The top 6% pay 49% of all income tax and USC

[PMU]

This is interesting http://www.finance.gov.ie/wp-content/uploads/2017/07/TSG-17-02-Income-Tax-and-USC-paper-FINAL-JC.pdf and relates to the 2018 budget.

PDF page 7

 

[TheBigShort]

It doesn't really mean anything when statistics are presented as % of a %.

For example, if there were 10 income earners in an economy, 9 earning €10,000 and 1 earning €50,000 and apply a 50% tax on all income, sounds fair right? Then the top 10% of earners will contribute 35% of the total tax take.
But to reduce the tax burden for everybody, in a fair way, the government introduces a tax credit scheme, exempting the first €5,000 of everybody's income from tax. Still sounds fair right?
But the income tax take is reduced, and even though everybody pays 50% on their taxable income and everybody receives the exact same tax credit, the top 10% overall contribution will increase from 35% of the overall tax take to 50%. Increase the tax credit further for everyone, in equal measure, and the overall tax contribution of the top 10% will increase further.

 

[Gordon Gekko]

I think the point is that when leftie clowns say "tax the rich", it's already happening, and that when wasters moan about austerity, it's laughable because they hardly pay for anything anyway.

Austerity has been savage on mid to high earners, but they've just got on with it.

 

[Brendan Burgess]

It would be handy to have the figures as follows

The top 6% earn [25%] of all income and pay 49% of all income taxes and USC.

Brendan

 

[TheBigShort]

It would be handy to have the figures as follows

The top 6% earn [25%] of all income and pay 49% of all income taxes and USC.

Brendan

It still would be somewhat meaningless. In my straightforward example above the top 10% earn 35% of all income, but once tax credits are applied in equal measure to everyone, the overall tax burden in, % terms only, increases on higher earners.
In real monetary terms, everyone still pays the exact same amount of tax on their taxable income (in this example 50%), in real life 20% on first €33,500, 40% thereafter - applicable to everyone.
One other important factor in these type of calculations is the fact that many people simply don't earn enough to contribute to the tax system as It is designed.
As much as some workers are being labeled as 'wasters' for 'not paying for anything', equally, their employers could be labeled scroungers for the miserable wages they pay. Neither position will assist in contributing to designing a fair tax system.

 

[Brendan Burgess]

Hi Shortie

Fairness is one issue, but there are other issues.

If 6% are paying 49% of the taxes, then it suggests to me that government revenue will be disproportionately hard hit hard during the next downturn.

If the incomes of the bottom 50% fall a bit, it won't affect the tax take that much.

Brendan

 

[TheBigShort]

If the incomes of the bottom 50% fall a bit, it won't affect the tax take that much.

Sorry, I'm not sure what this means. Are you suggesting that increasing tax on bottom 50% by a modest amount? If so, I would be interested in hearing the proposal.

 

[TheBigShort]

Just as an add-on, these type of stats do not necessarily suggest an inherent unfairness in the tax system. In fact they are a greater indicator of income inequality.
Again using my simple example above, if in year 2, the 9 workers got no pay rise, but the top 1 earner got an extra €20,000. Again, % income tax burden would rise on the the top earner, reducing the% burden rate of the lower earners.
For that, should we increase taxes on low earners?

 

[Gordon Gekko]

Why not decrease the single person tax credit and PAYE tax credit from €1,650 to €1,500?

It would raise circa €500m...

 

[PMU]

Just as an add-on, these type of stats do not necessarily suggest an inherent unfairness in the tax system. In fact they are a greater indicator of income inequality.

This analysis on Ireland from the OECD - Economic Survey of Ireland 2015 - http://www.oecd.org/ireland/economic-survey-ireland.htm (IMHO well worth reading) shows that Ireland's tax and transfer system reduces inequality by more than any other country in the OECD and that Ireland's relative poverty rate is low. And remember, 38% of Irish workers do not pay any income tax.

The Tax Strategy Group in is document noted that "However high marginal rates of taxation as a result of progressive taxation can have a negative impact on incentives to work for income earners, and lead to increased labour costs for employers who may have to offer a certain level of net income in order to attract employees in a competitive labour market. Marginal tax rates which are high by comparison to competitor jurisdictions can therefore have a negative impact on domestic businesses seeking to attract mobile highly-skilled workers. They can also be a negative factor in the location choices of foreign direct investment, a particularly important issue for the Irish economy." But this is just wrong, in that it focuses on 'mobile highly-skilled workers' and FDI, and ignores that in Ireland high marginal tax rates disproportionately hit ordinary workers, with over half Irish workers paying tax at the marginal rate.

 

[TheBigShort]

This analysis on Ireland from the OECD - Economic Survey of Ireland 2015 - http://www.oecd.org/ireland/economic-survey-ireland.htm (IMHO well worth reading) shows that Ireland's tax and transfer system reduces inequality by more than any other country in the OECD and that Ireland's relative poverty rate is low. And remember, 38% of Irish workers do not pay any income tax.

