Cut the dole to cut higher tax rates

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Duke of Marmalade

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Boss you're in form today in the Sindo, watch your back:) Broadly agree with you except I'm not sure there is any silver bullet for the pension crisis we face.
 
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Thanks Duke

My article in today's Sunday Independent:

High earners pay more than their fair share in tax, while others get a free ride

A significant part of the difference between the tax rates in Ireland and the UK is due to social insurance. An employee earning €40,000 in Ireland pays €1,600 a year in PRSI. A UK employee on £35,000 pays £3,283 a year in social insurance. That is right - they pay twice the social insurance in the UK.

But an Irish married man with a dependent wife gets weekly dole of €312.80, while his equivalent in the UK gets only £114.85.

So the Irish man pays half the social insurance but gets twice the dole. That is unfair to the general Irish taxpayer who has to fund the difference.
 
Duke of Marmalade said:
Broadly agree with you except I'm not sure there is any silver bullet for the pension crisis we face.
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"The PRSI system here should be changed so that a person's contributions should go into an account in their own name. This account would be used to pay their pension and their healthcare. They could also draw on the account during any periods of unemployment. The more they put into the account, the more they would get out. If someone earning €80,000 a year loses their job, they would get a dole payment based on their salary, but it would be drawn from their own account. They would not be getting some State handout, they would be getting their own money back. And it would always be in their interest to work. While they are working, they are building up their retirement account. While they are unemployed, they are depleting it.

When they retire, they would get a pension based on the amount in the account.

Such a system would go a long way to solving the pensions crisis we have. If people paid for their pension through a PRSI account in their own name, they would not need a separate, privately funded pension. They would be prepared to pay higher PRSI if they could see a direct link between what they pay in and what they eventually draw out. There would be no more arguments about the age at which a person should be able to draw the Old Age Pension. The amount of the pension they would get and the age from which it could be drawn would be decided by the amount they have in their PRSI account."

I think it would be a move in the right direction. But the current system is so completely dysfunctional, that it will take years to fix.

I think a personal account system would be a good first step in the right direction.

Brendan
 
Good article Brendan. A problem with Irish society is that we want everything provided for us but we don't want to pay for anything. Irish Water is a classic example.

Then there is the way the Exchequer is run, it is like a giant Ponzi scheme. As long as there is money coming in, we will continue to fund the expenditure. There will come a time when those taking will far outnumber those giving, so what are they going to do then? Absolutely nothing is ringfenced by the government, every penny that comes in is put in the general exchequer. And that's before getting to how much over the odds government departments pay for outside tenders etc. It's a gravy train.

Steven
www.bluewaterfp.ie
 
Brendan Burgess said:
Thanks Duke

My article in today's Sunday Independent:

High earners pay more than their fair share in tax, while others get a free ride

A significant part of the difference between the tax rates in Ireland and the UK is due to social insurance. An employee earning €40,000 in Ireland pays €1,600 a year in PRSI. A UK employee on £35,000 pays £3,283 a year in social insurance. That is right - they pay twice the social insurance in the UK.

But an Irish married man with a dependent wife gets weekly dole of €312.80, while his equivalent in the UK gets only £114.85.

So the Irish man pays half the social insurance but gets twice the dole. That is unfair to the general Irish taxpayer who has to fund the difference.
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Oh dear, oh dear oh dear! Where to begin?
 
SBarrett said:
A problem with Irish society is that we want everything provided for us but we don't want to pay for anything
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Speak for yourself, the vast, vast majority want to earn a living and pay their own way in the world.
Its mindsets like yours that costs Irish workers dearly.
 
TheBigShort said:
Speak for yourself, the vast, vast majority want to earn a living and pay their own way in the world.
Its mindsets like yours that costs Irish workers dearly.
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Hold your horses there mate. Ok, let's look at Irish Water. Every country in Europe pays for their water. We don't but we expect the pipes to be paid from the general exchequer. We also expect a top class health service, more schools, better standard of education, better roads, better infrastructure, help the disadvantaged. The list goes on. Where is the money going to come from to pay for all these services that we want? It has to come from taxation, and people don't want to pay any more than we current are.

