The effective tax rate for a retired couple on €50k?

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ClubMan said:

Some people seem keen to have elderly taxation policy driven by a single anecdotal example where a (possibly unusually) well off couple paid c. 8% overall. Sigh...

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fully agree, the average income and assets of pensioners, across the country, would on average, be a lot lower, then the very selective examples given. Yes, likely to be tens of thousands like it, but hundreads of thousands - NOT like these examples.

If you have worked and contributed to the social welfare system over several decades, you usually ( depends on contributions)get a non means tested contributory state pension of about 14 k a year. Other private pensions, were saved by those people(by their choice) over many years for non DB workers at least.

Every individual in the state can earn 18k a year free of PAYE, so this also applies to pensioners, and there is zero logic here, that that should change for the pensioner demographic, especially as the state pension is taxable income for pensioners, along with any other income they have.

PRSI stops when you reach 66, that knocks off 4% of the PAYE income portion - of pensioners, overall tax rate. Again here, there is zero logic to say that this should change, as the PRSI contribution clock stops, just after 65, a traditional retirement age.

As for the household package, i agree there is a valid arguement, for means testing that going forward. Its a pittance when you look at the overall big picture, but should probably be looked at.

Medical card at 70, is not automatic,(GP card is) that was changed years ago, it is means tested, and those who qualify have to have an income of under 55k (including assessment of savings, first 72k is disregarded for a couple), this being queried, is really, beyond belief.

To be fair, I wouldn't put too much store in what a biased lobby group like Social Justice Ireland have to say. I'd prefer more objective data/info.

Just a google lookup, to see effective tax rates overtime, i have no affiliation to any lobby group !

In any event, the point is, effective rates, are very similar, apart from the 4 % PRSI part, for everyone, if you are 27 or 77 years old.

Some have argued pensioners pay too little tax, pensioners pay quite similar effective rates to everyone else, when PRSI is taken out, and people who are working, who are able to max pension contributions, would have lower than average, effective rates than someone who is not contributing.

ClubMan said:

Any data to support that assertion?
And are they all paying only 8% tax?

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Before I go looking for data, my parents are completely average and typical: a retired teacher and a retired housewife.

There are thousands upon thousands of them.

I live here, I know there are thousands upon thousands of people like this.

The more substantive issue is: can we as a society afford to charge such low direct tax rates, while being so generous with benefits?

I think the answer is no.

SF think the answer is yes.

I don't propose to cut any benefit, for pragmatic political reasons.

I propose to charge a bit more income tax (easier to implement).

fayf said:

Just a google lookup, to see effective tax rates overtime, i have no affiliation to any lobby group !

In any event, the point is, effective rates, are very similar, apart from the 4 % PRSI part, for everyone, if you are 27 or 77 years old.

Some have argued pensioners pay too little tax, pensioners pay quite similar effective rates to everyone else, when PRSI is taken out, and people who are working, who are able to max pension contributions, would have lower than average, effective rates than someone who is not contributing.

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Yes, other than the PRSI, there are three differences:

(1) 18k / 36k income tax exemption - I suggest we abolish this
(2) age tax credit - I suggest we abolish this
(3) don't have to pay DIRT - I suggest we abolish this

Protocol said:

Before I go looking for data ... There are thousands upon thousands of them.

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Ok, so all anecdotal so? Thanks for clarifying.

Protocol said:

(2) age tax credit - I suggest we abolish this
(3) don't have to pay DIRT - I suggest we abolish this

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The whole €240/€490 and DIRT on basically nothing?
That should pay off the national debt in no time.

ClubMan said:

by a single anecdotal example

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You can look up the numbers yourself if you like.

A well-off couple like this pays a 7% effective tax rate.

€70k per annum is above average household income even for a working age household and nearly double what is typical for a retired household.

When you take into account asset position - almost always a mortgage paid off - this is a very financially comfortable household.

They pay lower tax simply because of their age, and at 70 start getting household benefits that they don't need.

It's not equitable, not least because the people paying for it today won't be able to get the same treatment in 30 years due to population ageing.

Protocol said:

Yes, other than the PRSI, there are three differences:

(1) 18k / 36k income tax exemption - I suggest we abolish this
(2) age tax credit - I suggest we abolish this
(3) don't have to pay DIRT - I suggest we abolish this

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And given that the vast majority of us haven't paid, or won't pay, enough PRSI during their working life to come anywhere near funding their State Pension the retired should continue to pay full PRSI.

