Let's drastically increase taxes!!

edanto

On the rich!!

It's absolute codswallop that high net worth individuals can be allowed to escape paying an equitable share of their taxes just by being rich enough to afford fancy accounting and dubious (e.g property) tax reliefs.

The standard retort to that is allowing them to invest more of their money makes jobs for us all and the country would be in an awful state without them. Sure the dependable trickle down theory tells us that the job creation would continue apace - just further down the ladder, at the SME level - which is exactly the place to harness the great entrepreneurial culture that we have here.

Want to discuss this with some people from kenya!?

http://suas.ie/vbulletin/showthread.php?t=66

Time Magazine

edanto wrote: »

It's absolute codswallop that high net worth individuals can be allowed to escape paying an equitable share of their taxes just by being rich enough to afford fancy accounting and dubious (e.g property) tax reliefs.

Agreed, but I'd like to see you try stop it.

Hanley

Nice theory..... but tell us what we should do in real life???

mumhaabu

There are some things a picture will describe far better.

EGaffney

The best way to get rich people to pay taxes is to levy a fair tax rate, like we have now, i.e. around 40%. "Drastically increase taxes" is an agenda for 1980s levels of tax evasion. Since rich people pay the greatest amount of income tax, which is one of the top 2 income sources for the government, this is also an agenda for economic ruin.

Hanley

EGaffney wrote: »

The best way to get rich people to pay taxes is to levy a fair tax rate, like we have now, i.e. around 40%. "Drastically increase taxes" is an agenda for 1980s levels of tax evasion. Since rich people pay the greatest amount of income tax, which is one of the top 2 income sources for the government, this is also an agenda for economic ruin.

Good post.

I woulda thought our low corporation tax was a good example of that... People cried foul at the time saying it would take away from tax reciepts, but it turned out to be a pretty smart move at the time.

asdasd

"Drastically increase taxes" is an agenda for 1980s levels of tax evasion.

Yeah. There is a lot of guff talked about tax evasion in the late eighties, but tax evasion is exatly what you would expect with the punitive amoount of taxation levied at the time. i hesitate to call it acceptable, but would agree to it being expected. High taxation reduce incentives. it is easy to give an example of this. In the early nineties the tax rate was 65% over £13K. Imagine a plumber who was honest, and kept accounts every month and who would have reached £13K earnings, for that year, by end October.

This means that all earnings from that date on are taxed at the marginal rate. In effect he would probably shut up shop for the last two months - why work on a £10 job if you get only £3.50 in return? Since this didnt happen, and trademen worked for the last two month of the year, and pubs stayed open, and traders traded we can assume levels of tax evasion amongst them, and can we blame them?

The thing is different with a wealth tax. Arguably you could tax Paris Hilton, get half her wealth and distribute it and this would promote economic activity. The problem is she wouldnt pay, she would leave and reside in Monaco etc.

EGaffney

Well £13k would have been quite a lot more money in the olden days. Having said that, the point still stands. Plus, when rich bankers are evading their taxes, who can blame tradesmen for doing the same thing given their far lower incomes?

At least we got something useful from the tax exemptions, i.e. property. It may be going unused now, but when the economy recovers, it will still be there.

edanto

Well drastically increase taxes is pretty much an attention grabber. I don't really have the analysis to hand to tell me what proportion of our super rich citizens pay no tax.

Anyways DmcW was asking how I would go about doing it.

First - try and get some facts, I might be completely wrong about the amount of tax that very wealthy people pay. Most of my opinions have been formed by reading such things as:

Very wealthy people have been able to use such incentives to reduce their tax liabilities to low levels or even zero.

http://www.finfacts.com/irelandbusinessnews/publish/article_10007319.shtml

Which is fine, but isn't really a quotable reference.

Then the references that are quotable give the headline impression that nothing is wrong...

http://www.finance.gov.ie/Viewtxt.asp?DocID=3977&CatID=1&m=&StartDate=01+January+2006

It is estimated that the average rates of tax paid by the high wealth individuals for whom Large Cases Division is responsible are set out in the following table.

Year Average Rate
2000/01 25.5%
2001 28.9%
2002 24.3%
2003 30.2%

Which seems like a reasonable contribution - until you realise that their taxable incomes have probably been reduced to the smallest amount possible by virtue of all the avoid-paying-tax schemes, some of which were running until this year.

Then I don't just want to pick on rich people.

There's also the corporations - 12.5% tax is just too low, at the very least that should go up a percentage point or two in the budget for starters. We're officially a tax haven according to the Christian Aid report on the true global toll of tax dodging (link to pdf)


Second - with the facts, find out the how. If there's a problem how does it come about. Lobbying? Are there any loopholes at the moment that should be closed?

Third - Get about campaigning. Obviously enough the global economy is in shock at the moment and ours is predicted to take a beating. This means that there's an opportunity to influence whatever the new paradigm is - it could be along the lines of what Sarkozy is proposing or it could be something else. I don't have much time for this, so I'll probably focus on trying to influence politicians or journalists.

To be clear - I'm not talking about drastically increasing taxes on any person or legal person with a return of less than about €80k, but simply that people or legal people that earn in excess of that are only allowed to benefit from tax reliefs etc insofar as they still contribute a minimum X% of their combined gross income to the exchequer.

asdasd

ChristianAid states

"The government of Ireland has in recent years laudably
increased its aid budget. Yet at the same time it has adopted
many of the characteristics of a tax haven, thus helping to
facilitate tax losses in developing countries."

