Indo - "Almost one in four Irish earners is paying no income tax, says Revenue"

TomEdison said:
If, instead of stamp duties, we'd had an annual property tax, like a grown-up country, the fall would have been nothing like 60% (though it would still have been more than 7.4%).
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Where does the 7.4% come from.

In most places property tax rate is set of what budget is required from it.

If a city needs €1bn from property tax, has 1m residents with an average home value of €100,000 then you set property tax a 1%.

If there is a cash, the average property value drops to €50,000 but you still need €1bn you set the rate to 2%.

You basically start with what you need and figure out how to get it as opposed to setting tax rates and seeing what happens.

Earnings can change quickly but you house value will be based on a known previous date.
 
faketales said:
Where does the 7.4% come from.
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It was the fall in income tax receipts in the year after the 2008 crash.
faketales said:
If a city needs €1bn from property tax, has 1m residents with an average home value of €100,000 then you set property tax a 1%.

If there is a cash, the average property value drops to €50,000 but you still need €1bn you set the rate to 2%.

You basically start with what you need and figure out how to get it as opposed to setting tax rates and seeing what happens.
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That's politicallly difficult; you're putting up taxes (doubling them!) at a time when people are already in economic shock. So the politicians will look at alternatives like, e.g., borrowing more, cutting back on spending and services, putting put different taxes. etc. But, yeah, you're basically right; the authorities will generally respond with some combination of more borrowing, less spending and a mix of increases, including some increaase in property tax.

(One other factor: putting up property taxes makes the crisis worse. The more burdensome the ownership of property is, the more property values decline.)
 
Sybilla said:
For 50 somethings, it depends when houses were purchased. A lot of people bought houses in 2004-2008 that are only now (in Dublin) just about worth more than we paid - and we paid 9% stamp duty. Everyone looks at property price increases from 2012, the low of the market. Some of us have not had huge net worth benefit from property price increases (although did benefit from low interest rates).
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If you bought then and there was no QE and bail out then you’d still be in negative equity.
 
Purple said:
If you own a house worth a million euros and have a pension fund worth in excess of a million euros then you are wealthy. You mightn’t have a high incomes but that’s a different thing. Such a person isn’t taxed on their wealth and pays very little income tax. Those are the people who are under taxed.
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Referring to the house worth a million.

How is the owner - say a person in their late forties with kids in school and a job that ties them to Dublin - supposed to monetise that wealth?

Perhaps the answer is that the person should be taxed to the point that they are forced out of their house and to move, say, a cheaper location in the midlands with a two hour commute, upending their kids and the rest of their lives. Move the livestock to more convenient pasture, so to speak. I'm not dismissing that - but I think we should be very clear about what kind of society we are trying to build through tax incentives.

Two tangential points:
- In my view, a principal private residence should be viewed as an expense and liability (opportunity cost of capital, property tax, insurance, maintenance and upkeep), not an asset, unless your worldview is that espoused in the previous paragraph.
- Those in charge of governance over many decades have built a society where the vast majority of people's wealth is tied up in principal private residences. Are the citizens now to be punished for that explicit policy? Again - you can say "well they voted for it" - but that is too simplistic.
 
blackdog said:
Referring to the house worth a million.

How is the owner - say a person in their late forties with kids in school and a job that ties them to Dublin - supposed to monetise that wealth?
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They are not. Most wealth is tied up in Capital Assets which have a use value.

blackdog said:
Perhaps the answer is that the person should be taxed to the point that they are forced out of their house and to move, say, a cheaper location in the midlands with a two hour commute, upending their kids and the rest of their lives.
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I don't think that would be in any way desirable.
I'd rather see less income tax and more indirect taxes so that those who work are better off.

blackdog said:
I'm not dismissing that - but I think we should be very clear about what kind of society we are trying to build through tax incentives.
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I agree. My view is that we should be building one based on equality of opportunity. If that's the desired objective then we should incentivise hard work rather than inherited wealth.

