Every young person should get €100k tax credit instead of a lifetime CAT allowance

Silversurfer said:

This begs the question should wealthy families subsidise the poor? If so to what level?

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We have very high levels of income redistribution in Ireland. Too high in my opinion. We tax high incomes at a very high rate but don't tax wealth retention at all. If you are wealthy you get to keep it but if you want to acquire wealth through work then you'll have the bejasus taxed out of you.

That's the hard working subsiding the wealthy and the poor.

Purple said:

We have very high levels of income redistribution in Ireland. Too high in my opinion. We tax high incomes at a very high rate but don't tax wealth retention at all. If you are wealthy you get to keep it but if you want to acquire wealth through work then you'll have the bejasus taxed out of you.

That's the hard working subsiding the wealthy and the poor.

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What about those who have had the ‘bejasus’ taxed out of them and acquire wealth? Or those who have acquired a family home through social assistance and then acquire wealth?

Silversurfer said:

What about those who have had the ‘bejasus’ taxed out of them and acquire wealth?

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Most of those people have benefitted from a succession of bail outs which have vastly inflated their property and pension assets. That is entirely unearned income. I'm one of those people.

Silversurfer said:

Or those who have acquired a family home through social assistance and then acquire wealth?

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Yep, there's too much social transfer here.

arbitron said:

Are these not just the cases that breach the threshold? So there were also X number of inheritances below the €335,000 cut-off (and not captured in the report) where people got 100% relief on the CAT that would have been due. I don't know what that theoretical lost CAT revenue is but it would be millions.

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No. As far as I know they are the total number of cases in Group A.

I read somewhere in CSO figures that only 36% of households received sizable gifts/inheritances across all threshold groups. I shall try and dig it out.

I would guess that the greater proportion of the yield would be composed of a small number of large gifts/inheritances. The rest would be under or equal to the threshold or slightly over.

CAT thresholds are confined to the relatively small proportion of the population that receive gifts/inheritances and the large group A threshold to an even smaller proportion. So at the moment it is affordable.

Given that the estimated cost of increasing the groups B and C threshold to the level of group A would be 291m per annum, all things being equal, this would reduce the CAT yield by 48%.

That should give an indication of the probable cost of your suggestion and its effect on the CAT yield.

Also, don't forget that the thresholds are designed specifically for gifts/inheritances received and received in the here and now. So that they are economically linked to something

At present, we are in a rising property market - which is reflected in the Group A threshold.

The exchequer collects what it needs. A reduction in something leads to a rise in something else. That something else might be more unpalatable.

You understand that I am looking at this purely from a feasibility angle.

I shall leave the rights and wrongs of CAT to others.

arbitron said:

CSO says the median value of inheritance is €99,200 and the median value of gifts was €15,900. €130k is above average and many would find it life-changing.

If my parents are rich, they give me a house worth €300k, I pay no tax on that, even though I have done nothing to earn it.

If my neighbour works on a building site breaking his back and earns €60k, he pays tax on it.

If my neighbour's parents are poor and cannot give him a gift, then his income taxes are paying for other people's CAT tax relief, e.g the €100k I should have been liable for on the free house my parents gave me.

So it's not edge cases at all. There are many people who get no/low inheritance. And then there are others who get sizeable inheritances and get the full whack of €110k tax relief from our pockets.

I'm not aware of an 80% CAT rate, I have only heard of 33%?

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It's not about being massively rich, if you have a house asset to pass on, most people have paid for it through earned income, whether back or brain breaking.
This would just be punitive to already taxed income most of us put into one asset and hope to pass on.

micheller said:

It's not about being massively rich, if you have a house asset to pass on, most people have paid for it through earned income, whether back or brain breaking.
This would just be punitive to already taxed income most of us put into one asset and hope to pass on.

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The proposal is to allow each individual to choose for themselves to either keep the Group A tax relief that already exists or to claim some/all of it against income tax. How would giving the same tax relief to everyone be punitive?

micheller said:

It's not about being massively rich, if you have a house asset to pass on, most people have paid for it through earned income, whether back or brain breaking.

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Most people who are now dying and leaving houses, or part thereof, to their children have accumulated most that wealth (the value of their house) through capital appreciation rather than after tax income. If any asset should be taxes it's an inherited house.

micheller said:

This would just be punitive to already taxed income most of us put into one asset and hope to pass on.

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So should there be no inheritance tax?
I'd rather live in a society where people kept a larger proportion of the money they earned and that was what decided whether they were affluent than in a society where over half our marginal income was taken in tax and whether or not we were affluent was determined by what we inherited. The inevitable outcome of that is a landed and moneyed ruling class. I'm not a big fan of that model.