Those who earn more ,should pay more

T McGibney said:
Why? We're talking here about rates, not amounts. This principle already applies to almost all other taxes.
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You either believe the marginal value of income declines the more you earn or you don't.

A true flat tax assumes no credits, allowances, deductions etc and taxes everyone the same rate on every cent they earn. Now, I am all for lower taxes but I also recognise asking someone on €15,000 to pay 40% on all their income is not the same as asking me to pay 40% on my income. Every cent of their €15k probably goes towards essential costs of living. Mine doesn't.

That's not a justification for taxing me to the hilt. It's just I recognise the fairness of a progressive system despite it's flaws.

This debate is going on in the US at the moment. Will be interesting to follow.
 
Except that nobody is paying 40% of their entire income in income taxes. Yet everyone (including the person earning €15k) is probably paying 40% (or damn near it) of their income in taxes, when indirect and stealth taxes are included.

The various tax collection systems are so complex, opaque and multi-faceted that nobody realises just how ridiculous their outcomes are. The opposition to almost any move towards simplification is generally based on the supposition that low-earners don't pay tax. This is patently untrue.

There is no fairness in the poverty and evasion traps inherent in all so-called 'progressive' tax systems.
 

But we are talking about income taxes here and the introduction of a flat rate tax which would mean people a rate (40% or whatever) on all their income.

I agree with you about the amount of indirect and stealth taxes but that's why when people say we should simplify the income tax system, it is very difficult to do.
 

But people are already paying the same amount of their income in taxes, they just don't realise it.

You say that it is difficult to simplify the tax system. I profoundly disagree. There are probably a hundred simplification measures that could be introduced in the morning if there was a political will to do so.
 

A flat rate tax would be much lower than people's perception. If there was a flat rate tax in Ireland for 2011 it would be c.17.67%.

Income tax receipts = 11,530m (Book of Estimates)
Average Earnings = 687.24 per week (CSO - Q2 2011).
No. of people employed = 1.821m (CSO - Q2 2011).

This percentage is probably on the high side as it doesnt take income account income tax paid by pensioners, so it could be 1 or 2% lower than my calculations suggest.

I think most people would prefer to pay a flat rate tax in the 16-18% rate than what we currently have.
 
T McGibney said:
But people are already paying the same amount of their income in taxes, they just don't realise it.

.
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How? When so many people don't even pay income tax even if they might pay a levy? This is just about income tax
 
Chris said:
Yeah, in a very juvinile and satisfying way!
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Maybe the file name was meant to be a hint at a proposed new tax - one that would hit Askaboutmoney.com harder than most.

Latrade said:
But if there's no quantitive analysis, how do we know? We can suppose all we want, but until then the only real proportional and actual analysis of tax paid and earnings is income tax.
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That's a very blinkered view - it's hard to work out the numbers, so we'll just ignore them. That's not the basis for any sound policy.
Sunny said:
I would guess they are also more likely to spend that income on 0% or lower VAT rate products.
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To some extent yes, but if the stereotypes are to be believed, much of the spending would be on products with high customs levies (booze and fags), so that needs to be part of the equation too.
 
Sunny said:
This is just about income tax
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But you can't have a meaningful discussion of tax policy and confine it merely to income tax, especially since our politicians are seemingly mortally afraid to raise income tax rates and we end up accordingly with USC, PRSI and stealth tax hikes instead of old-style tax increases. Hence my wishes for a more sensible, honest and simplified system.
 

It's a bit more complicated than that I am afraid. You can't just use the average wage to come up with a rate.
 

Grand, but I was never talking about the wider tax system. I was responding to posts about the idea of introducing a flat rate income tax rate and its implications on higher and lower income earners. If you want to broaden the discussion, work away.
 
Sunny said:
Grand, but I was never talking about the wider tax system. I was responding to posts about the idea of introducing a flat rate income tax rate and its implications on higher and lower income earners. If you want to broaden the discussion, work away.
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But for the nth time, you can't meaningfully discuss the idea of flat-rate income tax, and more particularly your own contention that this would be 'unfair' to low-earners, without considering the existing overall tax burden suffered by low-earners.
 
T McGibney said:
But for the nth time, you can't meaningfully discuss the idea of flat-rate income tax, and more particularly your own contention that this would be 'unfair' to low-earners, without considering the existing overall tax burden suffered by low-earners.
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But what is your point about the overall tax burden suffered by low-earners?

You made the point that people are already paying the same amount of their income in taxes without realising it. How do you work that out?
 
I don't have any particular point to make about the overall tax burden suffered by low-earners.

