Every young person should get €100k tax credit instead of a lifetime CAT allowance

[The Horseman]

33% is proportionate.

Is a 6-figure handout from a parent to a child not a disincentive to work/create wealth?



We can reward people by taxing their work less. Surely the right thing (both politically and economically) is to go and earn one's own income?

If someone wants a €110k tax relief on an inheritance from their parents when they are 60, fine.

But then let someone else claim their €110k tax relief against income in their 30s so they can buy a home.

Each person gets the benefit of the same tax relief, seems fair.

A six figure handout is not a disincentive to work. A worker will always work and those who don't won't to work won't work.

Why do you think we have generational welfare receiptents?. By and large children will have the same work ethic as their parents. Not all but most will.

OK if you tax someone less in work how do you fund it? If they use the less tax to purchase a property their family are hit with inheritance tax exactly what this topic wishes to increase.

We have a pensions timebomb and part of the answer to that is property ownership to fund nursing home care etc. Currently we have 4 workers for every pensioner where their pension is paid through current taxation. Within the next 20 yrs it will be down to two workers per receiptent.

We are heavily reliant on corporation tax and if the top 6 corporations leave Ireland we lose 20% of our corporate tax revenue.

 

[Aurora]

Where is the OP pulling the figure of €670,000 from.? Makes you wonder about the veracity of the entire post.

 

[arbitron]

Where is the OP pulling the figure of €670,000 from.? Makes you wonder about the veracity of the entire post.

Each person in a couple can each receive €335,000 from their parents, hence: "A couple ... can receive €670,000 from their parents tax free."

 

[arbitron]

A six figure handout is not a disincentive to work. A worker will always work and those who don't won't to work won't work.

Like a lot of people, I have had a paying job in some form since before my junior cert. If someone gave me €100k for nothing, I would absolutely take a year off work and enjoy myself.

On the other hand, if I got a €100k tax credit to be used over 10 years I would maximise my earned income during that time therefore increasing the productivity of the economy.

OK if you tax someone less in work how do you fund it?

Good question. How do we fund the current CAT breaks we give people?

 

[The Horseman]

Like a lot of people, I have had a paying job in some form since before my junior cert. If someone gave me €100k for nothing, I would absolutely take a year off work and enjoy myself.

On the other hand, if I got a €100k tax credit to be used over 10 years I would maximise my earned income during that time therefore increasing the productivity of the economy.



Good question. How do we fund the current CAT breaks we give people?

I too have and continue to work since junior cert. The idea of the €100k is to go towards a property purchase? I would not take a year off and enjoy myself. I personally have worked hard and sacrificed to better myself exactly as my parents did before me.

We don't fund the CAT as the tax from same has increased following the reduction in the threshold levels against the backdrop of rising property and investment/pensions etc.

 

[Purple]

People did "earn" their inheritance. My Father was a truck driver driving long hours, my Mother was a homemaker and then a factory worker again working long hours.

We never had a foreign holiday, we were lucky to go camping in the summer.

Because of all the sacrifices my parents made and by extension my siblings and myself in not having holidays, branded clothing, branded food etc people are suggesting penalising prudence!

At what point do we actually reward people for doing the right thing and trying to fend for themselves rather than having a hand out to the State?

That’s an argument for your parents paying less tax, retaining more of the fruits of their labour. It’s not an argument for someone else retaining the fruits of their labour.
your point supports the proposal at the start of this thread. They did the sacrificing so they should get the tax break. Then, if they so chose, there would be more to leave to their children. Their children would then be taxed fully on that larger inheritance.

Remember, the people leaving the inheritance don’t pay any tax on it.

 

[arbitron]

I too have and continue to work since junior cert. The idea of the €100k is to go towards a property purchase? I would not take a year off and enjoy myself. I personally have worked hard and sacrificed to better myself exactly as my parents did before me.

The point is that some people will work, some won't, depends on circumstances and stage of life, nothing necessarily to do with being work shy. The 100k when I was 25 would have gone to building savings for a deposit. The 100k in my 40s/50s, I'm off on holidays.

If we are going to give tax relief, it should be available to everyone, regardless of how wealthy their parents are, and the younger the better so we are setting people up for life. Surely as someone who has worked hard and sacrificed, you would not want to deny the benefit of tax breaks to younger people who are working just as hard. Why make them wait to use it against an inheritance that may never arrive?

No-one is saying give people a lump sum of 100k when they turn 18. But we can look at ways to give smaller but significant tax breaks over time to ease property purchases. And those tax breaks can come off their lifetime Group A threshold.

