices.

Very good. But Germany spends considerably more on social welfare than Ireland does, according to;

[broken link removed]

 

[orka]

Very good. But Germany spends considerably more on social welfare than Ireland does,

What's your point?

Germany CAN spend more on social welfare because it collects a lot more in social insurance contributions. Contribution rates are much higher than in Ireland and (you may need to sit down for this BS) these high contributions start at a very low income level (but they are capped - it's almost as if the lower earners pay more so the high earners can be given a break).

Also, bear in mind that social welfare spending includes pensions - Germany's population is much older than Ireland's and they have salary related benefits.

 

[Sophrosyne]

What is being proposed is to cut the dole in order to reduce taxes on the higher paid and furthermore to radically change the PRSI system.

This is based on the premise that those with higher income pay more than their “fair share”.

Frankly, I don’t buy it.

As mentioned previously, only 0.27% of taxpayers had an effective rate of income tax and USC greater than 40% - the highest ER being 42.54%.

Only 5.36% of taxpayers had an ER greater than 30%.

I have seen countless iterations on the same theme all arriving at the same conclusion – those with lower incomes should contribute more so that those with higher income can pay less.

There is not a lot wrong with our tax system it is rather the nature of the Irish economy.

We are a small nation of mostly micro to medium sized businesses with limited capacity to create employment – much less well-paid employment.

The majority of taxpayers have low incomes.

In 2014, 1,206,851 or 54.26% of taxpayers had incomes of €30,000 or less.

412,519 or 18.55% had incomes of less than €10,000.

We have to deal with the situation in Ireland rather than looking to other countries whose population and business demographics and natural wealth bear no resemblance to Ireland’s.

 

[TheBigShort]

Germany CAN spend more on social welfare because it collects a lot more in social insurance contributions.

So you are advocating that Ireland should collect more in social contributions?

Contribution rates are much higher than in Ireland

Yes, sounds pretty definite, you want to increase PRSI contributions.

and (you may need to sit down for this BS) these high contributions start at a very low income level (but they are capped - it's almost as if the lower earners pay more so the high earners can be given a break).

Including on low income earners, who are the primary beneficiaries of welfare payments (by virtue of their low incomes).

So if I have this straight, you want to increase PRSI on working people, including low income earners, so that low incomes earners will in turn have less disposable income and in turn, require increased welfare benefits, payable by increased PRSI contributions from higher earners who dont qualify for welfare benefits - and this will give those workers a break?

 

[MrEarl]

Hello,

I think we can get better value for the amount of overall dole payments the State makes each week ... for example, if we do a deal with a few large national retailers to accept vouchers in return for groceries, likewise if we do a deal with a couple of the energy providers, I'm sure we could buy the vouchers at less than par value and then distribute the vouchers as part of the dole payment each week. I know this would compel everyone claiming the dole to use the vouchers for their specific purposes, but food, light and heat are essentials so I can't see how anyone would have legitimate grounds to complain.

I also continue to have concerns regarding people claiming the dole on a fraudulent basis. Am I the only one who suspects there may be people claiming the dole illegally ?

 

[TheBigShort]

if we do a deal with a few large national retailers to accept vouchers in return for groceries,

It would have to be across the board with retail grocers, not every town and village has each of the retailers. Selecting only a few would impose an unnecessary inconvenience on people.

if we do a deal with a couple of the energy providers, I'm sure we could buy the vouchers at less than par value and then distribute the vouchers as part of the dole payment each week

Again, it would have to be across the board, otherwise it might represent an unfair advantage to register customers. For instance, if im with energia but they are not part of this program, and I lose my job, I have to change my energy provider.
Sounds like an inconvenience to everyone to implement such schemes, never mind the additional administration that would go with it.
Alternatively, we could adopt the attitude that if people want to watch TV, keep warm, and not starve, that they will most likely spend their money at the grocers and with energy providers anyway?