I merely queried the following statement, on the grounds that low-earners are already suffering what is for them a significant tax burden.

Sunny said:
I was simply arguing against the principle that we introduce a flat rate of tax and everyone pays it on every cent they earn and then call it fair.
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Sunny said:
It's a bit more complicated than that I am afraid. You can't just use the average wage to come up with a rate.
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It isnt complicated. You just multiply the average wage by the number of people employed to get the total amount of taxable income earned in the country. The amount the Government wants to take in is a percentage of this. It is that simple - which is one of the big advantages of the flat rate tax.
 

Those income tax receipts look more like 2010 numbers, €14bn is targetted for collection in 2011 (http://www.finance.gov.ie/documents/exchequerstatements/2011/analtaxsept.pdf)

This would push up the flat rate to 22%. Also note that the 4% rate of PRSI would need to be added on to give a total flat rate of 26%.

Someone on €100k would gain €15k from this regime, increasing disposable income by 25%.

A married couple on a combined income of €50k would lose €6k or the equivalent of half a mortgage payment on a €200k mortgage each month.

Every single person on an income of less than €40k (and couples with joint incomes below €80k) will be worse off under your proposal. Am I right or wrong?

Most people would be worse off, as many people on lower incomes need to pay more tax to pay for higher tax savings for fewer people on higher incomes.
 
Yes indeed, I would class myself as a follower of Austrian Economics. But flat rate taxation is not just an ideology. There was a time when the US had a flat rate of income tax, and that was 0%. Nobody complained about the rich not paying there fair share in the US from 1776 to 1913 when the constitution was amended to introduce a federal income tax. And most of that period was the most prosperous in US history.

I absolutely agree that there are people out there working more than one low paying job, or working very hard for their weekly wage, but would they do so if they got less than 50% of the money they earned? I think a lot of people would not. My point was more to highlight the fact that (a) the majority of "the rich" work extremely long hours for many years before they make that money and (b) that they are driven by the possibility to take home that money.
The best motivating factor to work hard is the money you take home at the end of the day; reduce that amount through taxation and people will not work as hard as they otherwise would.

I think that simplification of the tax system would be a lot simpler than many would assume. First thing to do would be to throw out the old tax code in its entirety and start from scratch. The new system should then be so simple as to require a minimum paper work and as few as possible rates and types of taxes.

I would agree that selling a flat 40% tax rate would be very difficult, but as I said before it should be sold so that the majority of earners pay less. csirl has made a good start with the 17%, but I would go quite a bit lower than that. This would also only be possible if there was some severe cutbacks in what government provides.
Unfortunately this country is in a situation where 50% of earners do not pay income tax, and that is simply unfair on the remainder of the income tax payers; unfortunately this will mean that quite a few people will end up paying more taxes, that would not be avoidable.
Ideally I would like to see a 0% flat income tax rate, which would be easiest to sell on its own. Taxes should then be collected through excise and sales taxes, which could even be progressive. This would result in a huge incentive to work harder with a disincentive to spend.
As already mentioned though, this would require some serious cutting of government.
 

Hi Chris,

I would imagine that excise and sales taxes would rise astronomically under this model to bring in funds for the government. Surely this would make us extremely uncompetitive as a country to do business in? In addition, with the advent of the internet and the open border with Northern Ireland raising sales taxes may be counter-productive anyway? Having said that, I'm all for a 0% rate of income tax
 

Only if you maintain the current level of government spending, which, as shouldn't come as a surprise to many here, I believe could and should be cut "astronomically". The long term affect would be that many wealthy people would move here, and wealthy people spend quite a bit of money, which would result in increased sales tax revenue. It would also mean that a lot more would be invested here, meaning that there would be a lot more job creation, resulting in less dependence on state welfare.
In the short term of course this is a bit more difficult, and deficit spending should be avoided. Any revenue shortfall should be covered by selling off state assets and drastic spending cuts.
The biggest advantage of having a sales tax is that government is kept in check. If government raises sales taxes too high, then people will spend less resulting in less revenue. With income taxation there is no way of not paying it to voice your objection, the only option is to leave or earn less, neither of which is a desirable outcome.
 

It would be lovely to wave a magic wand and arrive at this situation, however I'd imagine there would literally be blood on the streets if this was implemented. Given the nature of politics here and the voting system, no political party would even consider it. Finally, if it was implemented, then IMO it would only be a matter of time before the old ways crept back in....a td getting a new road built in his constituency etc etc.

Sadly, I think that all we can hope for is reduced government spending on a gradual scale, but I have my doubts here too
 

I think you are very right there. But we can dream
 
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