This is a foundational proposal at the very least. It used to be index linked to inflation but it was removed, I'd love to view the cited rationale behind that chestnut.
Why are Capital Gains taxed at a lower rate than Income?
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T McGibney
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The rationale was quite logical and simple - CGT was then historically low at 20% and inflation had for years been non-existent. Needless to say, that didn't last.
Remember,
Simple minded perhaps. Logical? I don't think so.
It was around 2003 it was removed I think.
Wouldn't it have been reasonable to rule that it would remain indexlinked at all time into the future even if inflation was zero or near zero & regardless of the CGT rate?
It was around 2003 it was removed I think.
Wouldn't it have been reasonable to rule that it would remain indexlinked at all time into the future even if inflation was zero or near zero & regardless of the CGT rate?
Tax on income and wealth accumulation should be minimal, or outright abolished. You should be incentivized to earn and allowed to keep as much as you can while you're alive. Instead, let's have a high rate of Inheritance Tax on people's estates. I've never seen a hearse with a tow-hitch.
T McGibney
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OK, in 2021 Income Tax took in €29,389,379,000. Capital Acquisitions Tax (on inheritances and gifts) took in €519,701,000, less than 1.8% of the Income Tax figure. Source Revenue Annual Report page 85
By precisely how much do you propose raising CAT in order to cut or abolish Income Tax?
As much as is necessary. Think about how much fairer society would be if there was little or no inherited wealth for a moment. Redistribute that wealth instead to those who need it, make the shift away from taxing income/earnings.
T McGibney
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How much?
Bear in mind that if you double it, ie by raising CAT to 66%, you can then afford to reduce the Income Tax take by 1.8%. If you triple it, ie by raising CAT to 99%
, you can then afford to reduce the Income Tax take by 3.5%.I await your answer.
Societies that in the past have confiscated all inherited wealth have turned out to be anything but fair. It's usually a precursor to societal collapse, if not genocide.
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To really look at figures, as CAT only applies after thresholds have been reached, how much wealth is actually inherited annually?How much?
Bear in mind that if you double it, ie by raising CAT to 66%, you can then afford to reduce the Income Tax take by 1.8%. If you triple it, ie by raising CAT to 99%
I await your answer.
Societies that in the past have confiscated all inherited wealth have turned out to be anything but fair. It's usually a precursor to societal collapse, if not genocide.
But my question is an ideological one, and I realise this is a minority view, but wouldn't a society which didn't have inherited wealth be fairer?
What about people who don't/can't have children, are they really less motivated, less productive?
T McGibney
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If you want to know that, surely you can look it up as easily as I can.
Ok, you're in your first year in college, living away from home. You have two younger siblings, one with special needs. Your parents are killed in a car accident. Their savings and assets including your home are confiscated by the State as 100% inheritance tax.
You suddenly have nowhere to live and nobody to pay your college and accommodation costs. Your siblings go into HSE care because none of your relatives feels capable of minding a teenager with special needs. You drop out of college, penniless, unqualified and unemployed. There's a housing crisis so you end up on the streets.
Where's the fairness in that?
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Fairer to who though? It wouldn't fairer to the vast majority who hope to hand on some of their life's work in value rather than have it revert to the state. I'd prefer my family to have the ability to benefit from what is left than general society which has already benefited from me as a tax paying useful citizen.
The Horseman
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Brendan
How many times do you actually want to tax the same euro. One of the biggest issues I actually see in Ireland is the more you try to look after your future to not rely on the State the more the State wants to take.
Middle income Ireland is getting crucified. We contribute a higher % of our income than any other group yet we get very little benefits for doing so.
The fair deal scheme is a prime example of this. Two people will receive exactly the same care and it will cost one significantly more than another simply because one was prudent.
Our tax system is fundamentally flawed, if we look at the property tax as another example. We have a tax base calculated on the value of your property. So you could have two properties (certainly in Dublin) both identical in size located within the same distance of identical amenities paying different property tax.
Surely the idea behind any tax is to encourage people (within reason) to be as self sufficient from a financial perspective as possible without continually relying on the State.
At what point should individuals be held responsible for their own (in)actions regarding their financial position.
I appreciate we need some safeguards but if we don't encourage responsibility the situation will never improve.
How many times do you actually want to tax the same euro. One of the biggest issues I actually see in Ireland is the more you try to look after your future to not rely on the State the more the State wants to take.
Middle income Ireland is getting crucified. We contribute a higher % of our income than any other group yet we get very little benefits for doing so.
The fair deal scheme is a prime example of this. Two people will receive exactly the same care and it will cost one significantly more than another simply because one was prudent.
