What taxes do low earners and middle earners pay in Ireland?

Brendan Burgess

Brendan Burgess

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Total taxes on a single person

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Despite paying less tax and National Insurance than their UK counterparts, Irish people get twice the dole!

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Total taxes on a married couple with one earning and 2 children

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Conclusions

  • We have extremely low tax rates for low and average earners who are married with children
  • We have low tax rates on low and average earners who are single
  • Despite having lower taxes, we have much higher social welfare
  • Whatever might be squeezing the middle, it is not income taxes, USC or PRSI
 
Do we know the average wage in UK compared to Ireland. Also we are expected to pay for GP and school books etc, are there other differences in what UK get for their taxes or are we similar?
 
  • We have extremely low tax rates for low and average earners who are married with children
There are no tax reliefs for married people with children. Only in the UK. It seems to be a common misconception.
 
phileasfogg said:
Do we know the average wage in UK compared to Ireland. Also we are expected to pay for GP and school books etc, are there other differences in what UK get for their taxes or are we similar?
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Hi Phileas

You can make it as complicated as you like.

You would have to take in Council Tax in the UK which is around £1,000 a year on a £200,000 house. And water charges of around £350 a year.

You would see an awful lot of GPs for the money saved on these in Ireland.

Brendan
 
phileasfogg said:
  • We have extremely low tax rates for low and average earners who are married with children
There are no tax reliefs for married people with children. Only in the UK. It seems to be a common misconception.
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A married person with one income gets a married tax credit and a €42,800 20% tax band, compared to a €33,800 tax band for a single person.

If they have children, so they get the Home Carer Tax Credit?

They get €1,680 per child in Child Benefit.

You can see from the first post
A single person on €25,000 contributes €3,368 to the Exchequer
A married person with one income on the same salary gets a net €1,642 from the Exchequer.


Brendan
 
But I think it is complicated. We have low taxes but high non direct taxation and less services- this is just what has been sold to us. I am wondering if this is indeed true, do the taxes we pay on cars, vrt etc and the services we pay for like gp etc even the playing field or can we easily compare just income tax alone? Also, i still am not sure if tax reliefs exist in ireland for children? I don't think they do, or at least i have never claimed any.
 
Yes the home carer tax credit of 1000 euro a year is granted when one parent stays home to care for children. My interpretation of squeezed middle is 2 income family.
 
From the citizens advice website:


Youcannot claim the Standard Rate Cut-Off Point for dual income couples and the Home Carer’s Tax Credit.Your local tax office will help you to determine which is better for you.
 
Daffodils said:
From the citizens advice website:


Youcannot claim the Standard Rate Cut-Off Point for dual income couples and the Home Carer’s Tax Credit.Your local tax office will help you to determine which is better for you.
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That just means you can't have SRCOP of €44k yourself plus €25k for your spouse (i.e. you can't have €25k to cover his/her income).
 
Squeezed middle single earner:

"Top Rate of Tax
The evidence is that the top rate of tax in Ireland at 52 % (55% for self-employed) is not out of line with other EU and OECD countries.

What is unusual is that it applies at a low level of income by international standards.

For example, a single person on average earnings in Ireland has a marginal tax rate of 52 per cent which is the third highest in the OECD (after Belgium 54.9 per cent and Germany 52.1 per cent) and significantly above the OECD average of 36 per cent.

For a single person at 167 per cent of average earnings, Ireland’s marginal tax rate at 52 per cent is the 5th highest in OECD and compares to an OECD average of 40 per cent."

Public policy.ie

Marion
 
Marion said:
"Top Rate of Tax
The evidence is that the top rate of tax in Ireland at 52 % (55% for self-employed) is not out of line with other EU and OECD countries.

What is unusual is that it applies at a low level of income by international standards.
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Hi Marion

That is misleading.

The reason we have the top tax rate so early on is that there is such a high tax free allowance - €16,500 for single people and higher again for married people where one is earning.

Brendan
 
It would actually be interesting to see some proposals as to how to redress the perceived imbalances. Rather than open another thread on the same subject, why not open a thread with some possible solutions?
 
Brendan Burgess said:
Hi Marion

That is misleading.

The reason we have the top tax rate so early on is that there is such a high tax free allowance - €16,500 for single people and higher again for married people where one is earning.

Brendan
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Dont high earners receive these allowances and personal tax credits as low earners?
That is where your perceived imbalances are being derived from.
As a person's income rises the proportion of their income, in percentage terms, keeps increasing, even though the same rate of tax is applied.
I showed you a simple example of two workers, one earning €50,000, the other earning €10,000 with a 50% tax rate on all income. Both pay 50% (€25,000+€5,000 respectively). Total tax take is €30,000. But in % terms the high earner pay 83% of the tax, the low earner 17%. Add a personal tax credit of €2,000 each and the total tax take falls (23,000+3,000) €26,000 in total. But now the high earners % proportion of tax is 88.5%!
So despite paying less tax, the perception when looking at % proportions, increases the tax contribution.
 
I have amended the tables in the first post to include a salary of €60,000 and classified it has high average.

A married couple with kids on that salary pays a net contribution of €12,000 after child benefit.

Brendan
 
TheBigShort said:
Dont high earners receive these allowances and personal tax credits as low earners?
That is where your perceived imbalances are being derived from.
As a person's income rises the proportion of their income, in percentage terms, keeps increasing, even though the same rate of tax is applied.
I showed you a simple example of two workers, one earning €50,000, the other earning €10,000 with a 50% tax rate on all income. Both pay 50% (€25,000+€5,000 respectively). Total tax take is €30,000. But in % terms the high earner pay 83% of the tax, the low earner 17%. Add a personal tax credit of €2,000 each and the total tax take falls (23,000+3,000) €26,000 in total. But now the high earners % proportion of tax is 88.5%!
So despite paying less tax, the perception when looking at % proportions, increases the tax contribution.
Click to expand...
That's the point; allowances mean a lower effective tax rate. If the allowance was €9000 with 50% tax on the balance then both parties pay 50% but the effective tax rate on the lower earner is down to 5%.
 
Purple said:
That's the point; allowances mean a lower effective tax rate. If the allowance was €9000 with 50% tax on the balance then both parties pay 50% but the effective tax rate on the lower earner is down to 5%.
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And what is wrong with having lower effective rates? It's what's in people's pockets is what counts. The allowances simply distort the allocation of income taxes. Each worker pays 50%, each worker gets €9,000 personal allowance. What is the issue?
Are we to re-allocate the tax burden on the basis that some people don't earn nearly as much as others? Because one worker only earns €10,000, that therefore he should start paying perhaps a 60% tax on his €1,000 taxable income? While perhaps reducing the higher earners tax rate to 40% on his €41,000 taxable income? Is that what is being proposed?
 
TheBigShort said:
And what is wrong with having lower effective rates? It's what's in people's pockets is what counts. The allowances simply distort the allocation of income taxes. Each worker pays 50%, each worker gets €9,000 personal allowance. What is the issue?
Are we to re-allocate the tax burden on the basis that some people don't earn nearly as much as others? Because one worker only earns €10,000, that therefore he should start paying perhaps a 60% tax on his €1,000 taxable income? While perhaps reducing the higher earners tax rate to 40% on his €41,000 taxable income? Is that what is being proposed?
Click to expand...
Yes.
 
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