Is my effective marginal tax rate closer to 85%?

[TomEdison]

In the US you deduct what you have paid in Sales Taxes and things like VRT, Property Tax, etc from you income before you pay income tax.

OK, couple of important qualifications here.

First, you can only claim a deduction for state taxes if you are claiming itemised deductions, rather than the standard deduction. Only about 10% of taxpayers claim itemised deductions — either the standard deduction works out more generously for them, or it is not sufficiently less generous to make it worth their while to do the huge amount of record-keeping and paperwork that claiming itemised deductions apparently involves. The 10% who do claim are, broadly speaking, the richest 10%. So the deduction for state taxes is irrelevant to the situation of the great bulk of taxpayers.

Secondly, somewhat bizarrely, you can claim a deduction for the state sales taxes you paid, or for the state income tax you paid, but not both. Presumably, if you want to claim for the state sales taxes, you have to be able to vouch your claim with receipt for all your expenditure during the year, which must be an utter pain. My guess is that most people claim the state income tax, which is more easily vouched, unleess they live in a state that doesn't have a state income tax.

Thirdly, stamp duties and transfer taxes are not deductible (because they're capital in nature).

Fourthly, there is a monetary cap on the total deduction you can claim in respect of all state taxes.

You can also deduct all of your mortgage interest,

No, there's a cap on the amount of the mortgage in respect of which interest will be deductible.

And, again, you can only claim this if you claim itemised deductions - not if you claim the standard deduction.

 

[Purple]

Fourthly, there is a monetary cap on the total deduction you can claim in respect of all state taxes.

Yes, $40,400 of net incomes below $505k.

No, there's a cap on the amount of the mortgage in respect of which interest will be deductible

It is claimable on the first $750,000 of your mortgage.


In short a single person getting paid $100,000 a year in Texas will pay around $20,000 in taxes without making a itemised claim. Someone of the same income here (€86,000) will pay $32,750 (€27,950) in income tax. Without any of the deductions above the Irish person pays 60% more payroll tax.
The American will pay far more property taxes, at between 1.3 and 2.4% of the value of their home each year. They tax wealth more and tax income less than we so and the left wing Parties in Ireland want to tax wealth even less and tax work even more. Crazy.

 

[Cervelo]

but we also have an evolutionary instinct to make life better for our kids, even at our own expense

Evolutionary instinct for me is feed, clothe, educate and prepare them for adulthood, any expense after that is usually driven by societal/cultural pressures which at the end of the day is a choice, again not saying it's wrong but it is still a choice that a parent makes

 

[Purple]

any expense after that is usually driven by societal/cultural pressures

Those are also a result of evolutionary factors.

 

[getting_on]

In the US you deduct what you have paid in Sales Taxes and things like VRT, Property Tax, etc from you income before you pay income tax. You can also deduct all of your mortgage interest, In other words there is far less double taxation. When we hear people claiming that income tax rates in much of the US are close to rates here that fact is never mentioned.

That sounds both fairer and more logical if complex to calculate.
An egregious example here of double taxation is the VAT charged on the government levy on your electricity.
The example I gave was about as extreme as it gets but in general I think it's immoral to tax income more heavily than wealth and that's definitely
the case in Ireland.
I read an article once where the author explained how taxing income heavily effectively prevents most people with no wealth from ever attaining any. Literal wage slavery.
When it comes to arguments against taxing wealth the arguments appear to be 1: they'll flee the country, or 2: that it doesn't raise much because there are so few truly wealthy people or 3: the plight of income poor, asset rich, elderly widows living in mansions is evoked.

 

[Cervelo]

Those are also a result of evolutionary factors

I was thinking more along the lines of environmental factors maybe in a few more generations time it might be evolutionary??

 

[Itchy]

When it comes to arguments against taxing wealth the arguments appear to be 1: they'll flee the country, or 2: that it doesn't raise much because there are so few truly wealthy people or 3: the plight of income poor, asset rich, elderly widows living in mansions is evoked.

I don't think those points capture the premise of this thread, which is the more common reason people generally oppose a wealth tax. As far as I can see, this argument is framed by arbitrarily adding headline rates together, ignoring the generous tax reliefs and concluding that IHT, a tax the worker will never pay and is entirely conditional on the circumstances of the recipient, being a barrier to working more?

The irony is, that taxing wealth more and reducing the tax on income lifts all boats. It increases the wealth pie and encourages more self sufficiency and productivity. The current system rewards those who are related to rich people.

 

[TomEdison]

They tax wealth more and tax income less than we so and the left wing Parties in Ireland want to tax wealth even less and tax work even more. Crazy.

In fact, you would have to call into question whether it is really accurate to describe these parties as "left wing parties".

 

[bish123]

I often hear this argument and don't believe it. If I put my savings in the bank or invest it in AIB stocks, it is not out of circulation, it is very much in circulation. The only exception being if I put it under the mattress.

AFAIK most people don't buy AIB stock. They can buy gold and hoard it (out of circulation), buy stocks in one of new platform in EU (out of Irish economy), buy agriculture land to avoid tax (out of use for farming) or buy house (compete with young buyers) so the argument still holds.

 

[patfert1]

AFAIK most people don't buy AIB stock. They can buy gold and hoard it (out of circulation), buy stocks in one of new platform in EU (out of Irish economy), buy agriculture land to avoid tax (out of use for farming) or buy house (compete with young buyers) so the argument still holds.