Steven
www.bluewaterfp.ie
 
SBarrett said:
Hold your horses there mate. Ok, let's look at Irish Water. Every country in Europe pays for their water. We don't but we expect the pipes to be paid from the general exchequer. We also expect a top class health service, more schools, better standard of education, better roads, better infrastructure, help the disadvantaged. The list goes on. Where is the money going to come from to pay for all these services that we want? It has to come from taxation, and people don't want to pay any more than we current are.

Steven
www.bluewaterfp.ie
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What people want from our great leaders is a country no bigger than the size of greater Manchester to be able to access housing a decent health service and employment opportunities for our young people. I have gone to every water protest because I believe that our water was been lined up to be sold off. Look what has gone on with bins/charges. Siteserv, Nama, mobile licences to name a few.
I work for a little above the average industrial wage. I have paid PRSI for over 30yrs. I have paid private health insurance for years now. I go to a consultant I pay my 150 euro. So in reality I am paying 3 times firstly through my PRSI then my private health insurance and I still have to hand out a further 150 euro. What other country would put up with this nonsense. This is one example of our great system.
People in Ireland through past experience dont like paying out any more because it is wasted.
Countries like Canada have a Finance Minister who actually has a back ground in finance and a minister for health who has a comprehensive background in health.Here we have a group of burnt out teachers who are given a portfolio because simply the head of the country thinks its a good idea or likes them.
The size of greater Manchester- families living in hotels, hundreds sleeping on the streets. Hundreds dying every year because they cant get a hospital bed. Over 100k to keep a prisoner in Mountjoy. Over 370k to keep a young offender in Oberstown. The list goes on.
Fool me once shame on you. Fool me twice----.
When the tax payer is confident their taxes are spent properly and not on 135k pensions for ex-ministers they might be willing to contribute more.
dont hold your breath.
Rant over time for glass of wine.:(
 
SBarrett said:
We also expect a top class health service, more schools, better standard of education, better roads, better infrastructure, help the disadvantaged. The list goes on. Where is the money going to come from to pay for all these services that we want? It has to come from taxation, and people don't want to pay any more than we current are
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But this topic is not about raising more taxes to pay for the things that you have presented. It is, at its worst, about cutting welfare rates in order to provide tax cuts for higher earners and at best, it is about transferring the taxation burden from higher earners onto lower earners in return for zero services.
Either way, the argument presented in the Indo article is devoid of any impartial analysis, full of contradiction and skewed calculation.
 
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"If the couple in Ireland has two children, they will pay €5,143 in taxes and receive €3,300 in child benefit. If you view child benefit as a negative income tax, the net tax falls to €1,843, or 4.6pc of their gross income."

The question I have here is, does the author view child benefit as a negative tax? As someone who has two children with a childcare bill of €11,000 pa, not to mention the cost of food, schooling, extra circular activites, etc, such a sentiment is devoid of any understanding of society and economy.
In a nutshell, cut child benefit and it will disincentive at least one parent to go out and work, delay family planning, and reduce family sizes.
 
According to the OECD, the tax take on low earners is the lowest in the OECD.

Is this a bad thing? Really? Is the author advocating high tax take on low income earners? Perhaps not, perhaps a higher tax take than what is currently applied. But astonishingly, this extra tax take is not to used to provide for improved public services but rather to provide for a tax cut for higher income earners!
 
An employee earning €40,000 in Ireland pays €1,600 a year in PRSI. A UK employee on £35,000 pays £3,283 a year in social insurance. That is right - they pay twice the social insurance in the UK.

But an Irish married man with a dependent wife gets weekly dole of €312.80, while his equivalent in the UK gets only £114.85.

So the Irish man pays half the social insurance but gets twice the dole. That is unfair to the general Irish taxpayer who has to fund the difference.

Whatever about the amount of dole for an the Irish couple, the UK equivalent amount is dismal.
But the analysis is based on the contributions of one earner on €40,000 pa and doesn't consider the tax take in the round. For instance, in the UK the higher tax rate of 40% doesn't kick in until £43,000!. In Ireland its €35,000.
 
