Those who earn more ,should pay more

[shnaek]

but the idea of a progressive tax isn't wrong.

It's the naming of the tax that bugs me. Lets just call it a 'disincentive tax', which is what it is. Why all the sneaking around? Call a spade a spade.

 

[Sunny]

It's the naming of the tax that bugs me. Lets just call it a 'disincentive tax', which is what it is. Why all the sneaking around? Call a spade a spade.

I agree that the system has many flaws especially with regard to middle income earners (who get screwed the most everytime!) but if someone told me that if I earned 500k a year, I would have to pay 55% tax, I would still take the money!

 

[Firefly]

I agree that the system has many flaws especially with regard to middle income earners (who get screwed the most everytime!) but if someone told me that if I earned 500k a year, I would have to pay 55% tax, I would still take the money!

But you would more than likely have the services of a good tax accountant employed so you wouldn't be paying anything near 55% in the first place...

 

[orka]

I agree that the system has many flaws especially with regard to middle income earners (who get screwed the most everytime!)

How are middle income earners screwed more than (compliant, non-tax-relief-scheme-using) higher income earners?

if someone told me that if I earned 500k a year, I would have to pay 55% tax, I would still take the money!

Doesn't look so great if you already earned 480K and paid 50K tax... It's very easy for someone on 30K to say 'if I earned 75K, I wouldn't mind the tax I would have to pay' and for someone on 60K to say 'if I earned 100K I wouldn't mind the tax I would have to pay' etc. But that's not really the point; very few people go from low to massive in one step and if every step of the way you are hit with more and more demands on your income, you can't help but feel a bit aggrieved with putting in lots of work to earn more and more money only to see it whittled away by 'progressive' taxation.

 

[Purple]

How are middle income earners screwed more than (compliant, non-tax-relief-scheme-using) higher income earners?

Simple; they aren't.

Doesn't look so great if you already earned 480K and paid 50K tax... It's very easy for someone on 30K to say 'if I earned 75K, I wouldn't mind the tax I would have to pay' and for someone on 60K to say 'if I earned 100K I wouldn't mind the tax I would have to pay' etc. But that's not really the point; very few people go from low to massive in one step and if every step of the way you are hit with more and more demands on your income, you can't help but feel a bit aggrieved with putting in lots of work to earn more and more money only to see it whittled away by 'progressive' taxation.

That’s the point though, isn’t it; to move from a middle income to a high income required that you work harder, usually much longer and take on more responsibility and stress. Drive around an industrial estate on a Sunday morning and you’ll see that it’s the expensive cars parked outside the premises. Why should someone work harder and longer so that well over 50% of what they earn gets taken away from them. It is a disincentive for wealth creators to create wealth.

 

[Sunny]

How are middle income earners screwed more than (compliant, non-tax-relief-scheme-using) higher income earners?

Doesn't look so great if you already earned 480K and paid 50K tax... It's very easy for someone on 30K to say 'if I earned 75K, I wouldn't mind the tax I would have to pay' and for someone on 60K to say 'if I earned 100K I wouldn't mind the tax I would have to pay' etc. But that's not really the point; very few people go from low to massive in one step and if every step of the way you are hit with more and more demands on your income, you can't help but feel a bit aggrieved with putting in lots of work to earn more and more money only to see it whittled away by 'progressive' taxation.

When I say middle income earners, I mean people who don't have the incentive to earn more because they will jump into the higher tax bracket. They also tend not so benefit from the same social schemes that lower income earners do and yet still don't earn the high salaries of high earners but are treated as such.

As for the 480 to 500k, of course it is not nice to pay more tax but I would still take the pay rise and extra repsonsibility and extra work if offered. It simply career progression and a desire to push myself. Tax is not going to stop me doing this or disincentivise me as much as I might give out. You could use your argument to support people who decide they are better off staying in mcdonalds flipping burgers rather than take a job with career prospects simply because they would be paying more tax. (Not slagging McDonalds)

 

[Shawady]

One other option is a staggered rate of tax but everyone pays something.
For example, everyone pays 10% on the first 20K, 12% on 20-40K, 14% on 40-80K, 16% on 80-100K, 18% over 100K etc.

Therefore everyone is contributed and higher earners are paying more. However if someone moves to a higher salary if for example promoted, they are not being penalised as much.

 

[Sunny]

That’s the point though, isn’t it; to move from a middle income to a high income required that you work harder, usually much longer and take on more responsibility and stress. Drive around an industrial estate on a Sunday morning and you’ll see that it’s the expensive cars parked outside the premises. Why should someone work harder and longer so that well over 50% of what they earn gets taken away from them. It is a disincentive for wealth creators to create wealth.

Paying more tax is not a disincentive by itself. It all depends on the individual. The majority of people would not allow the thought of paying more tax stop them from progressing in their career or trying to become wealthy.