As @Sophrosyne said, anything like this would have to be tempered by the exchequer needs, public policy, etc., so maybe it's €30k over 6 years? I don't have skin in the game either way, but I don't agree with giving lucky people a tax relief that is not available to workers. It is anti-meritocratic and favours the already wealthy.

We don't fund the CAT as the tax from same has increased following the reduction in the threshold levels against the backdrop of rising property and investment/pensions etc.

I don't understand. If my friend gives me €303,000 tomorrow, I pay CAT of 33% on €300,000 of that, i.e. €100,000 CAT. If my dad gives me the same amount, I pay 0% CAT. There is a difference of €100,000 that the exchequer doesn't get. That is money lost, even if in the abstract, but the only difference is that the donor and I share genes. From an economics and revenue point of view it seems bizarre.

If we are going to offer a Group A tax relief, we should consider letting people use it more flexibly, that's the proposal.

 

[Sophrosyne]

I realise that you are thinking things out and don’t wish to rain on your parade, but this is a non-runner.

According to this report from the Tax Strategy Group:

CAT receipts for 2022 were 605m,

Group A yield for 2022 was €243m,

No of Group A cases was 7,357.

No of cases in Group B – 12,940 and Group C 4,875. Total B & C cases – 17,815

According to the report:

“Increasing the Group B (currently €32,500) and C (currently €16,250) thresholds to bring them into line with the Group A threshold (currently €335,000) would be costly, estimated at approximately €291 million per annum. This is because a significant portion of the yield from gifts and inheritances arises from the Group B threshold...”.

What, therefore, would be the cost to the exchequer of extending the monetary value of the Group A threshold to every taxpayer and what taxes would have to increase to recover the cost?

 

[Brian McD]

There will always be a strong desire of wealthy parents to take care of their children and there are multiple ways of doing this. Is it fair on others who do not have family wealth, no, but those parents have earned the right to do as they please with their money. This has & will always be the case.
Take for example a family business doing well, multiple family members in various functions, the ability to pass this down to the next generation and continue to trade, grow & create employment would be severely impacted by a large tax bill. Reliefs in place enable this to happen and when the business gets sold at some stage in the future the state will take a big share of the pie at that stage. Seems a lot fairer to me than taxing the business out of existence after one generation

 

[DannyBoyD]

I paid stamp duty when I bought my house, I paid VAT on every item in the house, I paid VAT on every home improvement, I paid Property Tax on the house, I paid the mortgage & interest from taxed income, if I need care in the later part of my life, a % of my home will be taken.

I consider inheritance tax iniquitous; I should be able to give my property to anyone I like without them paying a penalty.

We don't tax lotto winnings & thats unearned income!

 

[Annieindublin]

Where an adult child lives on in the house they may well be exempt from any taxes but unless they are an old child or the property was willed them it’s not always simple. And doesn’t mean they don’t have to sell. However thats complexities outside the tax system.

The idea of a life time exemption which could be applied in different ways appeals academically but I’m not sure that it’d be easy to make decisions. 20 year old me would have favoured in income and spent it on travel. 50 year old me would favour investments or pensions, 30-40 would have been handy with childcare costs or housin.

The state needs the cash generated by the tax, the books have to balance.

They employ economists and policy makers to work it out.

We all have skin in the game, my parents have a reasonable pension and with help can continue to live at home. If they need expensive care their assets, acquired through hard work and frugal living, will cover it. Unfair perhaps, maybe we should encourage them to spend it all now and enjoy it. Or give regular gifts to their many grandkids. Empty the piggy bank and leave only their house.
My friend’s parents live in a council house with only the state pension. Maybe they’ll all end up with the same care and neither of us will have an inheritance, her parents have nothing and mine will spend theirs paying care home bills.

 

[Annieindublin]

There will always be a strong desire of wealthy parents to take care of their children and there are multiple ways of doing this. Is it fair on others who do not have family wealth, no, but those parents have earned the right to do as they please with their money. This has & will always be the case.
Take for example a family business doing well, multiple family members in various functions, the ability to pass this down to the next generation and continue to trade, grow & create employment would be severely impacted by a large tax bill. Reliefs in place enable this to happen and when the business gets sold at some stage in the future the state will take a big share of the pie at that stage. Seems a lot fairer to me than taxing the business out of existence after one generation

Isn’t there a relief for business you are working in similar to farms?

If your kids are already shareholders they aren’t really inheriting the whole business. Or is that how wealthy people manage it?

