Property Tax - Will you pay?

[T McGibney]

Just one other point on this. I think we are reaching a saturation point on incomes taxes in terms of disincentivising effort (and all the points you mention above), which is why a property tax is a lesser evil than an increased level of income taxes.

If the poor, unemployed and low income earners are exempt from a property tax (which I understand will probably be the case), then the so-called property tax is merely another income tax, with all the same (albeit indirect) disincentive implications.

 

[DerKaiser]

If the poor, unemployed and low income earners are exempt from a property tax (which I understand will probably be the case), then the so-called property tax is merely another income tax, with all the same (albeit indirect) disincentive implications.

You are correct in that it adds to the poverty trap, creating further disincentives to work at lower incomes.

It's not a disincentive to whether someone decides to bust their ass doing overtime or hoping for a promotion though. Higher rates and lower bands disincentivise that, but a fixed property tax wouldn't.

 

[T McGibney]

It's not a disincentive to whether someone decides to bust their ass doing overtime or hoping for a promotion though. Higher rates and lower bands disincentivise that, but a fixed property tax wouldn't.

Indeed, but that's hardly at issue though?

It is clear that a property tax will have a disincentive effect, only that the disincentive will be a further poverty trap for low earners rather than a further bonus/promotion/overtime trap for comparitively higher earners.

One could argue about the relative merits of both approaches, but I suspect that the additional poverty trap will be more harmful, in a variety of respects, than the alternative.

It would be far more efficient and less costly to forget about the property tax and simply reduce personal tax credits accordingly. But instead of this clear logic we are fed balderdash about how a property tax will somehow magically 'widen the tax base' when the same limited range of people end up paying it AND income tax.

 

[DerKaiser]

It would be far more efficient and less costly to forget about the property tax and simply reduce personal tax credits accordingly. But instead of this clear logic we are fed balderdash about how a property tax will somehow magically 'widen the tax base' when the same limited range of people end up paying it AND income tax.

I'd agree with that. I don't think they are reducing the tax credits this time, but it would be a far more efficient way to achieve something similar.

One point I wouldn't agree on is that the bonus/overtime/promotion trap isn't as important as the poverty trap. The 52% tax rate kicks in around €32k/€33k. If the band goes much lower or the rate much higher we will have a serious problem competing internationally with a disincentivised workforce.

 

[ontour]

Assuming that it is inevitable, the property tax should be applied to all properties. If the owner has an inability to pay the tax, it should be accrued with interest until the owner can afford to pay the tax or until the property is sold. The tax should be paid from the proceeds in preference to other charges against the property.

 

[T McGibney]

Assuming that it is inevitable, the property tax should be applied to all properties. If the owner has an inability to pay the tax, it should be accrued with interest until the owner can afford to pay the tax or until the property is sold. The tax should be paid from the proceeds in preference to other charges against the property.

In other words, the State will eventually own the properties of the poor? This would be an utter scandal.

 

[ontour]

In other words, the State will eventually own the properties of the poor? This would be an utter scandal.

So theoretically in 50 or 150 years the state may accrue taxes and interest that equal the value of the property. Is that a good enough reason not to apply a property tax to all properties?

 

[T McGibney]

If they charge the same rate of 'interest' on late paid property tax as they do on late paid NPPR tax (10% per month) it won't take 50 years And it won't be theoretical either

 

[Firefly]

We seem to be obsessed with raising taxes in this country at the moment. Increasing taxes, as has been pointed out, will disincentivise productivity and make it more attractive to go on / stay on the dole. We should IMO be cutting taxes and slashing government spending at the same time. Make it necessary (by cutting the dole) and attractive (cutting income tax) for all those who are able to work to do so. Make it much more affordable for employers to hire by cutting employees PRSI and slashing commercial rates.

By introducing / raising taxes, the government has less incentive to cut its cost. The result is even more money being transfered from the private sector. I've said it before...there will come a point where even those with jobs will start to emigrate simply because it won't be worth staying. There will be others who will go on / stay on the dole. Who will fund our budget deficit then?

 

[oldnick]

Is this a fair summary of what's been said so far...?

There seems to be general agreement that increasing taxes may -like many austerity measures - actually impede the growth neccessary to pay off our debts and service our economy.

However, depending on how it's applied, property tax may be less incentivising than income and other tax increases.
If there was a means of postponing payment until the sale of the property/death of the owner and the penalty for delaying payment was based on an equitable interest rate then many people may prefer this tax to extra income tax.