I also continue to have concerns regarding people claiming the dole on a fraudulent basis. Am I the only one who suspects there may be people claiming the dole illegally ?

No, you are not the only one who has concerns. The Dept of Social Protection published a headline €660m preventive measures for fraud. The figure is an estimate of how much fraud there would be if they didn't carry out their fraud prevention measures.
The real fraud figure is estimated to be between €30m and €80m of the entire €20bn budget.

 

[jjm]

The company i work for supply parts to a German company last year we were on short time ,German company also had some of its operators on lay off ,From talking to the person we deal with, people who are there the longest usually get laid off first because the get there full net wages the longer you pay in to the system the more you get out,

 

[TheBigShort]

The company i work for supply parts to a German company last year we were on short time ,German company also had some of its operators on lay off ,From talking to the person we deal with, people who are there the longest usually get laid off first because the get there full net wages the longer you pay in to the system the more you get out,

Yes, its a good idea. But the Germans spend considerably more on their social welfare programs than we do.
So if we are prepared to raise taxes further (corporation tax might be an option), including on lower income earners, then we can have a German style welfare system.
But the proposals in this thread is to cut taxes on higher earners and place the burden more on lower earners.

 

[Purple]

What is being proposed is to cut the dole in order to reduce taxes on the higher paid and furthermore to radically change the PRSI system.


This is based on the premise that those with higher income pay more than their “fair share”.

It’s based on what everyone else does, what we have been advised to do by the OECD, the Troika and others who manage to run their countries in a way which avoids boom-bust cycles.

As mentioned previously, only 0.27% of taxpayers had an effective rate of income tax and USC greater than 40% - the highest ER being 42.54%.

Only 5.36% of taxpayers had an ER greater than 30%.

Yes, and that 5% pay more income tax than the bottom 50% of earners, and no, they don’t earn more than them.


I have seen countless iterations on the same theme all arriving at the same conclusion – those with lower incomes should contribute more so that those with higher income can pay less.

There is not a lot wrong with our tax system

I think there’s a lot wrong with a taxation system which tells people that if they work harder and try to better themselves the state will take over half of the fruits of their labour.

it is rather the nature of the Irish economy.


We are a small nation of mostly micro to medium sized businesses with limited capacity to create employment – much less well-paid employment.

Yes, and our taxation system ensures that people who can and will create businesses which generate high incomes will be punished for their efforts.

The majority of taxpayers have low incomes.


In 2014, 1,206,851 or 54.26% of taxpayers had incomes of €30,000 or less.


412,519 or 18.55% had incomes of less than €10,000.

That includes part time employees so is meaningless.

We have to deal with the situation in Ireland rather than looking to other countries whose population and business demographics and natural wealth bear no resemblance to Ireland’s.

We have the most “progressive” taxation system in the developed world. We pay more tax sooner and no tax for longer. The argument that we are somehow special and so can and should do things which are economically stupid, and therefore socially destructive in the longer term, is delusional and dangerous.

 

[TheBigShort]

It’s based on what everyone else does, what we have been advised to do by the OECD, the Troika and others who manage to run their countries in a way which avoids boom-bust cycles.

There is no advice anywhere, let alone from the OECD, Troika etc, that advocates imposing tax increases on lower earners to supplement tax breaks for higher income earners other than on askaboutmoney.com.

 

[TheBigShort]

That includes part time employees so is meaningless.

Why is it meaningless? These are the people that you want to impose taxes on in order to provide tax relief for higher earners.

 

[Purple]

There is no advice anywhere, let alone from the OECD, Troika etc, that advocates imposing tax increases on lower earners to supplement tax breaks for higher income earners other than on askaboutmoney.com.

I didn't say there was. There may well be but the post you quoted was not about that specific point.

 

[Purple]

Why is it meaningless? These are the people that you want to impose taxes on in order to provide tax relief for higher earners.