The Tax Strategy Group in is document noted that "However high marginal rates of taxation as a result of progressive taxation can have a negative impact on incentives to work for income earners, and lead to increased labour costs for employers who may have to offer a certain level of net income in order to attract employees in a competitive labour market. Marginal tax rates which are high by comparison to competitor jurisdictions can therefore have a negative impact on domestic businesses seeking to attract mobile highly-skilled workers. They can also be a negative factor in the location choices of foreign direct investment, a particularly important issue for the Irish economy." But this is just wrong, in that it focuses on 'mobile highly-skilled workers' and FDI, and ignores that in Ireland high marginal tax rates disproportionately hit ordinary workers, with over half Irish workers paying tax at the marginal rate.

I'm not disputing any of that. I'm disputing that headline stats, like the title of this topic are meaningless.
If for example, given your post, that the cut off point for the marginal rate was raised to €45,000. This would go someway to addressing the issues raised in your post. But simultaneously, it would reduce the overall income tax take but still leave incomes over €45,000 paying the marginal rate. So that next year, when this issue is raised again, the headline may read 'top 6% pay 51% of all income tax'.
The overall tax burden in % terms has increased on the highest earners, even though in monetary terms they are now better off.

 

[TheBigShort]

Why not decrease the single person tax credit and PAYE tax credit from €1,650 to €1,500?

It would raise circa €500m...

You could do that. But the effect for low and middle income earners would be to reduce their disposable income by the equivalent of one to two weeks wages per annum.
Given what we know about the daily struggles of people and families in these income brackets, reducing their income will only exasperate those struggles.
I would fear that the €500m in extra taxes would simply be used to provide additional welfare supports for those who can't make ends meet as a consequence of this measure.

 

[Sarenco]

I'm disputing that headline stats, like the title of this topic are meaningless.

The headline stats are not meaningless. The stats may not suit your ideological viewpoint but that does not mean the stats are meaningless.

We have an exceptionally progressive income tax and social welfare regime by international standards. I happen to think that is something we should be proud of as a nation. However, any argument that ignores or tries to obscure this reality (and the hard left are masters at this art) leaves me cold.

Has the progressive nature of our income tax regime gone too far? Is it impacting our ability to compete for FDI? Is it reducing incentives to work? Should we instead increase taxes on capital by way of a meaningful property tax?

There is plenty of room for debate in all those areas but trying to deny or fudge reality doesn't advance your agenda.

 

[TheBigShort]

The stats may not suit your ideological viewpoint but that does not mean the stats are meaningless.

It's nothing to do with my ideological viewpoint, it's simply to with math. The headline stat means zero unless you analysis the actual earnings. I've already shown a simple example of where everybody pays the same rate of tax and everybody receives the exact same tax credit on their incomes, yet depending on the level of actual income, these stats can be distorted.
If I'm wrong, and these stats have meaning, I would gladly like someone to explain the meaning of them.

We have an exceptionally progressive income tax and social welfare regime by international standards. I happen to think that is something we should be proud of as a nation. However, any argument that ignores or tries to obscure this reality (and the hard left are masters at this art) leaves me cold.

Where did I argue the contrary?

There is plenty of room for debate in all those areas but trying to deny or fudge reality doesn't advance your agenda.

I think you have mistaken me for someone else.

 

[Gordon Gekko]

You could do that. But the effect for low and middle income earners would be to reduce their disposable income by the equivalent of one to two weeks wages per annum.
Given what we know about the daily struggles of people and families in these income brackets, reducing their income will only exasperate those struggles.
I would fear that the €500m in extra taxes would simply be used to provide additional welfare supports for those who can't make ends meet as a consequence of this measure.

It's €3 a week per credit...perhaps we should all put our shoulders to the wheel rather than the same old crew?

 

[TheBigShort]

It's €3 a week per credit...perhaps we should all put our shoulders to the wheel rather than the same old crew?

€3 a week to a family trying to keep the lights on would certainly be putting their shoulders to the wheel.
I'm not sure a high income family would consider an extra €3 a week in the same vein.
When you say "we should all" put our shoulders to the wheel with an extra €3 a week, it doesn't really stack up, does it?

 

[PMU]

I'm not disputing any of that. I'm disputing that headline stats, like the title of this topic are meaningless.

The title of the topic comes from statistics produced by the Government's tax strategy group; I didn't make any of these figures up. If they are 'meaningless' you can always address your concerns to the Government's Tax Strategy Group.

 

[Sarenco]

If I'm wrong, and these stats have meaning, I would gladly like someone to explain the meaning of them.

The fact that the Dept of Finance estimates that the top 6% of income earners pay 49% of income tax and USC is a meaningful statistic. It may not tell you everything you might wish to know but that does not make it meaningless.

And, no, I haven't mistaken you for somebody else - your "arguments" are quite distinctive and very clearly driven by a particular agenda.

 

[TheBigShort]

The title of the topic comes from statistics produced by the Government's tax strategy group; I didn't make any of these figures up. If they are 'meaningless' you can always address your concerns to the Government's Tax Strategy Group.

I'm not disputing that the top 6% of earners pay 49% income tax and USC. Simply, I'm suggesting it really doesn't mean anything. Perhaps I can ask, what do these stats mean to you?

 

[TheBigShort]

The fact that the Dept of Finance estimates that the top 6% of income earners pay 49% of income tax and USC is a meaningful statistic.

A statistic yes, meaningful no.

It may not tell you everything you might wish to know but that does not make it meaningless.

It tells me very little. Of little consequence, to the point of being meaningless.
I stand to be corrected, what does the headline stat mean to you?