Who speaks for the squeezed middle in the pre-budget submissions?

[gnf_ireland]

*I am not sure if this is the right forum to post this, so mods please feel free to move it if you think there is a better one*

With pre-budget submissions coming thick and fast over the next few weeks, I am wondering who is speaking on behalf of the squeezed middle? Those on around the 55k mark (as defined by the Institute of Taxation), and pay more tax than Sweden, Switzerland, UK, USA or Spain, paying 49.5% of their income in taxes & levies. They take home around 6400 a month between them.

[broken link removed]

Those who can barely afford the average 3 bed semi house in Dublin (404k -10% deposit =3.3 times a couple earning 55k each salary), paying around 1800 euro a month in mortgage repayments - among the highest in Europe.

They do not qualify for the Affordable Childcare Scheme, so pay around 1000 a month for each child in creche. Despite not being eligible for the subsidy, they still have to pay the creche increases that appear to have coincided with the scheme.

If they are out of the creche system, they are may be availing of 'free education' but probably need some sort of after school care for the kids. All costs money and little to no support there for them.

If they are lucky, they put in 5% of their salary into a pension fund, matched by their employer, providing them with 'eye watering' security in their old age. They look at the ongoing (small) increases in the state pension, wondering will there be such a thing by the time they reach that age.

Those in the 'squeezed middle' wonder how they have ended up in this situation. They try to play by the rules as best they can and get on with life, but feel they have nothing to show for the hard slog.

So I am wondering is there any lobby group or political movement speaking on behalf of those who help keep the system ticking over? Who should I look out for over the next few weeks to hear their ideas/proposals?
There appears to be no shortage of those willing to speak on behalf of the 'non-working class' and those on lower incomes. The elitist group will always have some voice in government.

Leo says he wants to lead a government for those who "get up early in the morning", but I don't believe Fine Gael represents this demographic.... so who does?

 

[Purple]

€55,000 x 2 earners is a single tax case on €110,000 a year. That's not the middle by any count.
If you think you are being hit hard try being a single income earner on that salary. Now they really are hit hard.

The "Squeezed Middle"; a couple with a few kids on a combined income of €55,000 , will pay about €3,500 in total payroll taxes and will get €3,360 back in child Benefit. That's a net payment of around €140 a year or €2.70 a week. I don't think that can be called squeezed. I'd call it grossly under taxed.
The people who are earning more than that are hammered. If they are single and high earners they are totally screwed by the taxation system. A single earner who wants the same take home pay at the "Squeezed Middle" family (€54,860) has to have gross earnings of nearly €88,000.

 

[dub_nerd]

Those on around the 55k mark (as defined by the Institute of Taxation), and pay more tax than Sweden, Switzerland, UK, USA or Spain, paying 49.5% of their income in taxes & levies. They take home around 6400 a month between them.

I don't understand the arithmetic here. 6,400/month x 12 = 76.8k which is 70% of 2 x 55k. Where does the 49.5% tax figure come from? -- it looks like only 30%.

 

[gnf_ireland]

I don't understand the arithmetic here. 6,400/month x 12 = 76.8k which is 70% of 2 x 55k. Where does the 49.5% tax figure come from? -- it looks like only 30%.

Apologies, I should have said marginal tax rate of 49.5% - I was quoting too quickly from the Institute of Taxation's summary findings.

I am guessing from your comment, you believe 30% is an acceptable amount of tax to pay in general on this sort of salary. I probably would agree with you on this

 

[gnf_ireland]

€55,000 x 2 earners is a single tax case on €110,000 a year. That's not the middle by any count.

Maybe I read the Institute of Taxation report incorrectly. I read it as individuals/couples making 55k a year each. Maybe it just referred to an individual making 55k and excludes couples/families.

If a couple earning 110k is not middle by any count, can you help me in understanding who is able to purchase houses in Dublin in this climate? The average cost of a 3 bed semi is 400k odd, and assuming a 10% deposit and 3.5 times Loan to Income, they barely make the cut. Surely a couple who purchase an average sized house in Dublin are middle in some regard ???