So if I work 5 hours a week for €50 an hour I'm low paid, I'm not a high earner?
Someone on €20 an hour should have some of their income taken from them and given to me? Is that what you think?
If it's not what you think then you will agree that comparing the yearly income of a part time employee with a full time employee is meaningless.

 

[TheBigShort]

So if I work 5 hours a week for €50 an hour I'm low paid, I'm not a high earner?

Correct.

Someone on €20 an hour should have some of their income taken from them and given to me?

Depends. If they are only working 5 hrs a week, then no, that shouldn't occur. If they are working full-time (say 40hrs), by all means they should make some contribution to assist low-income earners. But in fairness, that contribution should not start to kick in at a level of income that is not applicable also to the low earner. That is why I would support the 1% USC rate to all earners.

 

[jjm]

Hi
We cannot cut the higher tax rates full stop ,even if we cut dole to 50 euro a week ,High tax rates makes it very easy for the goverment to take back tax/usc/prsi Worker/Employer Prsi/ pension levy on all pay increases private/public service ,Life is very easy for Michael by keeping tax high on high tax payers,He is getting the max tax possible half in goverment pocket half in your pocket, Happy days ,keep fighting high earner against people on the dole , All happy on how the are spending your money ,Employers prsi pays the dole with lots to spare

 

[orka]

As you can see from my previous post, in 2014, very few people (5,905 or 0.27% of taxpayers) had an effective rate greater than 40%.

Incorrect.

As mentioned previously, only 0.27% of taxpayers had an effective rate of income tax and USC greater than 40% - the highest ER being 42.54%.

Incorrect.


Classic mistake (or self-serving obfuscation) to assume you can use averages to inform comments on everyone within a group.

In 2014, a 40% effective (income tax and USC, excluding PRSI) rate kicked in at about 136K for a single person and about 180K for a married/one earner tax unit. So there will be people paying a 40%+ effective rate in every revenue grouping down to the 100K-150K group.

What you have shown is the average effective rate for a group of people who will have diverse incomes and usage of tax reliefs. And you have ignored those in lower income groups who also pay 40%+ effective rates – because they are grouped with people whose use of additional tax reliefs brings their particular group average effective rate down below 40%.

Only 5.36% of taxpayers had an ER greater than 30%.

Again, incorrect for the same reasons. For a single person in 2014, an effective rate of 30% (again excl PRSI for some reason – how hard is it to add 4% to a number?) kicked in around 61K income assuming no reliefs. So you would have to go way back in your revenue groupings before you could stop counting how many people had effective rates in excess of 30%.

Revenue’s statistics do not provide enough information to calculate what you are trying to show.

I'm not sure that these rates are excessive or would act as a disincentive.

Leaving aside the fact that your calculations of maximum effective rates and numbers paying them are incorrect, what makes you conclude this? Are you paying these levels of taxation? Do you have many friends/family paying these levels of taxation? Also, don’t forget to add the 4% PRSI onto what you are calling effective rates.

 

[MrEarl]

It would have to be across the board with retail grocers....Again, it would have to be across the board (re: energy suppliers).....Sounds like an inconvenience to everyone to implement such schemes, never mind the additional administration that would go with it......

Thank you for the response.

You are correct about any scheme being wide enough to ensure full and fair coverage. I took that as read tbh....

As for the bit about it being an inconvenience to implement ... lets not forget, the focus here is on getting better value for our money, not making life easy for everyone concerned (otherwise, we'd be paying Tesco & Supervalue to deliver the groceries to each dole recipients house etc ).

....As for the extra administration, in this day and age much of this could be done electronically I am sure so there may not be as much administration as you might first fear. Perhaps I should have suggested an electronic voucher system, to keep us both on track with this one (sorry ). Let us not forget, people collecting the dole are unemployed so have lots of free time to do a little bit of admin if it's required, in order to get their weekly benefits

 

[orka]

So you are advocating that Ireland should collect more in social contributions?