Our tax system is fundamentally flawed, if we look at the property tax as another example. We have a tax base calculated on the value of your property. So you could have two properties (certainly in Dublin) both identical in size located within the same distance of identical amenities paying different property tax.
Surely the idea behind any tax is to encourage people (within reason) to be as self sufficient from a financial perspective as possible without continually relying on the State.
At what point should individuals be held responsible for their own (in)actions regarding their financial position.
I appreciate we need some safeguards but if we don't encourage responsibility the situation will never improve.
Sophrosyne
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No tax system is perfect. It cannot be assumed that all inequalities can be solved by taxation.
The main problem is that there are not enough taxpayers.
Of the existing taxpayers, the vast majority of income tax (75%) is paid by those with incomes of €60,000 or more.
Middle income earners (according to the CSO are those with incomes of €43,915) would fall into the €40,000 to €50,000 income decile and accounted for 7.8% of income tax and 8.8% of taxpayers.
The highest percentage (15.82%) is paid by those with incomes of €275,00 or more though they represent only 0.54% of taxpayers.
2019 figures from Revenue.
We all know that we over-rely on MNCs. In 2020, they accounted for 49% of all employment taxes and 82% of corporation taxes.
Comparatively, the indigenous economy generates a much higher percentage of low paid employment that contributes nothing to the exchequer and necessitates welfare assistance.
If any adjustments to taxation are needed in these challenging times they must be directed to economic growth, high value job creation, innovation and diversification.
The more taxpayers there are the less everyone pays.
The main problem is that there are not enough taxpayers.
Of the existing taxpayers, the vast majority of income tax (75%) is paid by those with incomes of €60,000 or more.
Middle income earners (according to the CSO are those with incomes of €43,915) would fall into the €40,000 to €50,000 income decile and accounted for 7.8% of income tax and 8.8% of taxpayers.
The highest percentage (15.82%) is paid by those with incomes of €275,00 or more though they represent only 0.54% of taxpayers.
2019 figures from Revenue.
We all know that we over-rely on MNCs. In 2020, they accounted for 49% of all employment taxes and 82% of corporation taxes.
Comparatively, the indigenous economy generates a much higher percentage of low paid employment that contributes nothing to the exchequer and necessitates welfare assistance.
If any adjustments to taxation are needed in these challenging times they must be directed to economic growth, high value job creation, innovation and diversification.
The more taxpayers there are the less everyone pays.
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Excellent post.
The reality is that middle income earners pay too little income tax but their marginal rate is too high.
We need to broaden the tax base by bringing more people back into the tax net. At the very least the Universal Social Charge should be universal. People on €200k a year should be paying a marginal rate of 50% but people earning up to €100k shouldn't.
Multinationals employ around 12% of the workforce so that 12% pays four times as much income tax as their counterparts in the indigenous economy. That's a very risky funding strategy.
Brendan Burgess
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That is a great line.
The Horseman
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I agree no tax system will fix all inequalities but our system in my view falls disproportionately on the squeezed middle (ironically a fact the govt are finally acknowledging with the third income tax rate of 30%).
Example a person on a €250k mortgage will see interest rates increase by €47 per month following recent interest changes. Compare this to somebody for example on HAP living next door who won't see their rent raise by a similar amount.
Before any poster say's but the mortgage owner will own the house the title of this thread suggests that this person should be levied with a higher tax for being prudent.
I fully agree we don't learn when it comes to a narrow tax base. The property bust is a prime example of this, we are (as you rightly point out) heavily reliant on corporation tax and its associated taxes for a significant portion of our tax revenue.
More people paying tax to spread the risk of a shock to a particular tax head is appropriate but politically is unpalatable.
Sophrosyne
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Just to clarify, I am not suggesting that the tax base should be widened to encapsulate people who are tax exempt because they are poorly paid. We can’t get blood from a stone no matter what way we tinker around the edges of taxation. We need more better paid employees.
MNC employees pay almost half of employment taxes and most of our CT because they are highly paid and their businesses are highly profitable.
The only way to end reliance on MNCs is to have profitable domestic businesses who pay better wages and salaries so that their businesses and employees can contribute more to taxation.
Anything the Government can do to encourage this, whether through the tax regime or by other means is needed urgently.
MNC employees pay almost half of employment taxes and most of our CT because they are highly paid and their businesses are highly profitable.
The only way to end reliance on MNCs is to have profitable domestic businesses who pay better wages and salaries so that their businesses and employees can contribute more to taxation.
Anything the Government can do to encourage this, whether through the tax regime or by other means is needed urgently.