There's serious risk involved in investing in shares that's not properly factored in when setting cg tax rates and the way gains/losses are offset by revenue rules is not very fair.... Revenue always benefit on the upside.. I can completely understand why people leave there hard earned cash on deposit with banks..
McWilliams: "Nepo-babies" are creating a two-tier housing system
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The Horseman
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You have answered your own question. if you did not earn in the first place you would not have purchased a property and invested in a pension.
You paid via your earned income to be in the position you are. I am a similar vintage to you. Most of my contemporaries are exactly like you and I. We worked for what we have and sacrificed to get where we are. Unfortunately we have an entitlement culture prevalent in Ireland were people feel they are entitled to something without sacrificing to achieve it.
My nieces and their partners are in their 20's with modest incomes but were able to purchase property without family financial support. They sacrificed to get to purchase property.
Yes, but the wealth that resulted from that investment was unearned.
No, I was lucky and had skin in the game before a massive property boom and later a decade and a half of QE.
So do most working people. We are lucky enough to have been earing money when the value of labour relative to capital was much higher.
That's exactly my point; older people who are rich and think they earned it despite the fact that they quite clearly didn't. Their entitlement is astounding, especially as we bailed ourselves out of the 2008 crash by mortgaging our children's future. Our behaviour, and more so the behaviour of our parents was reprehensible. And now we wag our fingers at those same young people we sold out. It's just appalling.
And they'll sacrifice way more than we did because their homes are way more expensive than ours were relative to income. And that's our fault.
We should feel guilt and shame, not entitlement.
There's way more of a risk in setting up a business and employing people. That actually creates real wealth, but the income from it is taxed at over 50%.
Agree... These people need to be incentivised as well.
There is a difference though between employees (state, multinational etc) of companies /small business etc receiving a salary and the risk profile in relation to investing in certain asset classes. I never felt any risk associated with being employed in the MNC but being invested in equities is a whole different matter altogether... Not much fun at time's when you see your investment drop 30% or more and still hasn't recovered 3 years latter (and potential never recover.. Think of those who lost heavily on irish banks fall from grace)..
It's more difficult to get the balance right than people realised and not cause unintended consequences...
Our system is high income tax, low (no) wealth taxation. The reason they had to sacrifice was that the burden of taxation was stacked against them (and their generation) as it favours capital over labour. In order to access wealth, income has to be earned first. Lowering the barriers to acquire wealth i.e. shifting the burden from generating wealth on to realising wealth is surely better for society as a whole.
And QE has artificially inflated the cost of capital way beyond what it should be relative to labour.
The rate on taxation on the creation of wealth (work) is over 50%.
The rate of tax on the retention and capital appreciation of wealth ranges from 0% to 33%. I find that inequitable and socially undesirable.
Agree with everything you've said here, but just to be a bit pedantic for the sake on an honest discussion, most people are not paying 50% on their income. On say €150k your effective income tax rate is 42%, and you'll probably be making up to 25% pension contributions bringing your effective rate below 30%.
The problem is that any additional income is taxed at over 50%. That's a disincentive to work harder and create more wealth.
I don't think anyone on €150k who is paying a mortgage and putting a family through school/college can afford to put 25% of their income into a pension.
Of course if they are wealthy and own their home outright then I'm sure they could afford it but that's kind of the point I'm making. You either have capital (wealth) or you are paying for the use of someone else's capital (rent or mortgage) out of marginal income that is taxed at over 50%.
That's the trouble with socialists, their concentration on equality of outcome means that they build very unequal societies. It's also our problem as we are the most socialist country in Europe.
The problem is that any additional income is taxed at over 50%. That's a disincentive to work harder and create more wealth.
I don't think anyone on €150k who is paying a mortgage and putting a family through school/college can afford to put 25% of their income into a pension.
Then I would wonder if there might be a question of lifestyle and priorities. I say that as a member of a household who "survived" and manage to save and invest on half of this for most of the decade having bought during the Celtic Tiger.
I don't think anyone on €150k who is paying a mortgage and putting a family through school/college can afford to put 25% of their income into a pension.
Then I would wonder if there might be a question of lifestyle and priorities. I say that as a member of a household who "survived" and manage to save and invest on half of this for most of the decade having bought during the Celtic Tiger.
Okay, a coupe on €150k a year will pay €50k in income taxes of various sorts.
If they live in a modest enough house in Dublin and have 2 young children they'll pay around €35k-€40k in mortgage costs or rent and another €20k-€25 in creche fees. That leaves them with €35k to €45k a year to pay for utilities, pay medical costs, run 2 cars, pay health insurance, do the groceries and maybe get a holiday.
If they were unemployed and has a council house they'd have no mortgage costs, no creche fees, wouldn't have to run two cars and would get free healthcare. I don't see how they'd be much worse off.
If they were a wealthy retired couple on the State pension they'd have an income of €27,600 a year, have free healthcare, free travel, no mortgage or rent, no creche fees and get lots of other goodies from the State. I don't see how they'd be much worse off.