It only comes a problem when other considerations such as family committments, work/life balance etc come into play. If these things are so important to an individual, telling them that they won't pay any more tax on their increased salary probably won't make a difference to them. They simply won't take the job and that is fair enough. No-one is financially poorer from getting a pay rise especially at higher salaries.

This is not an argument for saying that high income taxes are right or fair. I don't think anyone should pay over 50% of their income on taxes no matter how much they earn.

 

[Purple]

No-one is financially poorer from getting a pay rise especially at higher salaries.

They are if they have additional childcare costs etc.
The work-life balance issue is also impacted by the net pay rise gained for more hours/stress etc worked, e.g. if you can bring the family on a nice holiday but don't get to see the kids a few evenings a week.

 

[Sunny]

They are if they have additional childcare costs etc.
The work-life balance issue is also impacted by the net pay rise gained for more hours/stress etc worked, e.g. if you can bring the family on a nice holiday but don't get to see the kids a few evenings a week.

But you don't need to get a payrise for these things to become an issue. High income taxes make it more expensive for companies to hire people and they are bad for employment but I really don't buy that there are loads of people out there that could be earning more if the tax rate was lowered and they incentivised to work harder. I get a bonus every year that I work damn hard for but end up paying most of it in tax despite making plenty of personal sacrifices Yet, every year I still work to get that bonus. If the government suddenly announced that my bonus was tax free, I would be delighted but it wouldn't change anything with regard my incentive to earn the bonus in the first place.

 

[Chris]

I object to it being called 'progressive'. 'Progressive' is the name given to this form of taxation by some very smart robber. So everyone associates this type of taxation with being forward looking, advancing, broad minded etc just because of word association.

Agree. From the taxpayers point of view, its regressive as earning more lowers your % takehome pay.

It's the naming of the tax that bugs me. Lets just call it a 'disincentive tax', which is what it is. Why all the sneaking around? Call a spade a spade.

Yes, I would agree as well, and I love the "disincentive tax" name.

I find it strange that there is such resentment against the so-called super rich. If someone pay a million Euro a year in income tax (plus all that VAT) maybe they've paid enough? Maybe there should be a cap after which we say "you've paid your share, keep the rest".

I like this idea, why not have Ireland compete with Monaco, Hong Kong and Switzerland as a tax haven?

I agree that the system has many flaws especially with regard to middle income earners (who get screwed the most everytime!) but if someone told me that if I earned 500k a year, I would have to pay 55% tax, I would still take the money!

But would you still do so if you were told that you would have to work 70 hours a week, work lots of weekends, do a lot of traveling, receive phone calls at home when you want to spend time with your family, may have to cancel family holidays last minute? What about if you were a business owner, and you would have to do all this while at the same time not knowing whether you would be able to pay yourself at all this year and next? I saw all of the this first hand when I was growing up and rarely saw my dad.

The one thing I think most people, who call for taxing the rich, do not appreciate is how much work and risk is involved for the majority of high income earners.

Paying more tax is not a disincentive by itself. It all depends on the individual. The majority of people would not allow the thought of paying more tax stop them from progressing in their career or trying to become wealthy.

It only comes a problem when other considerations such as family committments, work/life balance etc come into play. If these things are so important to an individual, telling them that they won't pay any more tax on their increased salary probably won't make a difference to them. They simply won't take the job and that is fair enough. No-one is financially poorer from getting a pay rise especially at higher salaries.

I disagree, taxation is a huge disincentive to work. What we are talking about here is raising taxes on "the rich". They are the ones that least need the extra €100,000 or €500,000; as you mentioned their subjective valuation of this extra money is less than a similar relative increase would be to someone earning €20,000. But if earning an extra €100,000 means more late nights, more weekends at work and less time with your family, then that "rich" person will likely say "forget it, I'll go home."

A friend of mine is a self employed accountant and tax advisor and in 2008 he earned €350,000, which I imagine many people would classify as "rich". For this he travelled 50% of the year, took 2 weeks holidays, and worked an average of 65 hours a week. Since all the new taxes have come in he has reduced his working hours to 45 hours a week, has taken 6 weeks holidays so far this year and will probably have an income of about €200,000 this year. His reason was that he could not justify the extra 4 weeks work and 20 hours a week to see less than 50% of the €150,000. He doesn't need the extra money, but has to work extremely hard to get it. The result is less revenue for the government, and I would fathom a guess that if there is a "rich tax" introduced, then he will simply pack up and go somewhere with lower taxes.

This is not an argument for saying that high income taxes are right or fair. I don't think anyone should pay over 50% of their income on taxes no matter how much they earn.

I 100% agree!

 

[Sunny]

Hang on Chris. I like your posts but you are ideologically driven. I am going to make an assumption that you come from the Austrian school of economics judging by some of your comments but could be wrong. Nothing wrong with that as long as long you recognise that you are not coming from a neutral bias just like me. Again nothing with that but we have to remember this is the real world with people and not some academic exercise.

