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Say it ain’t so… August 28, 2010

Posted by WorldbyStorm in Economy, Irish Politics.
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ABOUT 3,800 people who earned more than €100,000 last year paid no tax on their income, according to estimates prepared by the Revenue Commissioners.

These individuals were able to avail of tax breaks in areas such as property investment and business expansion schemes, as well as tax relief on trading losses.

And…

A breakdown of the figures shows that most of those who had zero tax liability were company directors, while just over 600 were classified as PAYE workers.

Granted these seem to date from 2007, and in fairness to one B. Lenihan he has a point when he notes ‘…many (some?) tax shelters have been closed off’.

But… colour me amazed.

By the way, check this out…

While some high earners may be able to escape paying high rates of tax, a breakdown of the overall level of income tax paid by workers in the State paints a different picture.

Latest Revenue projections indicate that the top 2 per cent of earners accounted for almost one third (32 per cent) of tax collected during 2009.

The top 5 per cent of earners accounted for almost half (48 per cent) of the total income tax take.

The figures also show how many low-income workers are shielded from income tax. Almost half of all workers (46 per cent) earning below a certain threshold were estimated to be entirely exempt from traditional income tax, although some were liable for the income levy.

Erm… there’s a reason those top 5% account for half of total income tax. That’s because they have proportionately much much greater wages. While those on the lowest incomes make feck all money in comparison. Still, got to love the way the poor put upon higher earners trope is gathering steam.

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Comments»

1. Tomboktu - August 28, 2010

I hate that style of reporting by the Irish Times. It’s fine in the opening paragraph to describe something as “estimates prepared by the Revenue Commissioners”, but as you read through it you are not told exactly what the source of the information is.

Is it the Irish Times re-hashing a story that was in the Sunday Tribune on 1 August? The accuracy of the media coverage of that was criticised by Karl Whelan at the time on irisheconomy.ie.

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WorldbyStorm - August 28, 2010

It’s something else, isn’t it? I hadn’t realised it might be a re-hash.

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2. Tomboktu - August 29, 2010

I see Karl Whelan drew attention to the withdrawal of the support of the Financial Times for the government’s banking policy. Well, that’s not quite how he put it. Just as well the FT isn’t a gov’t backbencher!

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3. Bartley - August 29, 2010

Still, got to love the way the poor put upon higher earners trope is gathering steam.

We gotta stop looking at the income tax distribution simply in terms of perceived fairness. Is it fair that the top two percentiles pay one third of all the income tax? Well 98% of people probably have a strong opinion one way, and no doubt the other 2% disagree, but really it doesnt matter that much.

The point is whether the revenue stream is stable and sustainable. And unfortunately such a concentrated tax burden is neither, in the long term.

Salon.com has some interesting ideas on the counter-intuitive case for a wider tax base:

http://www.salon.com/news/feature/2010/08/10/liberal_case_regressive_taxation

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DublinDilettante - August 29, 2010

I say we expropriate all their assets, all their property, all their businesses, use the billions thus claimed in reparations to create a sustainable economy, revoke their citizenship, deport them and let them use their vaunted entrepreneurial instincts to “make” themselves anew elsewhere.

You similarly indifferent about the “perceived fairness” of that, Bartley?

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4. Bartley - August 29, 2010

Expropriation of property, mass deportations, withdrawal of citizenship rights?

Why do those policies sound weirdly familiar?

Oh yeah, they\’ve all been tried before …

http://en.wikipedia.org/wiki/Kulak#Dekulakization

Didn\’t work out too well back then, or?

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DublinDilettante - August 29, 2010

Nah, not mass deportations, it’s only 2% of the population. I suspect you wouldn’t be among them. Some would argue that the moral thing to do would be to lock them up, but I have a treacherous liberal streak in me.

Your concern for the oppressed 2% minority is touching, though. I knew you had some kernel of perceived fairness buried somewhere in there!

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neilcaff - August 29, 2010

DublinDillettante: Agree except for the deportations bit.