The "Squeezed Middle"; a couple with a few kids on a combined income of €55,000 , will pay about €3,500 in total payroll taxes and will get €3,360 back in child Benefit. That's a net payment of around €140 a year or €2.70 a week. I don't think that can be called squeezed. I'd call it grossly under taxed.

Ok, I can accept this regarding taxation - this is why I considered the squeezed middle from a taxation point of view to be double that

If you think you are being hit hard try being a single income earner on that salary. Now they really are hit hard.

Without getting into details, I do not fall into either definition of the Squeezed Middle, so its not related to me personally.


Let me try and re-phrase what I was trying to ask - who speaks in the pre-budget submission on behalf of the hard working, reasonable income families who get taxed to the hint and get very little in return? Who are the voices that say no to increases in social welfare etc etc. Who is speaking on behalf of this group ?

 

[Protocol]

FG is meant to be speaking on their behalf.

Nobody in Ireland pays 49.5% effective tax rate.

But many people face a 50% marginal tax rate.

Don't confuse the marginal tax rate with the average tax rate.

It's MTR that are crazy high for ordinary workers in Ireland, not ATRs.

 

[Protocol]

My parents earn 49k approx, and pay under 10% direct taxes.

They get:

two medical cards
two free travel passes
free TV licence
35pm / 420 pa offf their elec bill

They are undertaxed compared to other countries, and compared to the benefits they get.

 

[Protocol]

The 50% approx top MTR is not too high, it's fairly normal to have 50% top MTRs.

It's just that it kicks in so early, at 33,800.

So what we need are more bands and rates to make the system smoother.

I propose 20% - 30% - 40% - 50%.

Let the 50% start at 100k, not 33,800.

 

[Brendan Burgess]

Hi gnf

You raise a very valid general point "Who speaks for the workers?"

First an overview of the tax position in Ireland

• Low paid employees pay virtually no taxes on their income
  
• Middle earners who are married with kids pay extremely low taxes compared with other countries
  
• Middle earners who are single and who don't have kids pay about average taxes compared with other countries
  
• Higher paid employees pay about average taxes compared with other countries

All of the above refer to the proportion of their income that they spend in taxes.

We have very low levels of CAT and CGT. The rate is high at 33%, but people can greatly reduce the effective rate through reliefs.

But the big problem is the generosity of our social welfare system. Someone who chooses never to work will get the same Old Age Pension as someone who has paid into the social welfare system all their life.

A person who has worked for thirty years, who loses their job, gets effectively the same Jobseekers as someone who has never worked a day in their life.

We also penalise people who try to provide for themselves. If you take out health insurance, you will be charged for a bed in a public hospital. If you save hard to buy a new house, you will pay VAT at 13.5% and you will fund a social housing levy for those who rely on the state for housing. If you pay your car insurance, you will pay a levy to fund the claims for those who don't bother to pay their car insurance.

Your insurance and costs generally are hugely inflated by the costs of personal injuries claims in Ireland which are much higher than in the UK.

Unless you have a cheap tracker, you are paying twice the mortgage rate than you would be paying in any other EU country.

The government has borrowed about €35 billion net to pay the wealthy depositors who should have lost the money they had on deposit in Irish Nationwide and Anglo Irish Bank. Workers will be paying for this for years to come.



And we continue to spend on ridiculous projects - High speed broadband for every house in the country so that they can watch Netflix, an underground from the City Centre to the airport despite the fact that the bus journey takes 20 minutes. We have about 40 major hospitals in the country when we should have around 10.


But the bad news is that it's going to get worse

We are living in a golden period which can't continue. Corporation Tax rates are artificially high. Exports are booming. The government is paying virtually nothing for its borrowing. This is the time when we should be generating tax surpluses to pay down our national debt, but in fact, we are borrowing to run the country.

When interest rates rise; when Corporation Tax receipts fall; when the next economic shock due to Brexit, Trumpenomics, Korea or whatever happens, we will be in deep, deep trouble.

