Key Post Nevin Institute: " low paid pay more tax"

ashambles said:
NERI don't care about being wrong and don't care about challenges.

They're simply trying to get some trade union spin in early for the budget. What the unions are saying is the same as the poster Deiseblue in this tread except not as honestly, don't even think of reducing income tax because they can increase public sector salaries instead. the last thing the peculiar Irish version of socialism wants is to help all workers.

Notably their internet sites don't seem to allow comments. http://www.nerinstitute.net/blog/ https://www.facebook.com/nerinstitute .
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I've looked at their website before. Their publications are fine as long as you are not bothered about economics, balance, facts, rationality or even a modicum of rationality etc. I've said it already but they are to economics what creationism is to evolutionary theory.
 
Hi RainyDay

NERI's FAQ does not deal with any of the substantial criticisms which I have made

1) The bottom decile does not pay 30% of its income in taxes. It gets 85% of its income from the Exchequer, so it has a massive negative tax rate.
2) There is no proper explanation of why their expenditure for the bottom decile is twice their income.
3) By and large, there is no VAT or indirect taxes on the necessities of life - basic foodstuffs, accommodation, and public transport
4) The 23% VAT rate and high excise duties apply to the luxuries - Cigarettes, petrol and booze.
5) Direct taxation is not levied on households - individuals and married couples are charged tax and the effective tax rate on individuals with an income of €160,000 is far higher than 24%
6) The data is based on the 2009/2010 period. Effective Tax Rates are much higher now for three reasons. They do not appear to have made any adjustment for the USC which was introduced in 2011 and adds an additional 6% points to the income of someone earning €160,000. Nor do they appear to have made any adjustment for the phasing out of legacy property tax reliefs will have also increased the Effective Tax Rate. I think that the introduction of Minimum Effective Rates of Tax will also have raised the Effective Rates since 2009/2010.

The policy implications are significant

Last year, NERI called for the Effective Rate of Tax on the top earners to be raised by 1.5% to 25%(?) Say the Minister for Finance announced in the coming Budget that he was abolishing all tax personal credits, allowances, pension deductions, medical expenses, nursing home fees, carers' allowances etc for those earning over €100,000 and he was going to charge a simple 27% of all their income instead of the mixture of income tax, USC and PRSI. This is a far higher tax rate that NERI is proposing. The high earners would be thrilled.

The direct taxation system in Ireland is not fair. Tax evasion is commonplace among low earners and high earners. Some people still have exempt income - artists, those with forestry income and, some who still benefit from the historical property tax incentives. High direct taxes on luxuries helps to redress the balance in a very small way.

The source of the data

The data is derived from the 2009/2010 Household Budget Survey not from the actual tax rates (where the marginal rate is 55%) or the Revenue Statistical Reports.

The purpose of the Household Budget Survey is to collect information for inflation calculations. In this survey, 5,000 people keep a record of their expenditure and their income and their tax payments for a two week period. NERI extrapolates this to a full year to work out the Effective Rates of Tax.



Direct taxation - income tax, prsi and USC

Direct taxation in Ireland is not based on households or on what decile of income you are in.

Individuals and married couples are the unit of taxation and the tax is based on their income.

NERI claims that a household with an average income of €159,000 pays 24% in direct taxes. A self-employed individual earning €160,000 who does not take any advantage of tax relief on pension contributions, etc, pays an effective tax rate of 47%. A couple earning €160,000 between them pays 40%. In 2011, according to the Revenue data, a single person earning between €150k and €200k paid 31% in income tax alone on their gross income. Some income such as child benefit and maternity benefit is not taxed, so you can argue that the Effective Rate of Income Tax was lower. I am trying to clarify with the Revenue the impact of pension contributions on the calculation of gross income. But let's reduce the 31% income tax to 27%. Now add 11% for USC and PRSI, so the effective rate of tax is 38%.

I am working on a full paper on this.

Indirect Taxes

The bottom decile has reported expenditure twice its reported income. I imagine that this is due to the manner in which the data is collected. It's self reported data from a sample of 5,000 households over a two week period.

At the very least, NERI should highlight this in its summaries and its press comments. I was not aware of this until Séamus Coffey pointed it out.
 
Great work Brendan.

The Household Budget Survey may well be an excellent indicator of inflation trends, but it is clearly a dubious basis for extrapolating national income statistics. For example, did NERI's paper mention any adjustments for the Hawthorne effect?
 
The more I look into this, the more disgraceful it is.

Check out NERI's own report from this time last year

[FONT=&quot]Income Taxes and Income Tax Options: A Context for Budget 2014[/FONT]


It's a great source of analysis and data which show the true Effective Tax Rates.

It makes the distinction between households and individuals very clear.

But here is a cracker from Page 19 (22 of the PDF)

[FONT=&quot]
Budget 2010 and the Finance Act 2010 (Department of Finance, 2009 and 2010) altered the High Earnings Restriction …. The restriction is currently structured so that those individuals with an income exceeding €400,000 experience this minimum effective income tax rate and the restriction and its taper commence at €125,000 and where an individual claims more than €80,000 in tax expenditures specified under the measure. The tapering system aims to ensure that high-earners above €125,000 and availing of these tax expenditures pay a minimum effective income tax rate of 30%. The minimum rate does not include liabilities for PRSI and USC which are paid on top of the minimum rate.
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[/FONT]


[FONT=&quot]So the minimum effective tax rate for high-earners above €125,000, who avail of the tax schemes, is 41% in 2014 when you include USC and PRSI. And this is for someone who has claimed over €80,000 in expenditures on schemes!
[/FONT]
This government has implemented very effective policies to raise the effective tax rate, yet NERI continues to claim that those earning €159,000 pay a 26% effective rate of tax.