I often wonder what would be done to the declassed bougeois if a socialist economy ever got off the ground. I’ve always thought the best thing to do would be to give them jobs as part of a general plan of full employment. Put them to work I say. Full trade union rights, holidays, sick pay, a vote in whatever democratic enterprise they happened to find themselves in. Basically give them the rights they denied workers while they were on top and lets see them roll those rights back using exclusively democratic means.

My favourite Republican slogan (ok it’s the only slogan I like) is our revenge will be the laughter of our children. I think that should be our watchword when we talk about what sort of society we want to build.

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neilcaff - August 29, 2010

Hmm, can a slogan be a watchword? Discuss.

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Tim Johnston - August 29, 2010

That’s terrifying, neilcaff. Are you going to build a whole economy on resentment, or do you have other plans? :)
If you’re ever in charge, I promise to escape from my re-education camp.

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WorldbyStorm - August 29, 2010

I’d be rather more concerned at the likelihood of whether or how such a programme could ever be sold to people outside of a catastrophic collapse of the current system.

It’s not that that latter is impossible, but rather that it seems unlikely, and in truth I suspect we’d be more likely to see very very unpleasant right wing regimes manifest themselves – for the basic reason that power remains strongly concentrated on the right (and I’m not by the way suggesting that people like you Tim or indeed most on the right would approve – simply that power structures would seem to me more likely to shift that way in extremis).

A more positive situation might be to see how rapidly we can move from the present through a transitional phase to something much much better – or better still cut out the transitional phase. Andre Gorz once put it as follows:

“The alternative to the present system is therefore neither a return to household economy and village autarky, nor total planning and socialisation of every activity. Instead it consists of reducing what has necessarily to be done, whether enjoyable or not, to a minimum in each person’s lifetime, and in extending as far as possible collective and/or individual autonomous activity seen as an end in itself.”

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neilcaff - August 29, 2010

Eh, who’s talking about re-education camps? Just saying they should get the same rights as everyone else in a democratic socialist society. I’m genuinely baffled that you could take some kind work camp idea out of what I said. I think you have work camps on the brain.

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DublinDilettante - August 30, 2010

Neil, I wasn’t being serious about the deportations (or entirely serious about most of the rest of it, truth be told.)

In fact, I’ve never been a believer in these Jail Corrupt Bankers/Politicians campaigns. Beyond a puerile desire for vengeance, I don’t see what purpose it serves. Prison, as a fundamentally inhumane punishment, should be a last resort to protect society from individuals likely to cause physical harm to others, and not something to be idly wished upon fellow human beings.

In the case of the corrupt rich, seizing their assets CAB-style and disqualifying them from owning and running businesses where appropriate is a far more fitting means of restitution and societal protection.

And yes, I absolutely believe that the rich (and one day former rich, le cúnamh dé) have the same right to life, health and happiness as everyone else. It won’t arise in my lifetime, but I’d even advocate crazy liberal ideas like taking into account the psychological and emotional impact of a complete change of lifestyle before taking away all their wealth.

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5. Pat McGrath - August 29, 2010
6. Bartley - August 29, 2010

Pat,

If someone proposed a solution to our economic problems that included the use of death camps and Zyklon B, would Godwin apply?

I think not.

The intention is to stop inappropriate comparisons to Nazism and other monstrous ideologies, not to protect actual monstrous ideas from any criticism.

DD,

not mass deportations, it’s only 2% of the population.

Someone such as yourself with a highly developed sense of justice would no doubt know that the international laws and conventions prohibiting mass deportation don\’t specify a lower bound on the proportion of the population forcibly transfered.

The 4th Geneva convention for example explicitly out-laws individual or mass forcible transfers, while the UDHR prohibits exile on the basis of a single individual.

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DublinDilettante - August 29, 2010

Evidently I was crediting you with a firmer grasp of the rhetorical than was warranted. Actually, you should have pulled me up on the arbitrary withdrawal of citizenship, which is equally unlawful (screw the Geneva Convention, though, that only applies to black people and Muslims, right?)

I don’t actually want anyone deported, or made stateless (the rest stands, though. Leave them with 5%, since we’re charitable people.) I just suspected, correctly, that your reaction to the squeezing dry and impoverishment of the wealthy 2% would be somewhat at odds with your blasé attitude to the further immiseration of the other 98%.