The story of your friend is great but why not substitute it for someone that lives on the poverty line and explain to them why earning that extra euro just isn't worth their while because they will have to pay more tax. I work in investment banking, I believe in capitalism, I believe in the Market, I believe in earning money is good and I believe in striving to work as hard as you bloody can. What I don't believe is that the tax system is some academic exercise that doesn't have severe consequences for many genuinely struggling people. I earn a good salary. Have no problem paying tax to help the less fortunate. I just don't want people to take the **** out of me!

 

[Sunny]

Also this assumption that only people who earn high wages work hard and sacrifice family life is rubbish and is snobbish. There are people working multiple low paid jobs to make ends meet. There are people doing minimum wage night work where they sacrifice family life. There are people earning average salaries who sacrifce family life every day. That is not the taxmans fault.

 

[Purple]

Sunny, the point is that when the guy on €350’000 decides to not earn that extra €150’000 then that money disappears from the economy. The state gets 55% of nothing. Those that the tax system helps lose out. There are no winners.
I agree with your views on taxation and I don’t mind paying tax either. I just think that very high rates of marginal income tax are counterproductive and that’s why I am against them. They reduce economic activity and damage the economic position of the state.

 

[Sunny]

Sunny, the point is that when the guy on €350’000 decides to not earn that extra €150’000 then that money disappears from the economy. The state gets 55% of nothing. Those that the tax system helps lose out. There are no winners.
I agree with your views on taxation and I don’t mind paying tax either. I just think that very high rates of marginal income tax are counterproductive and that’s why I am against them. They reduce economic activity and damage the economic position of the state.

I totally agree with you on high rates of income tax. Like I say, no-one should pay over 50% of their income no matter what they earn.

I was simply arguing against the principle that we introduce a flat rate of tax and everyone pays it on every cent they earn and then call it fair. I know I would rather be a poisiton where I can choose not to earn more because it is not worth my while than being in a position where I don't have a choice but to try and earn more even if it means paying more tax.

 

[T McGibney]

I was simply arguing against the principle that we introduce a flat rate of tax and everyone pays it on every cent they earn and then call it fair.

But people are already paying significant amounts of taxes on every cent they earn, through a combination of direct taxes like USC, PRSI, employer PRSI, indirect taxes like VAT and excise, and a whole array of stealth taxes. People throw their hands up in horror saying that 'we can't tax people earning €5k per year' but it is already happening.

A properly calibrated flat tax could involve some element of rebalancing of the existing tax burden (not just income tax) so that low earners aren't paying any more tax in overall terms than they already do.

 

[csirl]

Its middle income earners who are disincentivised from working hard. Most of them are paying 50+% on some of their income. There are many who will not bother to better themselves - maybe learn a new skill, take on more responsibility or simply do some overtime because most of the extra 5-10k per annum they might earn will be taken by Revenue.

Many companies in Ireland have difficulties because of this - a high proportion of their employees are incentivised to stay put doing the same job because its not worth bothering for tax reasons. It creates a glut of plodders and a shortage of go getters. There are many jobs in which the career structure and the companies needs dictate that you work your way up through the ranks and when a high proportion of people opt out of this for tax reasons, then the company gets into difficulties.

 

[Sunny]

But people are already paying significant amounts of taxes on every cent they earn, through a combination of direct taxes like USC, PRSI, employer PRSI, indirect taxes like VAT and excise, and a whole array of stealth taxes. People throw their hands up in horror saying that 'we can't tax people earning €5k per year' but it is already happening.

A properly calibrated flat tax could involve some element of rebalancing of the existing tax burden (not just income tax) so that low earners aren't paying any more tax in overall terms than they already do.

I am not saying you can't tax anyone. I do believe everyone should contribute something to the running of the State if they are earning. I am simply saying that asking someone to pay the same tax rate on every cent they earn as someone who earns a multiple of their salary is unfair.

If you start talking about protecting low earners, chances are that middle and higher income earners will have to pay for it. Like I said miles back, a flat tax is a good idea in theory but it is very difficult to implement.

 

[T McGibney]

I am simply saying that asking someone to pay the same tax rate on every cent they earn as someone who earns a multiple of their salary is unfair.

Why? We're talking here about rates, not amounts. This principle already applies to almost all other taxes.

 

[T McGibney]

Many companies in Ireland have difficulties because of this - a high proportion of their employees are incentivised to stay put doing the same job because its not worth bothering for tax reasons. It creates a glut of plodders and a shortage of go getters. There are many jobs in which the career structure and the companies needs dictate that you work your way up through the ranks and when a high proportion of people opt out of this for tax reasons, then the company gets into difficulties.

Its also a massive problem in the civil and public service. High marginal tax rates mean that there is damn all incentive for middle-managers with family and commuting commitments to apply for more senior posts, with the likelihood of higher stress/ overtime/ energy drain.