[FONT=&quot]
[/FONT]
 
Thanks Brendan, the whole thing (from NERI) is a gross distortion and misrepresentation of some information in order to present it as something else. It is an outrageous untruth and it is shameful that more of the media has not called them on it.

Despite two articles exposing the dishonest nature of the NERI report (one by Brendan) Stephen Kinsella still sees fit to write a heart-tugging fluff piece citing the same Nevin Research rubbish as it was fact
 
I have just come across a great post on The Property Pin by user ChickenParmentier

It's a long post, so allow around 10 minutes to read it and a bit more time to understand it properly.

The introduction alone is brilliant and summarises my feelings entirely. I have spent a long time countering the nonsense from the Nevin Institute which could be better spent on other consumer issues such as the very high Standard Variable Rate.

The problem with tendentious nonsense like this is that its takes an age to analyse and refute the messages being advanced and the conclusions being reached.

Even the headline message about the lower paid paying a greater proportion of their overall is not even an argument. It is made as an observation that the listener is meant to convert into an argument about the lower paid subsidising the better-off.
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Heads up....Vin B is back tonight and he has the Nevin Inst on to discuss their recent report. TV3 at 11.
I'm sure it'll be as balanced as ever on the Vin B lefty love-in
 
[FONT=&quot]In June 2014, TASC, “an independent progressive think-thank whose core function is economic equality and democratic accountability” published a paper How much tax do people pay on their incomes? [/FONT]
[FONT=&quot]Although TASC works closely with the Nevin Institute on many projects, they came up with very different figures from the Nevin Institutes. They correctly distinguish between single people and married people. Here is an extract from Table 3
[/FONT]


gross income|single|married{br}one income|married{br}two incomes
€87,500|36.9%|32.1%|26.5%
€125,000|39.3%|36.2%|32%
€175,000|41.5%|38.8%|35.9%
€275,000|43.2%|42.8%|41%
 
Brendan Burgess said:
Direct taxation - income tax, prsi and USC

..... Some income such as child benefit and maternity benefit is not taxed, so you can argue that the Effective Rate of Income Tax was lower. I am trying to clarify with the Revenue the impact of pension contributions on the calculation of gross income. But let's reduce the 31% income tax to 27%. Now add 11% for USC and PRSI, so the effective rate of tax is 38%.

I am working on a full paper on this.
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Very minor point, but maternity benefit is taxable since a recent budget.
 
Another Union rows in behind the Nevin report - Danny McCoy CEO of IBEC has just stated on Prime Time that the Nevin report has made a valid point & our tax system is regressive ! :D
 
Hi Deise

I am surprised he gave it any credibility at all, but what I think he said was that indirect taxes are regressive.

Brendan
 
Deiseblue said:
Another Union rows in behind the Nevin report - Danny McCoy CEO of IBEC has just stated on Prime Time that the Nevin report has made a valid point & our tax system is regressive ! :D
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You are correct on one point though; IBEC is a union.
 
Cormac Lucey had a good article on the Nevin report in the Sunday Times last week

http://cormaclucey.blogspot.ie/2014/09/the-nevin-institute-and-lobby-for-ever.html

I am very surprised by this:

The relevant measure of the impact of state policy on the poor is anyway not the impact of individual policies but the impact of all state policies combined. In particular, we should compare people’s disposable income before state intervention to their disposable income after it. Here the CSO figures are clear. The system is progressive and, as of 2009 and 2010, the bottom seven deciles were net recipients of state funding (i.e. they paid less in tax and social insurance than they received in state transfers). This means that the Irish state is effectively being financed by just its top three income deciles i.e. by households earning more than about €50,000 each year.
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And a nice conclusion

It was over 30 years ago that the late John Kelly TD stated in a speech to the Claremorris Chamber of Commerce “since there was always a political party or group willing to take up and amplify any demand, however little justified according to earlier standards, the habit grew of looking to the State or a State agency for everything.” Today there is a broad identity of political interest between Ireland’s public sector, our liberal “knowledge class” (in the media, academia, NGOs and clergy), trade unions and a large underclass dependent upon government.
The trade union-funded Nevin Institute aims to provide this constituency with intellectual ammunition. They all want a growing public sector, extensive welfare and a large but docile government. The answer to any problem is always more government but only seldom greater personal responsibility. The political challenge facing those who would reverse this pattern of institutionalised dependency, auction politics and the dubious pension accounting on which they rely is therefore considerable. But at least the facts may be on their side.
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Hi Gerry

It's hard to get everything in during a 12 minute piece.

But the piece highlighted a few issues
The effective rate of tax on salaries of €150k is 41%
The higher paid, pay most of the taxes.
The lower and middle earners pay a lot less than their counterparts in Europe.

The programme was flagged as covering "who has lost the most due to the austerity budgets" but both Seamus Coffey and Micheál Collins reminded us that the big losers, were those who have lost their jobs.

I brought up the NERI nonsense that the bottom 10% pay the same effective tax rate as the top 10%.

Overall, I was very happy that the programme produced more information and facts than most other programmes and commentators who just talk about the squeezed middle.
 
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