If I have a lot of money in a jam-jar in the cupboard, it is out of circulation. If I then use it to buy a house from you, it is back in circulation. The solicitor, property agent, and the government get a cut and you get the majority. It is up to you if you keep it in circulation or put it in a jam-jar in your cupboard.

Same for gold, same for agricultural land. I get the asset and my money goes into circulation.

As for investing outside the Irish economy, while this is a point (personally I "buy Irish" where I can), we firmly live in a world economy and even more so in a single-market single-currency EU economy. We are also very strongly tied with trade to the UK economy. Are you saying if I buy a book from Amazon.co.uk the money is not in circulation because it leaves the ROI? And also if I buy that book from Amazon.de despite we are in a single market with Germany and the single currency circulates in the Eurozone? What if I buy a product made in NI, given the ROI and NI economies are very closely intertwined and people spend cash freely back and forth across the border every day? What about a Japanese car I import directly from the UK - or the Japanese car I buy from a dealer who imported it into Ireland? How about honey from an Irish brand which is actually 90% non-EU honey?

 

[Purple]

I was thinking more along the lines of environmental factors maybe in a few more generations time it might be evolutionary??

We've been civilised for a few thousand years, and that was a small minority of people. That is too short a period of time for anything that has happened since we started to farm to effect evolutionary change. We are, from an evolutionary standpoint, still hunter gatherers (with a strong emphasis on the latter).

 

[Purple]

In fact, you would have to call into question whether it is really accurate to describe these parties as "left wing parties".

Pseudo-left wing populist would be my description. Labour are the only proper left wing party as they understand the economic of their position.

 

[Cervelo]

That is too short a period of time for anything that has happened since we started to farm to effect evolutionary change.

For evolutionary instinct, yes it's too short a period of time but for some evolutionary factors, ie. environmental, that can be generational

 

[Purple]

environmental, that can be generational

Environment is absolutely critical to how people behave and how children develop into adults but the underlying genetic coding hasn't changed in any meaningful way in the last ten thousand years. Most of the genetic coding that influences our behaviour is older than our species.

 

[patfert1]

We've been civilised for a few thousand years, and that was a small minority of people. That is too short a period of time for anything that has happened since we started to farm to effect evolutionary change. We are, from an evolutionary standpoint, still hunter gatherers (with a strong emphasis on the latter).

We are not really civilised, we just like to think we are. Look at all the wars and human-inflicted pain and suffering in the world which is really just in the name of ego and power. It's no real different from neandrathal tribe A raping and pillaging tribe B to steal their some animals. I believe that if alien life ever visited us (assuming they are not already here) they would be so far evolved beyond us that they would consider us little different from the pigs and apes.

 

[Purple]

We are not really civilised, we just like to think we are. Look at all the wars and human-inflicted pain and suffering in the world which is really just in the name of ego and power. It's no real different from neandrathal tribe A raping and pillaging tribe B to steal their some animals.

War is a product of civilisation. It was pointless when we were hunter gatherers as we could only have what we could carry. Our sociability and innate goodness is a product of natural selection over the hundreds of thousands of years before we were civilised. It was only when we started farming and had surpluses, and then developed hierarchical societal structures which were not based on small family groups that we started having wars of any significant violent conflicts. Before agriculture and civilisation there weren't enough people on earth for it to be necessary to have conflicts over resources.

Thankfully as a species we are more compassionate and less violent than at any point in the last 5000 years. I think that's down to democracy.

 

[patfert1]

It was pointless when we were hunter gatherers as we could only have what we could carry.

I half-agree I'd rather argue that war scaled up as the world gradually became more global. We now fight over large areas of land whereas early man fought over a few chicken or pigs. We do live in an era of relatively great peace, but WWII was not that long ago. They called WWI the "Great War" and "The war to end all wars" until WWII came along and took the record.

 

[Purple]

We now fight over large areas of land whereas early man fought over a few chicken or pigs.

That's all very recent, only 5-10 thousand years for most of the world. before that we didn't have any chickens or pigs. Chickens were only domesticated about 3500 years ago, pigs about 10'000 years ago. We've been around for a couple of hundred thousand years.

 

[patfert1]

That's all very recent, only 5-10 thousand years for most of the world. before that we didn't have any chickens or pigs. Chickens were only domesticated about 3500 years ago, pigs about 10'000 years ago. We've been around for a couple of hundred thousand years.

Fair enough, you've got me on the chickens and pigs! But, do you think the small tribes of hunter gatherers never pillaged each other over something or other, whether it was furs, women or just the tribal leader wanting to boost his ego by taking out the other tribe? I think sadly this is in the human instinct and we will never be civilised until we truly work properly toward a common good. I'm not sure the human race will survive that long.

 

[Purple]

But, do you think the small tribes of hunter gatherers never pillaged each other over something or other, whether it was furs, women or just the tribal leader wanting to boost his ego by taking out the other tribe?

It doesn't happen in the primitive tribal groups that have been studies in South America and Southern Africa. The risk reward just isn't there and authority/leadership isn't as absolute as it is in medieval societies or primitive agricultural societies. They also don't have religion as we understand it so there's no divine right to rule or any of that nonsense. They are family groups where the leader/chief generally rules with the consent of the ruled.