But not one of our political parties or TDs will shout stop.

Brendan

 

[Firefly]

But the big problem is the generosity of our social welfare system.
Brendan

Whilst I agree I think it's only part of the problem. The headline tax rates may seem ok however it's all the add on charges that are the killer. Car tax rates, TV license, School books, 23% VAT on purchases. Ask any parent and the phrase "there's something every month" comes to mind. I said this here a few years ago that the way things are going, people with good jobs will start the leave Ireland and it's starting to happen. One of my best friends is a GP and I was at the dentist last night and both said that younger doctors / dentists are emigrating. Years ago people emigrated if they found themselves out of work, now people are emigrating for a better life - higher wages, lower cost of living and being able to buy their own home.

Of course, the fact that we have borrowed over 100bn (not including the bank bailout) since 2008 means we are in effect snookered.

 

[gnf_ireland]

Nobody in Ireland pays 49.5% effective tax rate.

But many people face a 50% marginal tax rate.

Apologies, this was taken from 2016 and the USC has dropped by 0.5% since that, so its 49%
- 40% marginal income tax
- 4% PRSI
- 5% USC

It's MTR that are crazy high for ordinary workers in Ireland, not ATRs.

Fully accept this statement.

They are undertaxed compared to other countries, and compared to the benefits they get.

I think the key here (in my personal view) is compared to the benefits they get. There are those who are net contributors to the system and those who are net receivers from the system. I believe there are too many net receivers for the amount of contributors

I guess my question is who is speaking on behalf of the contributors, and I know in theory it is meant to be Fine Gael, but not in practice

FG is meant to be speaking on their behalf.

The 50% approx top MTR is not too high, it's fairly normal to have 50% top MTRs.
It's just that it kicks in so early, at 33,800.

Absolutely. The average annual salary is around 38k to my knowledge. There is no way someone on an average salary should be paying the highest rate of tax (excluding USC).
There should always be an incentive to work and earn more money, especially at the lower income levels.

 

[gnf_ireland]

@Brendan Burgess thanks - you articulated this much better than my original attempt last night

I am guessing the question still exists - who speaks on behalf of the workers. I am guessing I already know the answer - no one, as it would not be a populist position to take

Whatever about all of the items you list above, I look at the whole pension time bomb that no one appears to be willing to address at all and see this blowing up in the next 25 years - just before I am due to retire

The government appear to have no clue about the impact of robotics and automation and the impact this will have on jobs in the country. You just have to look at bank branches where the move to automation is pretty evident. Same if you check in luggage with Aer Lingus - you don't need to speak to an individual to do it. This is only starting, so can only imagine what it will be like in 10-15 years

 

[Brendan Burgess]

The average annual salary is around 38k to my knowledge. There is no way someone on an average salary should be paying the highest rate of tax (excluding USC).

Hi gnf

If you were earning €38k , which of the following would you prefer?

1) A flat rate of 30% tax on all your income with no tax-free allowance.
or
2) A tax free allowance of €35k on which you pay no tax and a marginal rate of 50% on all income above €35k?



Brendan

 

[gnf_ireland]

Years ago people emigrated if they found themselves out of work, now people are emigrating for a better life - higher wages, lower cost of living and being able to buy their own home.

I agree with this in the 1980's in particular. I graduated in the late 1990's and a good block of my compatriots emigrated for adventure and life experience, and many stayed away due to love and other reasons. Many just loved the lifestyle abroad, although some are starting to drift home now as their parents get older. I think this was also driven by the rise of MNC's and the 'assignment' of some of their employees aboard.

I was abroad myself for the majority of the Celtic Tiger years only returning in 2006. Thankfully I had the good sense to hold off on buying property until 2011, but I really do not understand how people can afford to get on the property ladder now even on good jobs.

If a couple on 150-200k cannot afford to live in a decent neighbourhood, send their kids to creche, go on a holiday a year and generally live while saving for the future/pension, then we have serious problems in my view. I see a lot of people who are making decent money 'struggle' due to the cost of living here, and the general quality of life suffers accordingly

Of course, the fact that we have borrowed over 100bn (not including the bank bailout) since 2008 means we are in effect snookered.