Yes, sounds pretty definite, you want to increase PRSI contributions.

Yes I do – I’ve said this a number of times in this and other threads – increased PRSI, low/no threshold, and an earnings cap on contributions (similar to the cap that existed pre-2011).

Including on low income earners, who are the primary beneficiaries of welfare payments (by virtue of their low incomes).

The primary beneficiaries of welfare payments are pensioners, those with no income and those in receipt of child benefit. None of these would be impacted by changed PRSI.

So if I have this straight, you want to increase PRSI on working people, including low income earners, so that low incomes earners will in turn have less disposable income and in turn, require increased welfare benefits, payable by increased PRSI contributions from higher earners who dont qualify for welfare benefits - and this will give those workers a break?

You have very convoluted thought processes. Some thoughts:

I’m pretty sure pensioners are included in revenue income and taxation statistics (no reason for them not to be) – so many small occupational pensions will be included as ‘low earnings’ – these are not hit by PRSI.

As has been pointed out several times, low earners are often low earners because they work part time or for part of the year (my college age daughter who works in the summer and part time the rest of the year would be one of your huddled masses). A part time low earner is not necessarily part of a low income household and may not be in receipt of any welfare payments.

So for various reasons, many of those considered low income earners will either not be paying PRSI anyway or will not be eligible for increased (/any) welfare support as a result of changes in PRSI.

…payable by increased PRSI contributions from higher earners who dont qualify for welfare benefits - and this will give those workers a break?

I’ve said a few times that I would re-introduce the cap that applied to PRSI contributions until about 2011. This is fair in the context of this ‘insurance’ having caps on benefits.

 

[TheBigShort]

Yes I do – I’ve said this a number of times in this and other threads – increased PRSI, low/no threshold, and an earnings cap on contributions (similar to the cap that existed pre-2011).

Yes, you have. And I have agreed in principle with the idea. Im also in favour of welfare benefits equal to or close to the workers last wage, reducing over time.

The primary beneficiaries of welfare payments are pensioners, those with no income and those in receipt of child benefit. None of these would be impacted by changed PRSI.

True. But working people would be. The impression I get on this thread is that working people, particularly higher earners, are already taxed too much. So increasing their PRSI wouldnt wash well with them. Perhaps some of them reading this could comment on your idea?

A part time low earner is not necessarily part of a low income household and may not be in receipt of any welfare payments.

My apologies, I took it as a given when I referred to low wage earners in receipt of welfare, that it was understood I was talking about low income earners in receipt of welfare. Not low-income earners not in receipt of welfare.

So for various reasons, many of those considered low income earners will either not be paying PRSI anyway or will not be eligible for increased (/any) welfare support as a result of changes in PRSI.

Isnt the point of this whole thread is to get those who dont contribute anything or very little, to start contributing more?
It seems like those in favour of the general theme of this thread have a wide and varied views of how to go about it.
Purple wants to increase tax rates on low earners and reduce the rates on higher earners. Firefly wants a basic income with a flat rate of tax, Brendan Burgess wants to cut welfare rates and marginal tax rates and you want to increase PRSI on working people without necessarily imposing those increases on low income earners.
All of which are inconsistent with each other and are either ridiculous (Purples idea), uncosted (Firefly), unaffordable and politically not possible (Brendan) or completely at odds with the thread topic in the first place - that would be your idea.

 

[Purple]

It would be nice if we could stay away from the personal attacks BS.
I haven't seen any meaningful suggestions from you other than minor tinkering which would have no real effect on the problem.
Increasing PRSI, getting everyone to pay it and reinstating the cap would have the effect of reducing the marginal tax rate and broadening the tax base; increasing taxes on low earners and decreasing them on high earners. That would move things back to where we were a decade or so ago. It would be a step in the right direction. Why do you think broadening the tax base and getting people to pay what they paid for decades is ridiculous?