What priorities should they change?
Its a fair point on effective taxation, that usually gets missed. However, you can only avail of the facility, with disposable income, after you have met your priorities e.g. housing, childcare costs, transport etc. If you are renting and trying to save for a deposit at the same time, you get hit with full marginal taxation.
The taxation of monies used to acquire a property for example, should be shifted from the point of generation (income tax), to its consumption/realisation (property taxes/CGT).
Except that they really didn't.
They reduced the overall floor space minimum requirements for 1 bed apartments from 55 square meter to 45m2, but made no changes to other minimum size requirements such as bedroom sizes, storage spaces, "private amenity space" and living room/kitchen space, which remained the same as it was when such units were 10m2 bigger, making it almost impossible to design a unit that was compliant with the new rules. They also made no changes to a development requirement which insisted that a "majority" of such units in a development exceeded this minimum size, which in reality meant that the minimum size was reducing from 60m2 to 50m2, not 45m2.
In contrast 20 years ago we were building 2 bed units that were 55m2.
This update applied to ALL new builds including AHBs, social housing, conversions of period properties etc. With increased green requirements this meant that a 1 bed had to be almost the size of a tiger era 2 bed, and have properties that would have been considered luxury even 10 years ago.
This is why we have a housing crisis.
Actually he has, I was at a private event he spoke at a few months ago and he more or less espoused Georgism and explained it to the audience. He was also asked a question about a likely Sinn Féin government and he was surprisingly cynical about them (this was a private audience of people who work in financial services, mind).
If you look at the census from 1991 and 1996 there is a very tiny proportion of people aged 18-25 who own their own homes AND own them outright - something like 2.9%.
Jump forward 10 years to the tiger era census and this figure jumps to something like 10.9%, but here's the thing, in all of the census taken since, that percentage has not dropped off.
That is just one group - this is adult children being gifted entire homes or having them bought for them by wealthy parents, or with money they have acquired from wealthy parents. They've been around since the late 1990s, I recall my sister's best friend's father buying her a brand new 3 bed semi off Griffith Ave in the mid 90s. She was one of the early ones. Add that to an already existing pot of "old money".
The next group are the group being gifted money from parents or relatives in order to fund a deposit.
Yes there is also a cohort who Daddy pays the bills for in their rental, or perhaps "helps out" with the rent also.
The next group are the cohort who still live at home either rent free or at nominal cost, perhaps they pay the ESB or something.
Then you will have some who still live at home and make a contribution but still at a rate below market rent.
Finally there is the group who move into a property owned by family at nominal or no rent (often evictions for "family use" are about this group), where they then save their own deposits.
You often find a lot of these are not the only benefits conferred to large adult sons and daughters by parental benefactors. Sometimes they are being given jobs in family businesses on top of this, or the parent gets them into a company they are connected with.
Its not just one thing but a whole set of perks and benefits with come with being the adult child of someone wealthy.
However I'm not entirely sure this always pushes up prices as much as McW and other's suggest - a lot of the time they are being given use of or signed over properties from the family that they otherwise couldn't afford. A lot of them don't have the same pressure to "do well" at work so they often make a mess of their careers or don't really push themselves because they don't have to. So they often fall out with family, fall on "hard times" or get into trouble in other ways.
As for the sister's friend, her father got into financial difficulty a couple of years ago, saw he was selling his own mansion in the sticks - the sister's friend has vanished off the face of the earth and doesn't answer calls or emails from anyone.
This isn't just one thing, its a range of things, however it doesn't always quite work out, and it often just ends up costing the family a lot of their own hard earned savings and wealth to facilitate. They certainly have advantages with deposits but wouldn't necessarily have the hard earnings to get the higher mortgages needed to finance expensive southside semi Ds worth 700k or more
50thbirthday
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Supply, supply supply....just want to bring to everyone's attention that kildare County Council cut housing supply in that County by 59%. From now to the end of the decade. It's called the Core strategy. Why aren't we challenging this?
50thbirthday
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Cairn and Glenveagh challenge Kildare County development plan
Cairn Homes and Glenveagh Properties have applied to the High Court to seek a review of the new Kildare County development plan, which it says underestimates the population growth trajectory of the county.
m.independent.ie
So he does it in private but not in public. Okay.
The State buying homes that would otherwise be purchased by first time buyers is a far bigger problem.
Or inheriting them directly from Granny. With reducing family sizes and more intergenerational wealth this will become more of a factor.
In the context of encouraging wealth creating effective tax rates are irrelevant.
"If I work harder/longer/get that promotion and take on more responsibilities what will it be worth to me after tax?" That's the question and the answer is all about marginal tax rates.
If you earn over the average industrial wage the the State is taking over 20% more of your after tax income than they were a few decades ago. That's absolutely outrageous.
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Classic McWilliams. He's very good at telling whatever audience that's in front of him what they want to hear.
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