Myth: The rich don't pay much income tax

Brendan Burgess

Brendan Burgess

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This comes up time and time again. Why should the poor pay any tax as the top paid people are paying no taxes. Ronan Lyons did a great piece a few years ago. I think it would be useful to set out the facts.

This comes from Table IDS1 of the Revenue [broken link removed] for 2009

|income|Tax|effective tax rate|including prsi & levies
Earning less than €25,000|€m 12,138|€m 129|1%| 0% to 5%
€25k to €50k|€m 24,374|€m 1,720|7%|16%
€50k to €100k|€m 25,694|€m €3,849|15%|25%
€100k +|€m 19,790|€m 4,915|25%|35%
Total|€m 82,000|€m 10,616|13%
The average effective rate of tax on income was 13%

People earning less than €25,000 paid an average income tax rate of 1%
People earning over €100,000 paid an average income tax rate of 25%


PRSI/Income Levy/Health Levy - examples

Salary |rate
14,000|0%
25,000|5%
100,000|9.5%
 
Brendan,

For fear someone will complain about this, I think you should rename the title of this thread to:

"Myth: The rich don't pay much Income taxes"

Firefly
 
Brendan Burgess said:
This comes up time and time again. Why should the poor pay any tax as the top paid people are paying no taxes. Ronan Lyons did a great piece a few years ago. I think it would be useful to set out the facts.

This comes from Table IDS1 of the Revenue [broken link removed] for 2009

|income|Tax|tax rate
Earning less than €25,000|€m 12,138|€m 129|1%
€25k to €50k|€m 24,374|€m 1,720|7%
€50k to €100k|€m 25,694|€m €3,849|15%
€100k +|€m 19,790|€m 4,915|25%
Total|€m 82,000|100%|€m 10,616|
People earning less than €25,000 paid an average income tax rate of 1%
People earning over €100,000 paid an average income tax rate of 25%

This ignores prsi which would increase both rates.
Click to expand...

I must say, I am surprised at the figures for the 50-100k bracket as 15% seems very low. I can appreciate those earning >100k paying 25% tax (or even less) as they would have the means to employ tax accountants and the like, but I find it hard to identify that the average 50k-100k person only pays 15% in taxes, or am I reading this all wrong?
 
Hi Brendan, thanks for posting that,its about time some people realised that those who earn more contribute so much more:people earning over €100,000 paid an average income tax rate of 25%..
Either way those who earn over 100k are hardly "Rich"..
Its all relative really as I know people on the dole who think anyone who has a job is rich..People who earn less than others always think of others as rich..perhaps the thread could be called "Those who earn more pay most of our taxes"..
 
Number of tax payers at different rates

Exempt|968,000
top rate of 20%|874,000
top rate of 41%|309,000
Total taxpayers| 2,151,000

This seems strange. Only 14% of taxpayers paid at the top rate.
 
Firefly said:
I must say, I am surprised at the figures for the 50-100k bracket as 15% seems very low. I can appreciate those earning >100k paying 25% tax (or even less) as they would have the means to employ tax accountants and the like, but I find it hard to identify that the average 50k-100k person only pays 15% in taxes, or am I reading this all wrong?
Click to expand...

I am surprised at some of the figures myself, so if someone wants to verify them or correct them, I would welcome it.

In 2009, a married person earning €100,000 paid 26% income tax according to www.taxcalc.eu

A married person earning €50,000 paid 10% of their income in tax.
Given that there were more on €50,000 than €100,000, it seems about right.
 
There is a myth that all high earners use tax schemes to avoid paying tax.

I think that arises because the Revenue publishes figures for those who availed of tax schemes. The media incorrectly report these as all high earners.

Has anyone got the stats on the tax schemes?

For example, of the 110,000 people who earned over €100,000 in 2009, how many availed of tax schemes?
 
Surely the biggest "tax scheme" is putting money into your pension! Given the additional breaks given to higher earners this is of greater benefit to them. Whilst taxcalc gives an effective figure of tax how much is actually coming in from those people?
 
I think you have to include PRSI & USC to get a good picture - they'll add 11% onto all the rates quoted.