However, although a fair system of delaying payments until sale or death may procure good income in the distant future it wouldn't get the revenue which is neccessary now.
Regrettably, the govnt want the money now so I doubt if a sytem of postponments with a fair penalty would be allowed.

 

[ontour]

If they charge the same rate of 'interest' on late paid property tax as they do on late paid NPPR tax (10% per month) it won't take 50 years And it won't be theoretical either

The alternative is a system of exceptions is very expensive to manage. Loopholes will be found where parents may put the house in the name of the children because they have no income or 1,000 other manipulations of a complex set of rules.

If it is a property tax then it is based on the property. If it is a tax based on equity in property, then it is a wealth tax and if it is based on the earnings of the owners then it is an income tax.

 

[shnaek]

We seem to be obsessed with raising taxes in this country at the moment. Increasing taxes, as has been pointed out, will disincentivise productivity and make it more attractive to go on / stay on the dole. We should IMO be cutting taxes and slashing government spending at the same time. Make it necessary (by cutting the dole) and attractive (cutting income tax) for all those who are able to work to do so. Make it much more affordable for employers to hire by cutting employees PRSI and slashing commercial rates.

+1

there will come a point where even those with jobs will start to emigrate simply because it won't be worth staying.

That is already happening. I thought about starting a thread here to find out if there is a level of tax above which people would not be willing to pay. A level of tax in other words, at which point people would emigrate.

I have friends who contract abroad, who always said they'd return home, and thus paid their taxes here by choice. This year, all of them with no exception, decided to stop paying tax here. And most of them are now saying they will never return here. These are all high earners (80k +), highly skilled and highly motivated people. The more of these we lose, the more we will continue to lose. And now we are going to tax people simply for living in the country.

 

[ontour]

Regrettably, the govnt want the money now so I doubt if a sytem of postponments with a fair penalty would be allowed.

If the tax is based on property and not income, it should not act as a disincentive to work so arguably better than an income tax increase.

The state need the money now. If the interest rate is set correctly, people are encouraged to pay now if they can afford to do so. This will reduce the number of people who do not pay because they disagree with other people being exempt. Everyone pays eventually, if you have the cash it makes sense to pay now. The inevitable backlash is dampened as no one will be able to avoid the tax.

There is no pleasant solution to raising taxes. Major restructuring of the public sector would help our economy but that is not going to happen for political reasons. Also it would potentially have a devastating impact on many public sector workers. I did find it quite interesting on Prime Time last night that Ruairi Quinn was trying to wriggle out of his agreement with the students and one of the constraints that he was committed to the Croke Park agreement. Civil servant trumps student by the looks of it !

 

[Firefly]

If the tax is based on property and not income, it should not act as a disincentive to work so arguably better than an income tax increase.

It will if those who are not working don't have to pay it. It will also make home ownership less attractive which is another debate altogether.

Slashing government spending would obviously adversely affect public sector workers, but by also cutting taxes it would stimulate employment. More people working in the private sector (raising taxes) rather than more people working in the public sector (spending taxes).

 

[Purple]

It will if those who are not working don't have to pay it. It will also make home ownership less attractive which is another debate altogether.

True, but I don't see that as a bad thing.

Slashing government spending would obviously adversely affect public sector workers, but by also cutting taxes it would stimulate employment. More people working in the private sector (raising taxes) rather than more people working in the public sector (spending taxes).

No easy solutions here.

 

[ontour]

cutting taxes it would stimulate employment

I not sure I buy this. I am sure there is a tipping point at which employment is disincentivised by taxation but is there any evidence that we are hitting that? There are jobs available in Ireland but they do not match the skills of those who are unemployed. There are lots of technically minded people who worked in the construction sector who could be software engineers but choose not to change sector. Even if we managed to redeploy skills efficiently, there are lots more people who need jobs. I do not believe that most tax cuts would create a significant increase in employers needs.

Remove the concept of being unemployed entirely - either you work in a regular job or if you are unable to work in a regular job, you work for the state in return for a sustenance income.

Goes beyond property tax discussion though !

 

[shnaek]

I am sure there is a tipping point at which employment is disincentivised by taxation but is there any evidence that we are hitting that? There are jobs available in Ireland but they do not match the skills of those who are unemployed.

The evidence is that even though there are jobs available as you say, we can't even attract other Europeans over here to take up those jobs. And the skilled Irish that can do those jobs are emigrating to places with more favourable conditions, including more attractive rates of taxation.