The 'effective' tax rate is just a makey-up number,
Hi PMU
Let me ask you the question, I asked earlier:
Which would you prefer, if you were earning €30,000?
To pay €3,000 tax in total, but a marginal rate of 40%
or
€6,000 tax in total, but a marginal rate of 20%?
Personally, I would prefer to see 10% of my income going in tax, rather than 20%, even if they are "makey up" numbers.
Brendan
In this scenario:Hi PMU
Let me ask you the question, I asked earlier:
Which would you prefer, if you were earning €30,000?
To pay €3,000 tax in total, but a marginal rate of 40%
or
€6,000 tax in total, but a marginal rate of 20%?
Personally, I would prefer to see 10% of my income going in tax, rather than 20%, even if they are "makey up" numbers.
Brendan
So logically you would want to pay at the higher marginal rate because you have a lower taxable income.
The MTR is important for some reasons:
[1] people making decisions at the margin - will I work extra hours, will I do overtime
Also, the MTR facing a spouse / second earner going back to work.
[2] High MTR can encourage tax avoidance and tax evasion
Also note that people, perhaps incorrectly, focus on the top MTR. So if lots of people use it in their decision-making, we must be concerned/interested in it.
Who are you? | € annual income | € monthly take-home income 2008 | € monthly take-home income 2014 | € monthly take-home income 2016 | % decline 2008: 2016 | € decline 2008: 2016 |
---|---|---|---|---|---|---|
Higher earner (self-employed, married with rental income) | 175,000 | 8979 | 7,955 | 8,131 | -9.4 | -848 |
Millennial (low income) | 22,000 | 1,753.00 | 1,610 | 1,634 | -6.80 | -119 |
Single income Couple | 57,500 | 3892 | 3,568 | 3,688 | -5.2 | -204 |
Dual income couple | 120,000 | 7200 | 6,611 | 6,834 | -5.10 | -366 |
Single public sector worker | 37,000 | 2581 | 2,386 | 2,454 | -4.9 | -127 |
Single parent | 30,000 | 2329 | 2,194 | 2,233 | -4.10 | -96 |
Pensioners | 48,000 | 3812 | 3,724 | 3,768 | -1.20 | -44 |
Civil partners | 90,000 | 5043 | 4,868 | 5,014 | -0.60 | -29 |
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