 

[Philip S]

CAT appears to be one tax that people give out about the most. I agree with the people who work hard all their lives pay tax on their earnings then it is taxed again when passed to the next generation.
with the average gift/inheritance around 115k per another post IIRC correctly the average person is not paying tax at all if obtaining mostly from parents.
One issue I have with the groups is how certain people are treated for example half siblings are strangers if they gift to each other also in laws are treated as strangers which can create an issue if parents are gifting to help children get on the property ladder.
Regarding farms and business their is a relief that reduces the value of the asset by 90% if you meet certain conditions.

I would rather look at two other options

• either similar to the UK have a time span on gifts. Think in UK if the person gifting lives for 7 years after the gift their is no tax. This would encourage more living gifts where parents may be the enjoyment of the gift instead of gifting when the person is older and likely less overheads.
• The other options that has been discussed in the past is to remove the family home from the CAT net where it is inherited

 

[arbitron]

I realise that you are thinking things out and don’t wish to rain on your parade, but this is a non-runner.

According to this report from the Tax Strategy Group:

CAT receipts for 2022 were 605m,

Group A yield for 2022 was €243m,

No of Group A cases was 7,357.

Are these not just the cases that breach the threshold? So there were also X number of inheritances below the €335,000 cut-off (and not captured in the report) where people got 100% relief on the CAT that would have been due. I don't know what that theoretical lost CAT revenue is but it would be millions.

No of cases in Group B – 12,940 and Group C 4,875. Total B & C cases – 17,815

According to the report:

“Increasing the Group B (currently €32,500) and C (currently €16,250) thresholds to bring them into line with the Group A threshold (currently €335,000) would be costly, estimated at approximately €291 million per annum. This is because a significant portion of the yield from gifts and inheritances arises from the Group B threshold...”.

What, therefore, would be the cost to the exchequer of extending the monetary value of the Group A threshold to every taxpayer and what taxes would have to increase to recover the cost?

The lifetime cost would be up to €110,000 per person. A huge sum. But it is the same cost as the taxpayer-funded tax write off given to anyone who gets €335k or more under the current system. Unlike the CAT relief, this allowance would have to be spread over time otherwise the country would be bankrupt.

We could, for example, give people the option to retain their Group A allowance for future use or to increase their income tax credits. Say anyone who has paid income tax in Ireland for a period of 3 years can choose to double their EITC for the following 10 years.

EITC costs about €300m a year. If everyone qualified and everyone opted in that would cost an extra €300m a year. The help-to-buy scheme costs about €200m a year and according to Mazars about 1/3 of that goes to people who don't require it. So it's not an outlandish amount of money.

 

[Bluefin]

Are these not just the cases that breach the threshold? So there were also X number of inheritances below the €335,000 cut-off (and not captured in the report) where people got 100% relief on the CAT that would have been due. I don't know what that theoretical lost CAT revenue is but it would be millions.



The lifetime cost would be up to €110,000 per person. A huge sum. But it is the same cost as the taxpayer-funded tax write off given to anyone who gets €335k or more under the current system. Unlike the CAT relief, this allowance would have to be spread over time otherwise the country would be bankrupt.

We could, for example, give people the option to retain their Group A allowance for future use or to increase their income tax credits. Say anyone who has paid income tax in Ireland for a period of 3 years can choose to double their EITC for the following 10 years.

EITC costs about €300m a year. If everyone qualified and everyone opted in that would cost an extra €300m a year. The help-to-buy scheme costs about €200m a year and according to Mazars about 1/3 of that goes to people who don't require it. So it's not an outlandish amount of money.

All the associated exemptions would need to be addressed as described in the link provided above.

If we want to have a fairer society then the annual gift tax (3k) should be abolished…imagine rich families can legitimately give each child 6k (both parents) tax free per year for potentially 30+ years…add in another 6k to there partners and the grandchildren…that’s some wealth transfer!!

Should children going to college pay the full cost of there course and not the 3k fees per year…again college benefits the wealthy families and gives kids a better chance to earning more over their lifetime than non graduates!

Why should poorer families pay for the rich kids!

 

[Purple]

I paid stamp duty when I bought my house, I paid VAT on every item in the house, I paid VAT on every home improvement, I paid Property Tax on the house, I paid the mortgage & interest from taxed income, if I need care in the later part of my life, a % of my home will be taken.

I consider inheritance tax iniquitous; I should be able to give my property to anyone I like without them paying a penalty.

