Upcoming budget.

[shnaek]

Here's some interesting stats:

Income tax target from 2010 Book of Estimates = 11,979m

Average Wage Q1 2010 (CSO) = 35,634 per annum

No. of tax payers in country (Revenue Annual Report) = 2,496,762

Doing the maths, it means that if we had a flat rate tax, the 2010 rate would be: 13.5%

Whats encouraging is that we can easily increase our tax take by 25-30% (i.e. to c.18% flat rate tax) without much difficulty.

Flat rate is the way to go.

Hear hear. We need some radical thinking - something more than cut here and raise there - we should lead the rest of Europe in introducing a simple, fair, easy to implement tax system.

It's completely contradictory, but I'd go for a flat rate tax on income only, then look at a limited amount of sales, rates, etc taxes to support that.

Agreed.

 

[Shawady]

Here's some interesting stats:

Income tax target from 2010 Book of Estimates = 11,979m

Average Wage Q1 2010 (CSO) = 35,634 per annum

No. of tax payers in country (Revenue Annual Report) = 2,496,762

Doing the maths, it means that if we had a flat rate tax, the 2010 rate would be: 13.5%

Whats encouraging is that we can easily increase our tax take by 25-30% (i.e. to c.18% flat rate tax) without much difficulty.

Flat rate is the way to go.

Interesting stats.
The problem is if the goverment introduced a 13.5% flat rate on all income tomorrow, high earners would pay less tax and lower earners more tax. For example someone on 20K would pay 2.7K in income tax. I suspect this is substantially more than what is paid at the moment.
I like the idea of a flat rate. Easy to administer and calculate future tax yields. I also think it is fairer that when someone gets a pay rise they will pay the same rate of tax on the extra money, not the 60% they pay now.

 

[csirl]

But look at it this way. 13.5% tax takes in 12bn, we have a shortfall of 20bn, so we will have to increase income tax to 30% to balance the books.

No, income tax makes up only approx. 1/3rd of all Government income. So the pro rata deficit in income tax is only 6.6bn - and this is assuming no spending cuts.

The target for 2011 is 3bn. A 16.8% flat rate tax would generate this, assuming no cuts in spending.

If it were me, I'd go for a slightly higher flat rate tax - 18% would bring in an additional 4bnper annum.

I would also make some cuts in spending etc. to bring in another couple of billion. This would put us ahead of the curve in dealing with this deficit and without putting too much burden on the average tax payer or targeting specific groups of taxpayers with punative 50% plus tax rates.

 

[RMCF]

Sorted then. Lets do it !!

 

[Deiseblue]

Interesting stats.
The problem is if the goverment introduced a 13.5% flat rate on all income tomorrow, high earners would pay less tax and lower earners more tax. For example someone on 20K would pay 2.7K in income tax. I suspect this is substantially more than what is paid at the moment.
I like the idea of a flat rate. Easy to administer and calculate future tax yields. I also think it is fairer that when someone gets a pay rise they will pay the same rate of tax on the extra money, not the 60% they pay now.

The most perceptive post yet.

No Government is going to introduce a tax system whereby those on lower incomes are brought into the tax net while higher earners pay less tax than they are currently paying.

A recipe for major social unrest I would have thought ?

 

[shnaek]

A recipe for major social unrest I would have thought ?

Everything the government needs to do to get us out of this mess is a recipe for social unrest. That is why they are doing nothing.

 

[csirl]

The most perceptive post yet.

No Government is going to introduce a tax system whereby those on lower incomes are brought into the tax net while higher earners pay less tax than they are currently paying.

A recipe for major social unrest I would have thought ?

Good point, but, there are some political advantages to flat rate tax that could be real vote getters i.e.

- means that high earners cannot reduce/eliminate their tax bill with various tax schemes. Whether perception or reality, the prospect of rich people paying their fair share is something that the electorate would be pleased with.
- while low paid workers will pay some tax, political research suggests that the low paid and unemployed dont vote and many arent even registered to vote, so from a cynical political point of view increasing taxes for the low paid will not lose votes.
- The big winners in a flat rate tax system will be middle income earners who are currently overburdened with tax. These people vote in large numbers at elections.
- the system is simple and fair.

I think you get civil unrest when the ordinary average joe citizen gets hit hard. The middle income earners are the backbone of society. If they are getting a fair deal, you wont have civil unrest.

 

[z107]

The government aren't quite doing nothing.
They're bailing out their buddies at the tax payers' expense.

I wish they were doing nothing.


People who are suggesting tax increases should consider the laffer curve
http://en.wikipedia.org/wiki/Laffer_curve

Increasing income tax may well reduce the amount of income generated.

 

[shnaek]

The middle income earners are the backbone of society.

True, and they always get hit.

Another advantage to a flat rate tax is that, if government wanted to raise it to pay for something, then everyone would be paying a bit more, so people would be a lot more likely to scrutinise what their money was being spent on.

 

[z107]

Any decision that bertie ahern and the government made since they assumed power should be reversed. This includes all the property related tax breaks, huge pensions, and 'benchmarking' decisions.

