Low-paid workers’ exemption from tax base ‘unfair’ on middle earners

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Purple

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The Irish Tax Institute thinks that exempting 700,000 working people from the tax net is unfair on middle income tax payers.
I agree, especially since so many low paid people actually live in middle to high income households. It's largely a tax break on students and part time employees, paid for by those on average incomes who pay rent or mortgages and childcare. There is already a generous welfare system in place to support those on low incomes who need it.
 
So, are you suggesting that the household should be taxed?

Daddy earns €100k a year and pays 52% marginal rate tax. So trainee accountant daughter earning €20k should pay 52% on all her income? I presume you are not suggesting this.

So people need to assessed on their own earnings.

The big problem is that middle earning families with children pay very little tax or negative tax. There are only a few ways to solve this:
1) Increase taxes on lower paid
2) Stop supporting children
3) Abolish joint assessment
4) Increase tax rates on the higher paid

None seems attractive.

Brendan
 
I'd probably benefit hugely from broadening the tax base in this way, but is taxing lower paid jobs more (which we already have problems filling?) in our overall best interests?

And isn't the the counter-argument that our high consumption taxes disproportionally target the lower paid (as they are forced to spend a greater portion of their income on necessities) ?

Pensioners are a different matter. I think the healthy elderly are infantilized by the media in general and I'd have no problem with wealthier OAPs paying their fair share of income tax.

I'd worry though that any policy change on taxation of the lower paid or pensioners would be just the PR disaster needed to bring SF into government.
 
Brendan Burgess said:
So, are you suggesting that the household should be taxed?
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No.
I'm linking to an article that I broadly agree with. I don't think 700,000 people should pay no income tax.
I started paying income tax in a summer job at 14. What's wrong with a low rate of tax on low earners?

If a low earner, or two low earners, is/are heading a household there are welfare supports in place to help them. If they need more then provide more. My kids working summer jobs don't need to be removed from the tax net. When they start work and are still living with me they should be paying some tax.
 
MugsGame said:
And isn't the the counter-argument that our high consumption taxes disproportionally target the lower paid (as they are forced to spend a greater portion of their income on necessities) ?
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Yes, but VAT was always high and people on low incomes used to pay income tax and social insurance.
 
Lower paid people do pay tax. A single person on minimum wage full time job will pay some income tax (around 3%) and have total deductions of around 6.25% from their salary

A person on the so called "living wage" in a full time role will pay around 6.5% in tax and have total deductions of around 12%

Whether the pay enough tax is another story but the impact of fixed charge taxes such as TV licence, property tax etc is far greater on those then on higher earners
 
Peanuts20 said:
Lower paid people do pay tax. A single person on minimum wage full time job will pay some income tax (around 3%) and have total deductions of around 6.25% from their salary

A person on the so called "living wage" in a full time role will pay around 6.5% in tax and have total deductions of around 12%

Whether the pay enough tax is another story but the impact of fixed charge taxes such as TV licence, property tax etc is far greater on those then on higher earners
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Not if they aren't heading a household and the vast majority of low paid people aren't. I've no problem with low taxes and welfare supports for people who need them but this is like a universal payment. I'd rather a more targeted approach. There are plenty of cased where two middle income earners are jointly heading a household. They are paying taxes that could be carried more easily by people on lower incomes who are living in high income households. We shouldn't be using tax policy as a form of shotgun welfare.
 
Purple said:
but this is like a universal payment.
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Start by eliminating the one universal payment that crosses all tax boundaries - Child Benefit. Eliminate this payment to households/earners above a certain threshold, €200k p/a maybe and tax it above another threshold, €150k p/a perhaps.

Another area that needs to addressed urgently is the Free Electricity Allowance, FEA. This is stuck at its current daily rate of €1.01381932 plus vat @ 13.50% for several years now despite rapidly increasing energy costs and standing charges on electricity bills. The imminent once-off universal payment of €100 will still leave those entitled to the FEA seriously and disproportionately out of pocket with higher earners. OK so it's a benefit and not a tax, but it needs looking at urgently.
 
How much is there to be saved by making Child Benefit taxable for people earning over €200k pa?

Not much in the grand scheme of things I strongly suspect.

I agree with the overarching point though; it’s not fair that there are 700,000 people paying no income tax or USC. The tax burden at the higher end is too great.
 
Everyone should pay some tax. The smaller the number of people paying income tax, the over reliance we place on a source of tax revenue that can disappear.

Look at our reliance on the property sector in the past, look at our reliance on corporation tax. Whether people like it or not you cant continue to rely on middle Ireland to fund everything.

A wealth tax is not an answer as this discourages the accumulation of wealth as a result of sacrifices made by working people.
 
The Horseman said:
Everyone should pay some tax. The smaller the number of people paying income tax, the over reliance we place on a source of tax revenue that can disappear.

Look at our reliance on the property sector in the past, look at our reliance on corporation tax. Whether people like it or not you cant continue to rely on middle Ireland to fund everything.
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A broader tax base has been recommended by just about everyone who has examined our tax system.
The Horseman said:
A wealth tax is not an answer as this discourages the accumulation of wealth as a result of sacrifices made by working people.
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Wealth taxes are fair and equitable. Most wealth accumulated in Ireland in the last decade is not as a result of work or sacrifices made by working people. It's due to capital appreciation.
 
Peanuts20 said:
Any tax of lower paid workers would need to be balanced against reform of the SW system to not disincentivise people to actually go to work. it's not just as simple as increasing tax on those on minimum wage.
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True, but most people on minimum wage don't live in low income households so they wouldn't get welfare anyway.
 
The way to increase tax take is to increase low wages.
The way to reduce dependency on Social welfare, for those on low wages is to increase wages.
The way to increase wages is to encourage organised labour and strong trade unions.
 
This move to move low income out of the tax net was Bertie Ahern's and the trade unions/social partners legacy. Economic simpletons who neither understood socialism or how to build a robust tax system that can fund a Nordic style of socialism.

We now have one of worst outcomes for middle income earners with their taxes close to higher tax EU countries, but it's a fragile income tax system having few of the social benefits those countries can offer, often some type of income linked state pensions, better healthcare, childcare, public transport.

Keeping low income out of the tax net has been the policy in Ireland for over 20 years. To undo it in the current climate of political populism would be very slow - decades of gradual movement - even if any of the political parties showed an interest in doing so. Realistically it won't happen while any of us are still working. One of the biggest financial crashes in modern economic history only temporarily made a dent in it.
 
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