And yet still they don’t pay higher rates of tax… August 9, 2012
Posted by WorldbyStorm in Economy, Irish Politics.trackback
Rejoice, rejoice.
A CAMPAIGN to ensure the highest income earners in the State pay their fair share of tax has been largely successful, a new report by the Revenue Commissioners has shown.
An analysis carried out by the Revenue on the 2010 tax year shows the average effective tax paid by the highest earners increased from 5 per cent in 2006 to its stated target of 30 per cent four years later.
And:
It meant this group of 387 individuals earning more than €400,000 paid an additional €53 million in tax in 2010, almost double the amount of tax they would have paid that year had the new restrictions not been in place.
Six years ago, analysis by the Revenue of the tax returns of the 400 highest earning individuals showed a substantial majority were paying zero tax or tax of 10 per cent or less.
Wait a second. Many citizens pay income tax at the higher rate. That means that these ‘highest income earners in the State’ are still ten per cent below the rates many of us pay, and let’s not even consider additional deductions over and above income tax such as PRSI and USC. And that thought in mind for those on the ‘standard’ rate throw in those deductions and those ‘highest income earners’ are paying at rates not hugely greater.
Nor is it as even this mild amelioration is systemic…
However, nearly 600 people earning more than €125,000 but less than €400,000 still had an effective tax rate of 20 per cent or less, with some 18 paying less than 5 per cent.
And none of this is even close to the sort of measures being implemented in France.
And on a very slight tangent can I reference this post by Michael Taft where he notes that were the government to ‘fashion a set of tax measures, rates, reduction of tax expenditures , new taxes, etc – to bring the disposable income of the top 10 per cent to EU averages, it would take in between €3bn and €3.5 bn, enough to reach their Budget 2013 target. If the Government went Nordic, it would be enough for the next two budgets’.
But, and this is the crucial point he makes – and one that links right back to the issue the IT article deals with, he continues:
Would this be too onerous on high income groups? No. It would mean they would be ‘earning’ the same as their EU counterparts. But let’s not forget: we are in recession, we are in a bail-out. If there is a time to ask people who can afford it to make a sacrifice, now is that time.
Yesterday we had the pitiful display of hand-wringing on the part of the Irish Times editorial writer as regards social welfare cuts. For them there’s no alternative. But there is.
Many citizens pay income tax at the higher rate. That means that these ‘highest income earners in the State’ are still ten per cent below the rates many of us pay
In the interest of accuracy, I should point out that youre comparing two very different beasts there: the minimum effective rate required of very high earners and the marginal rate paid by many citizens.
Due to the progressivity built into the system, very few citizens end up paying an effective rate of 30% (that rate only tips in at about €92k).
And almost no-one pays an effective rate above 40%.
… and let’s not even consider additional deductions over and above income tax such as PRSI and USC.
The minimum effective rate is of course net of PRSI and USC, which are effectively shelter-proof.
For a single person on 60,000 the effective tax rate is 33.4% and for one on 100,000 it is 40.9%. The effective tax rate for very high income earners should be much higher than here: for a single person on 400,000 it would be over 51%. [http://www.deloitte.ie/tc/Results.aspx]
That said, these examples imply no use of tax breaks. It’s likely higher income earners are taking advantage of Ireland’s generous pension tax arrangements etc. etc. to reduce their tax liabilities. Reducing/standard rating these reliefs would likely raise the minimum effective tax rate possible for higher earners.
Alternatively, the government could legislate for something like the Alternative Minimum Tax in the US.
For a single person on 60,000 the effective tax rate is 33.4% and for one on 100,000 it is 40.9%. The effective tax rate for very high income earners should be much higher than here: for a single person on 400,000 it would be over 51%.
Youre including PRSI & USC in those figures, which were specifically excluded in the discussion above.
Alternatively, the government could legislate for something like the Alternative Minimum Tax in the US.
They have already.
Its called the minimum effective income tax rate, and has been in place for several years. In the last budget, it was increased to 30%.
(Again, that rate specifically excludes PRSI and USC).
Nice to see Harry McGee and the Revenue Commissioners can decide between them on what constitutes a ‘fair share of tax’.
+1
And nicely put. “..has been largely successful…” The smug arrogance of the IT/RTE (incarnated in this particular journalist) commentariat!
The distinction between marginal and effective rate is in the context of this discussion I’d have thought not the main point.
For the vast majority of workers as individuals in this state if they work in excess of €36,400 they pay precisely 41 per cent on all income they take in.
The issue of how much they earn over and above €36,400 is irrelevant whether it is €5,000 or €200,000. In terms of genuine progressivity I think someone making the sums described in the article in the IT should indeed be paying 41 per cent on the entirety of their income (and not on total income less the 36,400 which seems to be more or less the set up they face though I’d have to delve further into the figures to work out the actual rate they are being asked to pay on all income). Either way, the position of the person on PAYE and/or signfiicantly lower rates appears to be at a disadvantage in respect of these highest earning tax payers.
For the vast majority of workers as individuals in this state if they work[sic] in excess of €36,400 they pay precisely 41 per cent on all[sic] income they take in.
Are there typos in the above sentence? I ask because I doubt you meant to state that 41% is paid on all income they take in (which is clearly not the case, and thats plainly fundamental to our system of tax bands and tax credits).
In terms of genuine progressivity I think someone making the sums described in the article in the IT should indeed be paying 41 per cent on the entirety of their income.
Now youve really lost me. That would totally undermine the system of tax bands. The whole point of which is to avoid edge-effects (i.e. leave someone getting less net pay when they get a pay increase bringing their gross just above a band threshold).