We would probably have to couple this with some form of debt forgiveness, otherwise there will be a huge number of homeless people. Unfortunately, someone is going to have to pay for the debt forgiveness, and I don't want it to be me.

 

[Deiseblue]

I can see the headlines in the Indo already.

" Government employs sleight of hand tax reform to ensure Public Sector workers pay cuts are reversed at the expense of the lowest paid workers "

 

[starlite68]

Bringing low paid workers into the tax net (which I aggree with), should be done in conjunction with lower social welfare rates. Otherwise it is going to make it unattractive for people to return to the workforce.

leave the low paid alone, and dont think of lowering social welfare rates! you are no doubht one of those lucky to have a job.

 

[micheller]

Do you disagree in principle with the low paid contributing something, no matter how small?

I think everyone should contribute something, and the plain fact is that some low paid pay no tax, and actually receive from the system (like childrens benefits and FIS).

Everyone should be putting something in. Unfortunately when you do that, you have to reduce welfare a little too so as not to disincentivise work.

 

[starlite68]

Do you disagree in principle with the low paid contributing something, no matter how small?

I think everyone should contribute something, and the plain fact is that some low paid pay no tax, and actually receive from the system (like childrens benefits and FIS).

Everyone should be putting something in. Unfortunately when you do that, you have to reduce welfare a little too so as not to disincentivise work.

dont take me wrong, but i assume you have a job! try living on the other side of the street for a while.

 

[thedaras]

Good point, but, there are some political advantages to flat rate tax that could be real vote getters i.e.

- means that high earners cannot reduce/eliminate their tax bill with various tax schemes. Whether perception or reality, the prospect of rich people paying their fair share is something that the electorate would be pleased with.
- while low paid workers will pay some tax, political research suggests that the low paid and unemployed dont vote and many arent even registered to vote, so from a cynical political point of view increasing taxes for the low paid will not lose votes.
- The big winners in a flat rate tax system will be middle income earners who are currently overburdened with tax. These people vote in large numbers at elections.
- the system is simple and fair.

I think you get civil unrest when the ordinary average joe citizen gets hit hard. The middle income earners are the backbone of society. If they are getting a fair deal, you wont have civil unrest.

Your posts are always excellent..But can you say what you consider to be "middle income "?

 

[micheller]

dont take me wrong, but i assume you have a job! try living on the other side of the street for a while.

I see what you're saying and I have huge sympathy for anyone trying to pay their way on the dole or on low wages. When I started out years ago in a low paid job, I contributed, so I guess I don't see the problem with a small contribution.

Can you not see the other side yourself?
And do you essentially disagree with everyone making some small contribution?

 

[DerKaiser]

Doing the maths, it means that if we had a flat rate tax, the 2010 rate would be: 13.5%

Whats encouraging is that we can easily increase our tax take by 25-30% (i.e. to c.18% flat rate tax) without much difficulty.

1) What about the levies, are they in addition to the 13.5%?

2) All you're doing is taxing the higher earners less and the lower earners more

3) The idea that by simply changing the tax system we could generate 25% additional revenue with little or no hardship for anyone should have set alarm bells ringing as to the absurdity of the suggestion given the point from which we are starting.

Simple example.

A married couple on €50k p.a.(€25k each) probably pay about €3k p.a. in income taxes and possibly €3k p.a. in levies.

They possibly pay €18k p.a. on rent/mortgage, leaving them €500 a week to live on.

A 13.5% flat income tax would increase their income tax payments by about €70 a week.

The 'not so difficult' stretch to 18% flat tax would reduce their disposable income (after rent/mortgage) from €500 p.w. to about €385 p.w.

My point is this Csirl. You have been continually touting this flat rate tax idea, but I seriously doubt you have given a seconds thought to the real consequences of why it would cause enormous hardship on many people.

You're suggestion would involve reducing the disposable income of two married couples by up to 25% in order to cut the taxes of a guy on €100k p.a. by €12k per annum. How can this be easy?

13.5% is a nice sound bite compared to the current tax rates, but this is hugely misleading as you are not comparing like with like. When you factor in the elimination of tax free allowances and layer on the levies what your suggestion amounts to is real hardship on people who can least afford it.

To be honest you don't need these examples to arrive at the conclusion that if high earners are significantly benefiting, the less well off must be getting hit hard.

For my part, I'd suggest we eliminate the levies and PRSI and have a combined rate of income tax at a few levels. 0% on the first €10k, 15% on the next €10k, 30% on the next €10k and 50% of earnings above €30k. I do believe lower incomes need to be brought into the tax net to some extent, but we shouldn't cause excess hardship for the lowest paid, which is exactly what a flat rate tax would do.

 

[Complainer]

and the plain fact is that some low paid pay no tax,

This is a myth. Ever heard of VAT?

 

[starlite68]

Sorted then. Lets do it !!

if life were only so simple!

 

[RMCF]

I always wondered why there is such a delay to the budget?

This country is borrowing €500mill per week yet we have to wait til Dec for it. Is it not a matter of urgency or does the Gov feel afraid to bring the cuts around too quickly? We seem to have been talking about this Budget for ages now.