The basic point here is that there are large sections of society who don't pay much income tax - be it illegally (the black economy) or legally (based on a relatively generous thresholds).

Many will argue that extra taxes should be raised from those on higher incomes.

Fianna Fail actually did this, the USC being the one genuine measure so far to effectively reduce the deficit. Fine Gael aim to close the deficit slightly using non-income related taxes in 2012. On balance though, over the last number of budgets, most of the deficit reductions have come from income tax hikes from those earning above €30k as opposed to income tax revenues from bringing additional people from lower wage levels into the tax net or even raising revenue from non-income taxes.
 
Firefly said:
I must say, I am surprised at the figures for the 50-100k bracket as 15% seems very low. I can appreciate those earning >100k paying 25% tax (or even less) as they would have the means to employ tax accountants and the like, but I find it hard to identify that the average 50k-100k person only pays 15% in taxes, or am I reading this all wrong?
Click to expand...

Of the 378,862 'tax units' earning between 50,000 and 100,000, 188,451 (about half) are actually married couples with both people working, so what looks like 1 person earning 60,000 is actaully two people earning 30,000.
 
dereko1969 said:
Surely the biggest "tax scheme" is putting money into your pension! Given the additional breaks given to higher earners this is of greater benefit to them. Whilst taxcalc gives an effective figure of tax how much is actually coming in from those people?
Click to expand...
I have estimated elsewhere based on older figures, following the removal of PRSI relief and the collapse of new money into the pensions market that about €0.8bn of reliefs would have been availed of in 2011 (I'd love to see actual figures) suggesting an average tax rate reduction of under 2% of income for the €50k+ category.

As an aside, I'd be pretty confident that most of that €0.8bn will make its way back into the taxation system in the future. The richer those availing of it, the more true this will be.
 
circle said:
Of the 378,862 'tax units' earning between 50,000 and 100,000, 188,451 (about half) are actually married couples with both people working, so what looks like 1 person earning 60,000 is actaully two people earning 30,000.
Click to expand...

That could explain it alright. (Otherwise I'll be having a chat with my accountant!).
 
Brendan Burgess said:
Number of tax payers at different rates

Exempt|968,000
top rate of 20%|874,000
top rate of 41%|309,000
Total taxpayers| 2,151,000
This seems strange. Only 14% of taxpayers paid at the top rate.
Click to expand...

Would think it is strange, is the avg ind wage not still 35K or thereabouts?

However, as one of the 309,000 in the top rate I have to say it feels me with a bit of rage to see that 968,000 people do not pay any tax one income. Fairness?
 
Ronan Lyons has updated his commentary on tax in Ireland. Including VAT is very interesting. The richest 10% of households pay almost 40% of all receipts from income tax, VAT, USC and PRSI. The tax rate on wealthiest households (38%) more than twice that on average households (16%). Poorer households have to spend all their income (and then some), and all that spending is liable for VAT, their effective tax rate surpasses all other income groups except the wealthiest.

So the people at the bottom certainly appear to wear an unfair burden of taxation but it is not the people at the top who are escaping paying their 'fair share'.

<crossed with previous posts>
 
Poorer households have to spend all their income (and then some), and all that spending is liable for VAT,
Click to expand...

I have emailed Ronan about this as I don't understand it.

I had assumed that people earning €8,400 a year would spend most of it on food and rent both of which are VAT free.

How can they spend 30% of their income on VAT when the VAT rate is 23% ?

Brendan
 
The rich do pay a lot of income tax, as they have massive incomes.

There is massive income inequality in Irl, so nobody should be surprised that the rich pay so much of the income tax.

Many, many people have income so low, that they can't and shouldn't pay income tax.

Indeed, though the rich pay a lot of income tax, it can be argued that they don't pay enough.
 
Seamus Coffey, UCC, has a good blog piece on the level of income inequality in Irl:

http://economic-incentives.blogspot.com/2012/04/distributional-effects-of-direct-taxes.html

Here is a quote:

"Ireland has by far and away the greatest level of inequality when it comes to original income. The level of original income in the bottom quintile is more than 15 times lower the level of original income in the top quintile. The next highest country is Lativa at 11.8 with a weighted EU average of 7.9."
 
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