blackdog said:
Two tangential points:
- In my view, a principal private residence is an expense and liability, not an asset.
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In that case you are factually incorrect.

blackdog said:
- Those in charge of governance over many decades have built a society where the vast majority of people's wealth is tied up in principal private residences. Are the citizens now to be punished for that explicit policy?
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That's the case in every developed country in the world. In Irelands case that is more pronounced because we have a very progressive income tax system, less attractive tax treatments of investments, very few deductions against income tax for other taxes and very low rates in property tax.
 
blackdog said:
In my view, a principal private residence should be viewed as an expense and liability (opportunity cost of capital, property tax, insurance, maintenance and upkeep), not an asset.
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We can make certain that it is so regarded by taxing capital gains on the PPR at 100%. Is that what you think we should do? I'm guessing not but, we then we have to ask, why not?
blackdog said:
Those in charge of governance over many decades have built a society where the vast majority of people's wealth is tied up in principal private residences. Are the citizens now to be punished for that explicit policy? Again - you can say "well they voted for it" - but that is too simplistic.
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I don't think property taxes are a punishment. The truth is that property derives much of its capital value from services and facilities provided at the expense, or partly at the expense, of taxpayers. While you can argue the pros and cons of property taxes by which property owners pay, at least in part, for the services that enhance the value of their property, but I don't think we can reasonably call them a punishment.

As you point out, a huge amount of private wealth in society is tied up in principal private residences. If you think about it, that's not a good thing — society would be much better off if that wealth were deployed in more productive ways, generating activity, income, profits.

One way to bring this about would be to make PPRs less attractive as an investment, and certainly to stop favouring them over other investments. So you could, for example, abolish or limit the CGT exemption for PPRs. That way, people wouldn't be incentivised to invest their surplus income in bigger and better houses rather than in more productive assets. Another is to tax homes to more realistically reflect the cost of servicing them with roads, sewage, street lighting, water supply, etc, so that your investment in your PPR isn't subsidised by non-home-owning taxpayers.

Of course, these measures would be hugely controversial. But you make the point yourself that "those in charge of governance . . . have built a society where the vast majority of people's wealth is tied up in principal private residences". Incentives, subsidies and subventions of this kind are how they have done that. And it's a state of affairs that is now causing us signficant problems, of which the housing crisis is the most prominent. So how would we go about changing that state of affairs, if not through measures like these?
 

blackdog said:
Referring to the house worth a million.

How is the owner - say a person in their late forties with kids in school and a job that ties them to Dublin - supposed to monetise that wealth?
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I suppose they could sell the €1m house and buy something for say €700k relatively close by if they were stuck for a bit of cash.
 
faketales said:
In most places property tax rate is set of what budget is required from it.

If a city needs €1bn from property tax, has 1m residents with an average home value of €100,000 then you set property tax a 1%.
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In Ireland, it doesn't work like that.

The main rate of LPT is set by the Central Govt.

It is a local tax, in that the LA can vary the main rate by + / - 15%, so they have rate-setting powers at the margin.



What you describe applies to comm rates. The comm rates tax rate (ARV) is set to ensure that LA income = LA expenditure.
 
Protocol said:
Are you sure about that?

I bought in 2005, and paid zero in stamp duty.
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I bought in the early 2000's and paid 9% Stamp Duty. If there was no Stamp Duty the house would have cost 9% more, at least. There was no net extra outlay. If anything the high level of Stamp Duty depressed the price of the house.
 
Is this a way to broaden the direct tax base?

Remove the PRSI exemption, but re-introduce the PRSI-free allowance, say at €100 euro per week.

Therefore, earnings between 100 and 352 pw for people earning below 352 per week become part of the PRSI base.


This hardly affects marginal tax rates, so should not affect the supply of labour.

However, it could be seen as a unfair extra tax on low earners.

It could be sold as part of the adjustment of SI benefits to be linked to previous pay, e.g. JSB.
 
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