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Liam Kennedy - August 29, 2010

The post is about taxation and Bartley has managed, in two comments, to bring in Stalin, Hitler, the Nazis and the Holocaust.

I love it when taxation is brought up in front of a right-winger – it’s like throwing asprin into Cola.

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Tim Johnston - August 29, 2010

Is it still necessary in this day and age to point out that the 2% don’t necessarily get rich at the expense of the 98%?
Is it a truism to point out that the rich, as individuals, too have rights?
The enrichment of a small number of individuals, I would suggest, rarely occurs without state collusion and/or corruption, so that would seem a more appropriate target for ire. After all, who is worse: the man who offers a bribe or the man who takes it?

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ejh - August 29, 2010

Is this some kind of “aside to the audience” thing you’re trying here?

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Tim Johnston - August 29, 2010

?

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WorldbyStorm - August 29, 2010

I agree, it’s more complex than that Tim, however, just as it’s not a simple people getting rich at the expense, by the same token there are issues as to how large concentrations of wealth can affect a society and what a society should reasonably do (even an advanced capitalist one) in order to deal with the various ramifications of it.

I take your point about enrichment and the state, but states obviously come in many different forms, and their capture in regard to corruption/collusion takes many forms too from outright to differing degrees of influence being brought to bear. In other words the states are extensions of certain classes, overtly or not.

Which perhaps puts your last question in a different light.

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Tim Johnston - August 29, 2010

“the states are extensions of certain classes, overtly or not”

That I can understand. So you’re saying that rather than concentrations of wealth being the exception (and due to corruption), they’re a natural result of a system that looks after the interest of favoured groups (however small)?
Or have I got you wrong?

I definitely agree with the need to eliminate small concentrations of wealth. Maybe ‘eliminate’ is the wrong word. My point is that such has tended to be a result of political favours and collusion – as in both the US and Ireland – and as such there are systemic issues that need to be addressed, rather than focussing on the individuals that benefit. Although it goes without saying that any illegal activity should be punished according to the law, a punitive tax regime tends to have negative consequences beyond the intended targets.

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7. ejh - August 29, 2010

That’s all reasonable enough. I have to say though that I have no intention of stopping looking at anything “in terms of perceived fairness”.

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8. WorldbyStorm - August 29, 2010

Of course it’s not all or nothing. One doesn’t have to argue for outright expropriation or try to invoke the shade of the death camp to see there are entirely reasonable and rational courses that can operate short of revolution.

More to the point is it unfair that the top 2% pay a 1/3rd. To me it’s basic. On lower incomes a greater percentage of income goes on necessities. On higher wages the costs of necessities are a much lesser percentage leaving much greater amounts of discretionary income than their lower income brethren.

There’s few who would argue that higher wages per se represent an absolutely correct metric of value of work done…

But even putting that aside it’s entirely fair that those on very high wages pay a greater amount of tax and that given that those individuals are a minority – in itself an interesting and troubling fact – they will be able to give over a much greater amount of money. Indeed another way of looking at this is how telling it is that so few have such relatively enormous amounts of taxable income.

I don’t disagree by the way with you Bartley that there’s no end of tweaking to be done in terms of the nature of taxes, etc, and discussion on effectivity (on the other hand I’m dubious about -say – flat taxes, not least because they seem to me to evade the issue of asking for more from those who have more, and not simply in proportionate terms) but… the overall principles at work here seem valid, even… well, just.

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9. Jim Monaghan - August 29, 2010

Could we agree that the bonuses paid to teh bankers and pension top ups were undeserved/unearned.It annoys me no end that Seanies other half gets half his unearned pension and it cannot be stopped. This is 3 mill. Add in the rest of the pensions paid on illusionary performances and it amounts to quite a lot.In fact a lot of the high “earners” earnings were based it seems on smoke and mirrors.Add in the refusal of our “talented” senior Public Servants and Judges to take any real pain. Would not pay the debts accrued but I would feel better.