What about high earners? An Irish couple with two children earning €80,000, which just puts them into the top 10pc of earners, pays €22,272, or 27.8pc of their income, in net taxes after deducting child benefit. So a moderately well paid couple pays €22,272 whereas our friend on €40,000 pays €1,843. Where is the fairness in that?

Where to begin with the inaccuracies and contradictions in this statement?
First, apparently a couple on €80,000 pa are regarded as high earners in the top 10%. But a couple of sentences later they are reduced to "moderately well paid".
In reality of course, an individual earning €80,000 puts that person in the top 10%, but a couple earning €80,000 puts them in the average earnings bracket of...oh dear, €40,000 a piece each, or €80,000 between two.
This is surprising as the author posted the income brackets and associated taxes in another topic also.

Its not clear either, but it does appear, the author has excluded the child benefit from the higher earners tax liability but included it in calculating the lower earners tax liability.
 
According to the latest figures from the Revenue Commissioners, the top 20pc of earners pay 75pc of all income tax and USC paid in the country. The bottom 50pc of earners pay less than 4pc of the total tax and USC take. Some 750,000 low earners pay no income tax or USC at all.

These type of statistics (% of a %) are worthless. They are open to manipulation and misinterpretation. For instance, using the stats presented, the top 20pc pay 75pc of taxes. This would imply that the bottom 80pc only contribute 25pc of taxes. Meaning the top 20% are heavily burdened, while the bottom 80% are getting away lightly.
However another stat used by the author in the very same paragraph is that the bottom 50% only pay 4%, implying the top 50% contribute a hefty 96% of taxes.
But the top 50%, who contribute a hefty 96% also consists of taxpayers in the previous bottom 80% bracket! And those guys only pay 25pc of the tax!!
So, at any one time, a taxpayer could be categorized as both an overly burdened taxpayer (in top 50% bracket contributing to 96% of the tax) and simultaneously a tax payer who could contribute more (in bottom 80% bracket contributing to only 25% of the taxes).
 
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This is not fair. It's not fair that low earners get a free ride on the backs of the top 20pc. It's not fair that those on social welfare get among the highest welfare benefits and payments in Europe at the expense of a minority of taxpayers.

This is bizarre.
First, a low earner is a working person. They get up and do a job, for minimum wage or not much more.
How is working full-time for minimum wage ever to be considered as a free ride?
The only reason a low paid worker doesn't pay any tax is because their income is so low, allowing for personal tax credits, that the tax liability is calculated as zero.
On the other hand, the higher earner who is complaining about the amount of taxes ALSO receives equally the same amount of personal tax credits as a €20,000 a year worker.
In other words, even a person that earns €1m a year, will receive at least the same personal tax credits as the minimum wage worker. And as such, the €1m a year worker will pay the EXACT same amount of tax on the first €20,000 of their income as the worker whose entire income is only €20,000.

It is an absolute nonsense to compare the % amount of tax of two workers with different incomes as the tax rates differ on different levels of income.
 
Fine, push up the top tax rate and, while we are at it, cut the tax relief we give them on private health insurance.

At this point I think it's fair that I should agree that the tax system is somewhat skewed. But where I disagree is that it is skewed in favour of low paid. Where I see the unfairness is in the corporate tax system, and recent events with Apple, I believe just scratch the surface.
Also I am not inherently opposed to minimum wage workers paying extra tax. I am opposed that such a tax may be used to offer tax cuts for higher earners. This would be complete nonsense.
 
it's not good for the dole recipients themselves. If you have very high social welfare, people will become dependent on the State. They won't look for a job and try to get on in life.

And here is where it all goes pear-shaped for the author again. The implied assumption is that those on the dole could not command a higher income than what is offered on the dole. I mean why take a €900 a week production manager job when you can get your €180 dole, €400 rent supplement too?
Why would a 23yr old graduate, living with mammy and daddy, take a minimum wage job in a reputable when they can get €100 for doing nothing?
The implied sentiment inherent in the Indo article is that those on low incomes and welfare are lazy, unreliable and costly to society.
 
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