Your children didn't pay any of that VAT or property tax or interest so why should they get your assets tax free?
Using your logic if I have a bank account full of after tax income then I should be able to employ a cleaner or a gardener without them paying tax on their income. I should be able to buy a car and not pay and VRT. I should basically be able to distribute my after tax wealth to anyone I choose without them paying any tax. In fact since I paid tax in earnings, unlike the untaxed gain on my home, there's an even stronger moral argument for passing that money on tax free... but that's not the way taxation works; the State gets their cut every time a Euro changes hands... so why should it be different for what is in many cases mainly the untaxed and unearned wealth from the capital appreciation of a house?

 

[Purple]

All the associated exemptions would need to be addressed as described in the link provided above.

If we want to have a fairer society then the annual gift tax (3k) should be abolished…imagine rich families can legitimately give each child 6k (both parents) tax free per year for potentially 30+ years…add in another 6k to there partners and the grandchildren…that’s some wealth transfer!!

Should children going to college pay the full cost of there course and not the 3k fees per year…again college benefits the wealthy families and gives kids a better chance to earning more over their lifetime than non graduates!

Why should poorer families pay for the rich kids!

I agree but only if there is a corresponding reduction in income tax rates.

 

[The Horseman]

That’s an argument for your parents paying less tax, retaining more of the fruits of their labour. It’s not an argument for someone else retaining the fruits of their labour.
your point supports the proposal at the start of this thread. They did the sacrificing so they should get the tax break. Then, if they so chose, there would be more to leave to their children. Their children would then be taxed fully on that larger inheritance.

Remember, the people leaving the inheritance don’t pay any tax on it.

My parents along with others sacrificed so their children would not have to go through the difficulties they did in this instance leaving an inheritance. The tax breaks as you reference were not there to avail of.

The fair deal scheme is a prime example of how the system is wrong. You have two identical people one with assets the other without yet both people receive exactly the same care but one has to pay for it and the other doesn't where is the fairness in that?

Do most if not all parents try improve their children and grandchildren lives rather than a strangers one? At what point do people take responsibility for where they are in life?

What they wish to do with their assets should be their decision not the States.

I always find it ironic that people want to tax those who actually worked hard, sacrificed and earned their situation in life and rather than let them decide what they do with it they want to control them. Right up to the mid 1990's Ireland was not a wealthy country.

 

[Silversurfer]

All the associated exemptions would need to be addressed as described in the link provided above.

If we want to have a fairer society then the annual gift tax (3k) should be abolished…imagine rich families can legitimately give each child 6k (both parents) tax free per year for potentially 30+ years…add in another 6k to there partners and the grandchildren…that’s some wealth transfer!!

Should children going to college pay the full cost of there course and not the 3k fees per year…again college benefits the wealthy families and gives kids a better chance to earning more over their lifetime than non graduates!

Why should poorer families pay for the rich kids!

This begs the question should wealthy families subsidise the poor? If so to what level?

 

[Purple]

My parents along with others sacrificed so their children would not have to go through the difficulties they did in this instance leaving an inheritance. The tax breaks as you reference were not there to avail of.

The fair deal scheme is a prime example of how the system is wrong. You have two identical people one with assets the other without yet both people receive exactly the same care but one has to pay for it and the other doesn't where is the fairness in that?

I pay well over €100,000 a year in income tax. I have considerable assets. Should the State provide me with more and better access to healthcare than the average person?

Do most if not all parents try improve their children and grandchildren lives rather than a strangers one?

Do you want to live in a country where that entails making sure those children and grandchildren are well adjusted and well educated so that they can make their own way in life or that they just inherit a big lump of capital?

At what point do people take responsibility for where they are in life?

I suggest that the children and grandchildren who inherit tax free wealth aren't taking responsibility for where they are in life, rather they are simply beneficiaries of a wealth transfer.

What they wish to do with their assets should be their decision not the States.

It is their decision.

I always find it ironic that people want to tax those who actually worked hard, sacrificed and earned their situation in life and rather than let them decide what they do with it they want to control them. Right up to the mid 1990's Ireland was not a wealthy country.

No, I want to reduce the tax burden on people who work hard. I want to see a corresponding increase in tax on those who will inherit the fruits of that hard work.
Right up to the mid 90's if you worked hard and earned a good income you would be able to buy a house. Now what you inherit matters more than how hard you work. I think that's bad for society. We should tax earned income less and pay for it with a corresponding increase in tax on wealth.

Remember, income and wealth are not the same thing. When the populist left talk about wealth tax they are in fact actually talking about more income tax.