Bartley, whatever else about our differing points of view I don’t think I ever pretend that you’re an idiot. It would be good if you returned the courtesy.
Well I am genuinely baffled by your earlier post on the 41% rate applying to all income … can you explain?
See, this is what makes it so difficult for me to argue otherwise when people I trust say you’re a troll. When presented with what you’re doing in your last two comments it’s impossible not to think you’re simply stirring it for the sake of it. You know that I understand how the 41 per cent rate operates on income earned in excess of the €36,400 level. You know that at worst it was a comment not clearly enough expressed, but you persist in suggesting that my understanding is otherwise. Poor, even for you.
Thanks for this Bartley “Due to the progressivity built into the system, very few citizens end up paying an effective rate of 30% (that rate only tips in at about €92k).”
This for me means a necessity for a 50% tax on everything over this.
Very interesting that when it comes to income tax and social insurance there is no reference in the MMS to what’s happening in “Europe”. When talking of the unemployed we’re usually told how” rich” they are compared to the rest of Europe. When talking of the minimum wage we’re usually told how generous it is when compared to the rest of Europe.When there’s talk of public service pay again we’re usually informed that they’re the best paid in Europe.
Funny then how when it comes to tax these Europhiles make absolutely no mention of where we stand in relation to the rest of Europe.
@WbS
Bartley: Are there typos in the above sentence? I ask because I doubt you meant to state that 41% is paid on all income they take in.
WbS: You know that at worst it was a comment not clearly enough expressed, but you persist in suggesting that my understanding is otherwise.
Fair?
You asked the question when you knew, short of me losing my mind, the most likely/reasonable answer. These things are clues.
Well actually I wasnt sure whether you had misspoke/mistyped, since you repeated in the same post the concept of the 41% rate being applied to the entirety of income.
You could have just clarified, or given that you presumably have comment-editing karma, just fixed the darn typo(s).
You can keep this up as long as you like. I’m in no hurry, but what you can’t do is persuade me that you’re acting in good faith in your interactions here both in the specific instance above or more broadly over the past while.
Bartley, why don’t you just ban WbS? It’s your site after all.
@WbS
Why not simply explain what you meant?
Because I’m tired of dealing with someone as disingenuous as yourself.
As regards the comment you made so much of initially (one which by the way acknowledged the distinction between marginal and effective tax rates that you made the point in your first comment on the thread) I noted in it…
The issue of how much they earn over and above €36,400 is irrelevant whether it is €5,000 or €200,000. In terms of genuine progressivity I think someone making the sums described in the article in the IT should indeed be paying 41 per cent on the entirety of their income (and not on total income less the 36,400 which seems to be more or less the set up they face though I’d have to delve further into the figures to work out the actual rate they are being asked to pay on all income).
In the context of this exchange the key element of that is in brackets where I clearly indicate that 41 per cent is paid on total income less the 36,400 (the clear implication being that sum is one on which only the standard rate is paid on).
I’ve waited and wondered for a day now when you’d clock to that. If you didn’t bother to read the original comment clearly enough to see that fundamental point and yet made an issue of how ‘you lost me’ and ‘bafflement’ that too is another clue.
Following Romney’s announcement of this guy as running mate, we’re going to be hearing a lot more about him and his beliefs (‘ideas’ is too weak a word).
http://www.newyorker.com/reporting/2012/08/06/120806fa_fact_lizza
Don’t mention Mitt Romney’s underpants, whatever you do, they have a special place in ‘Bartley’s’ heart. Or, put another way, slagging Mitt’s jocks is equal, in ‘Bartley’s’ mind with abusing muslim women for wearing hijab. It’s all about political priorities….
@CMK
Mormon-baiters dont get to pass themselves off as somehow superior to Islamophobes, just because their target is a arguably a theocratic, homophobic, misogynistic religion with a history of tolerance of polygamy, enforcement of chastity and prohibition of alcohol.
Wait a minute …
As Lincoln almost said: “It would have been better to have stayed silent and been thought a troll, than open your mouth and remove all doubt.”
Please ignore the superfluous comma in the above.
I can’t, I can’t, it’s really getting to me. There should be a rule that those would post here are allowed a maximum of say three punctuation missteps; a fourth one and you’re banned from CLR, for life! We have to keep up standards! If a superfluous comma is allowed pass god knows where we’ll end up.
Are you saying that I have exceeded this quota?! I shall have satisfaction, sir!
Careful examination will tell. The CLR punctuation commisars are working furiously (all 200 of them) on your case, comrade, you may, or may not, hear a knock on your door at 5am. Pack a suitcase, just in case. Punctuation errors, even one, are clear evidence of counter revolutionary tendencies! The bourgeois will stoop to nothing, even misusing humble commas, semi-colons and colons to baffle the masses! Punctuation errorists must be ruthlessly dealt with! When it come to punctuation there can no room for sentiment! The revolution must be perfectly punctuated!
Should “counter revolutionary” not have a hyphen?
@WbS
(and not on total income less the 36,400 which seems to be more or less the set up they face though I’d have to delve further into the figures to work out the actual rate they are being asked to pay on all income)
Sure the clause youve bolded was indeed the most sensible part of your comment, but even that leaves me a bit confused.
Why would you need to delve further into the figures to work out the actual rate they are being asked to pay on all income?
By definition, that is simply the effective rate of income tax, i.e. the whole subject of your post and indeed the original IT article – that the Revenue have reported this rate is hitting 30% for high earners, as required by law.
You didn’t read the clause initially or if you did you didn’t bother to contextualise with the rest of the comment. What was in it makes it clear that everything you wrote subsequently was time-wasting. Give it a rest.