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Tim Johnston - August 29, 2010

If someone’s stupid enough to pay them, than it’s their sanity (and ethics) that needs to be questioned, not the recipients. As Thomas Sowell said, you can be as ‘greedy’ as you like, but it doesn’t add one cent to your paycheck.
What offends me more that the cases you’ve mentioned, Jim, is that the developers, who are technically and actually bankrupt, are still happily sitting in their expensive (now state-owned) homes instead of out looking for a real job like everybody else.

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Worldbystorm - August 29, 2010

There’s a twofold dynamic at work here, a willingness to pay as you note Tim, and a societal aversion despite the complaints to say that’s too much, even now in extremis.

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10. Bartley - August 29, 2010

WorldbyStorm,

More to the point is it unfair that the top 2% pay a 1/3rd.

Well many among the lower 98% would argue that the current burden distribution is perfectly fair, if anything the highest earners should be paying even more.

Some within that top 2 percentiles will feel they are shouldering an unfair burden. Pity about them says you, and I kinda agree. In the sense that I dont much care about how they feel, I prefer to concentrate on what will produce a long term sustainable tax base that we can rely on to fund quality public services.

It should of course be obvious that with some changes to the tax code, the top 2% could end up both paying more in absolute terms than before and also account for a lessor share of the total tax take (for example as a result of a third PAYE band being imposed and/or the minimum effective rate being further increased, while at the same time bringing a much larger chunk of the workforce into the PAYE net).

I would argue that changes such as the above are absolutely necessary and would bring us more in line with the Northern European social democracies so widely admired in this parish. However arguments based on pure fairness will end up leading us down a rabbit hole that will just delay and frustrate the necessary tax reforms. If we push the fairness argument to its logical conclusion, we\’d up arguing that no one should pay a penny more in tax until the richest man in Ireland has his net income reduced to that of the 2nd richest, and then both of them are brought down to the level of the 3rd, and so on as far as we need to go. Sounds loverly and Utopian, but we all know it would never fly in the real world and instead just act as a distraction from the real reforms needed.

Also the whole expropriation riff just comes across like an NKVD Troika short on their kulak quota this month (Godwin notwithstanding ;)). In other words, totally counter-productive and not worth the steam it allows one to blow off.

Instead the left should IMO be pushing the ideas of tax-paying as an act of good citizenship for all, of taxation as horizontal solidarity and pooling our resources as opposed to only being about redistribution, of getting what you pays for as opposed to always seeking to off-load the cost elsewhere.

BTW I agree that flat taxes are not totally the way to go, instead our progressivity needs to be maintained while being made more consistent. However, certain limited elements of the flat tax value proposition are worth investigating (specifically, simplification of the tax code and wholescale elimination of reliefs).

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ejh - August 29, 2010

Instead the left should IMO be pushing the ideas of tax-paying as an act of good citizenship for all, of taxation as horizontal solidarity and pooling our resources as opposed to only being about redistribution, of getting what you pays for as opposed to always seeking to off-load the cost elsewhere.

Now we know that, what do we do?

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WorldbyStorm - August 29, 2010

That’s a thoughtful outline (though I take ejh’s point about that the idea of ‘off-loading’ costs) and there’s much I’d agree with there. I particularly agree about the citizenship issue as regards payment of taxation – it’s one reason I think even a nominal extension of tax to all citizens able to pay is important. I sort of buy in to your notion of horizontal solidarity – and I guess there’s a utilitarian argument in political terms that that’s the only way it can be sold so therefore buckle up and away we go particularly if we want (and I use the we advisedly :) ) broad coalitions moving in progressive directions.

And yes, there’s a tension between fairness and efficiency. Though, I see no reason to sacrifice either at the others altar.

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Tim Johnston - August 29, 2010

I completely agree about taxpaying as an act of good citizenship, even if it’s a miniscule amount.
But why wait for Revenue to do the distributing? There’s no reason 100,000 or so citizens can’t get together and pool their resources now for the benefit of the community at large. There are plenty of co-operative businesses around and there’s no reason employee-owned companies couldn’t become more widespread.

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ejh - August 29, 2010

There’s no reason 100,000 or so citizens can’t get together

This is never true.

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