Protocol said:

Yes, other than the PRSI, there are three differences:

(1) 18k / 36k income tax exemption - I suggest we abolish this
(2) age tax credit - I suggest we abolish this
(3) don't have to pay DIRT - I suggest we abolish this

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All income tax payers, have an income tax exemption limit up to 18k/36k, so abolishing that, will impact most young workers, and some partime workers, many of whom, are currently outside the income tax net, as they earn under 18k per annum. Its not an excessively high amount, its less then the minimum wage, and its globally common, to have a low floor exemption amount, and its extremely unlikely this will be changing.

Tax policy, cannot cherrypick certain demographics, because some people find their effective rate, offensive. Some of the examples are at the perfect cusp of just under certain limits, and the fact their mortages is paid off has nothing to with tax policy.

There is certainly a good arguement to be made on the DIRT exemption, there is a certain logic to that, particularly those who have substantial amounts. Same for the household package, which should probably be means tested, along the lines of the medical card limits.

Age tax credit is €490 a year, for a couple, both over 65, its not excessive, less than €5 per week per person, and it was reduced from €650 per couple, around 2011, and has stayed at the level, so actually has lost value in real terms, over those 11 years.

fayf said:

All income tax payers, have an income tax exemption limit up to 18k/36k, so abolishing that, will impact most young workers, and some partime workers, many of whom, are currently outside the income tax net, as they earn under 18k per annum.

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Most minimum wage earners live in medium to high income households. Taking them out of the tax net is not good social policy.

fayf said:

All income tax payers, have an income tax exemption limit up to 18k/36k, so abolishing that, will impact most young workers, and some partime workers, many of whom, are currently outside the income tax net, as they earn under 18k per annum. Its not an excessively high amount, its less then the minimum wage, and its globally common, to have a low floor exemption amount, and its extremely unlikely this will be changing.

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"All income tax payers, have an income tax exemption limit up to 18k/36k"

That is false. The exemption applies only to people aged 65 or older.

Protocol said:

"All income tax payers, have an income tax exemption limit up to 18k/36k"

That is false. The exemption applies only to people aged 65 or older.

Exemption limits

This page explains exemption limits on certain taxes.

www.revenue.ie

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And once you're 66 you stop paying PRSI.

Protocol said:

"All income tax payers, have an income tax exemption limit up to 18k/36k"

That is false. The exemption applies only to people aged 65 or older.

Exemption limits

This page explains exemption limits on certain taxes.

www.revenue.ie

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Apologies, i didn’t see an “and” between the two criteria, i assumed it was an “either”

“
If you are not married or in a civil partnership, you are exempt from Income Tax (IT) where:

• your total income is less than the exemption limit
• you are 65 or older.”

So, if this is correct it would be effectively 17k exempt, for under 65’s , as the ‘2022 tax credits of €3,400 mean, zero income tax is due up to 17k, so only gives over 65’s a €200 annual tax advantage, which is not really very significant.

fayf said:

So, if this is correct it would be effectively 17k exempt, for under 65’s , as the ‘2022 tax credits of €3,400 mean, zero income tax is due up to 17k, so only gives over 65’s a €200 annual tax advantage, which is not really very significant.

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And 2% USC, and no PRSI.

Purple said:

And 2% USC, and no PRSI.

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We get the message Purple, fairly obvious where you stand as regards older people, and your perception of what they should have, or not have.

noproblem said:

We get the message Purple, fairly obvious where you stand as regards older people, and your perception of what they should have, or not have.

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I've no problem with older people but I do have a problem with treating rich people as if they are poor. That also applies to high income earners getting children's allowance, free third level fees etc.

NoRegretsCoyote said:

You can look up the numbers yourself if you like.

A well-off couple like this pays a 7% effective tax rate.

€70k per annum is above average household income even for a working age household and nearly double what is typical for a retired household.

When you take into account asset position - almost always a mortgage paid off - this is a very financially comfortable household.

They pay lower tax simply because of their age, and at 70 start getting household benefits that they don't need.

It's not equitable, not least because the people paying for it today won't be able to get the same treatment in 30 years due to population ageing.

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My parents are well off. My father still has aa substantial income. He also has a private pension, an Irish State pension and a small UK pension. My mother gets her State pension. Their household income is well into the hundreds of thousands. They worked hard all their lives blah, blah blah and now they are very comfortable in their old age.
I don't think they need a Medical Card, free travel and fuel allowance, lower tax rates and higher allowances etc. because they don't need them I don't think they should get them.
I won't need that either and don't think I should get any of it.

I think that money would be better spent elsewhere... like on child poverty or mental health services. That must make be ageist or whatever other makey-up word there is now for hurting people's feelings.

Purple said:

That must make be ageist or whatever other makey-up word there is now for hurting people's feelings.

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You could try the word "ignorance"