And this is a whole different discussion....

 

[gnf_ireland]

If you were earning €38k , which of the following would you prefer?

Obviously Brendan, the tax system that best suits me
But, if the 30% tax meant my social welfare was linked to my salary for the first 12 months, and the cost of living could be reduced so I was not paying additional charges such as 23% VAT etc, then I may consider it

Ask someone the same question if they are earning 150k, and they will give the same "whats best for me" answer..

 

[Firefly]

The 50% approx top MTR is not too high, it's fairly normal to have 50% top MTRs.

It's just that it kicks in so early, at 33,800.

So what we need are more bands and rates to make the system smoother.

I propose 20% - 30% - 40% - 50%.

Let the 50% start at 100k, not 33,800.

I agree. There are plenty people working part-time up to the max they can earn at 20% as after that it doesn't make any sense - for example (usually) mothers who work part-time whilst the kids are at school. Once they hit circa 25k it makes no sense to keep working for 1/2 their income to be taken in taxes, especially if additional child care is required which will negate the income.

 

[Firefly]

And this is a whole different discussion....

As is this

The government appear to have no clue about the impact of robotics and automation and the impact this will have on jobs in the country. You just have to look at bank branches where the move to automation is pretty evident. Same if you check in luggage with Aer Lingus - you don't need to speak to an individual to do it. This is only starting, so can only imagine what it will be like in 10-15 years

 

[galway_blow_in]

My parents earn 49k approx, and pay under 10% direct taxes.

They get:

two medical cards
two free travel passes
free TV licence
35pm / 420 pa offf their elec bill

They are undertaxed compared to other countries, and compared to the benefits they get.

the likes of willie o dea wants to shower even more benefits on pensioners , the new minister for social protection ( regina doherty ) wasnt an actual week in her new job when she stated her biggest priority would be raising the state pension to 300 euro per week , no politician ever lost a single vote by promising to spoil pensioners and whats more , most people of all age groups appear to support it even it means they get hit

amazing how many people dont realise just how well off the elderly are in ireland

 

[willyfones]

Only Public Sector Unions speak for this group,,, the decline of unions in the private sector have lead to wages remaining static while those at the top have seen their wages balloon to obscene levels..

My opinion of unions (and I am not part of any myself) has changed over the last few years,, I just noticed they have been often demonised in the media and partly their own fault for contributing to a public Sector worker vs Private Sector divide..

However, they do look out for their workers and speak out on their behalf..

A wider issue is of course that in this country, everyone has their cap in hand pre budget,, The government doesn't get any real kudos or votes for investing our money where it maters most (in water infrastructure, building social housing, etc)

The Irish electorate does love a hand out though... State pension,, child benefit,, etc etc... simple tools that governments use to raise (using tax payers money of course) each budget,, with the farce each year,, and political kite flyer leading up to the budget...

We vote this shower in,, so only have ourselves to blame.

 

[cremeegg]

You raise a very valid general point "Who speaks for the workers?"

Brendan, your post at no. 9 is superb. With a little work it could be supplied to politicians, as a basis for someone who might be willing to "speak for the workers"

There are some aspects that need work. You say that each of the 4 categories you identify pay low or average taxes, then go on to say that the problem is social welfare is too high. I don't think that anyone would object to high social welfare if it could be funded with low taxes. A little more detail needed there.

The next point I would question is the 'ridiculous' projects. We have a habit in this country of underfunding infrastructure. Without a proper cost benefit analysis I would not be dismissing too many of these projects. I am not familiar with the Dublin transport issue, but high speed rural broadband seems an excellent idea to me. It would mean that parts of the country which are today almost cut off from the modern economy could become realistic locations for many types of employment. No manufacturing MNC is ever likely to set up in Longford, but many services business could locate anywhere with adequate broadband. Someone recently went about setting up an asset management business on Inish Mean.

I would be delighted to email my TDs before the budget on the basis of a revised version of your post.