The thing is, that we were a developing country ( of a sort), when we decided to lower the tax rates on corporations, and the effect is on richer countries not developing ones. Intel is not going to the poorest third world countries as they are too unstable.

I think corportation tax is an easy tax, and a form of double taxation. If socialists are (legitmately) concerned about income distribution then that is handled with income tax, or dividend tax. Corporate tax merely stops the corporation from becoming s cash rich as it would like, but a rich corporation does not lead to income disparities.

As for competition against China etc. I think, given environmental and labour laws in the West, China has a huge competitive advantage over Ireland/Europe so we should do what we can.

insofar as they still contribute a minimum X% of their combined gross income to the exchequer.

As often is the case, the capitalist US has a mechanism for this. The AMT.

edanto

asdasd wrote: »

I think corportation tax is an easy tax, and a form of double taxation.

I disagree. Wealth exists in the legal person, the legal person has income and benefits from investments that the state makes in real people such as health and education.

Legal people should pay more tax than they do at the moment.

A dividend tax doesn't cut it, who holds on to shares long enough these days?

I would be very open to more regulation of the financial markets and things like the Tobin tax and think that it would address global inequality but it's probably off-topic for this thread about Irish taxes.

Frankie Lee

I wouldn't mind seeing a 2% reduction on taxation on the lower rate coupled with an increase on the the 40% coupled with more tax incentives for the wealthy to invest in small and medium enterprises, can't see it happening to be honest.

Whats more likely to happen will be the increase of VAT rates along with more stealth taxes.

eamonnm79

edanto wrote: »

I disagree. Wealth exists in the legal person, the legal person has income and benefits from investments that the state makes in real people such as health and education.

Legal people should pay more tax than they do at the moment.

A dividend tax doesn't cut it, who holds on to shares long enough these days?

I would be very open to more regulation of the financial markets and things like the Tobin tax and think that it would address global inequality but it's probably off-topic for this thread about Irish taxes.

Closing off the loopholes would be a start. Any tax paid by the super rich in Ireland is an act of philantropy. They could avoid the tax if they wanted too.
Now thats what I call moral hazzard.

asdasd

the lower rate coupled with an increase on the the 40% coupled with more tax incentives

No increase on the 40% rate is justified, we need a new band on higher income earners ( i.e. 100K at least for a couple). In terms of who is going to be wealth poor in the downturn, it will be the people who bought recently and most will be on 40%. Lower earners did not earn enough to buy a house.

leninbenjamin

Frankie Lee wrote: »

I wouldn't mind seeing a 2% reduction on taxation on the lower rate coupled with an increase on the the 40% coupled with more tax incentives for the wealthy to invest in small and medium enterprises, can't see it happening to be honest.

Whats more likely to happen will be the increase of VAT rates along with more stealth taxes.

the bit in bold is what this country badly needs. i fear you may be correct on the stealth taxes though.

Frankie Lee

Also expect massive cut backs which will just exacerbate the whole situation.

Hanley

asdasd wrote: »

No increase on the 40% rate is justified, we need a new band on higher income earners ( i.e. 100K at least for a couple). In terms of who is going to be wealth poor in the downturn, it will be the people who bought recently and most will be on 40%. Lower earners did not earn enough to buy a house.

100k in this day and age is sweet FA. Especially if they re-introduce college fees... that'll knock a sizeable proportion off that figure too. If we were talking about a larger tax on people earning 500k I might be inclined to agree, but a punitive tax on what most "professionals" can hope to aspire to is nothing more than a disincentive to work had and enjoy the rewards that they deserve.

And giving out about corporation tax, c'mon, seriously. If it wasn't for our low corp tax rate we'd still be in the dark ages. We're doing enough to erode out competitive advantages already without taking out what is probably the biggest one.

asdasd

Hanley, I am not sure if you are addressing me but I actually suggested that corporation tax was a double taxation.

100K for a couple is getting up there, but it is certainly not rich. I was arguing against the idea that we increase the tax on higher earners without adding a band.

In any case 500K is too high. If we agree that people get quite conformtable at around 100K per peson then 200K is a minimum limit.

Hanley

asdasd wrote: »

Hanley, I am not sure if you are addressing me but I actually suggested that corporation tax was a double taxation.

100K for a couple is getting up there, but it is certainly not rich. I was arguing against the idea that we increase the tax on higher earners without adding a band.

In any case 500K is too high. If we agree that people get quite conformtable at around 100K per peson then 200K is a minimum limit.

The comment on corp tax wwas in reference to this post; http://www.boards.ie/vbulletin/showpost.php?p=57422410&postcount=9

I do agree that a new band might be a good idea, and in retrospect, 500k IS probably too high. 200-300k would be fair enough I suppose. I just don't like the idea that a professional who has worked their way up the career ladder over 10-15 years will suddenly end up in this new tax bracket. Realistically speaking it's not going to have a huge impact on their net pay, I just think it sends a bad signal.

Victor

The trick is to have a low rate of tax on everything. So tax those luxury food products and houses and abolish the property based incentives.

Frankie Lee wrote: »

I wouldn't mind seeing a 2% reduction on taxation on the lower rate

Why bother? An equivalent expansion in tax credits would be more useful.

EGaffney

Hanley wrote: »

I do agree that a new band might be a good idea, and in retrospect, 500k IS probably too high. 200-300k would be fair enough I suppose. I just don't like the idea that a professional who has worked their way up the career ladder over 10-15 years will suddenly end up in this new tax bracket. Realistically speaking it's not going to have a huge impact on their net pay, I just think it sends a bad signal.

Not a lot of people/families earn that much money through the PAYE system though.

Given that Ireland has a very high proportion of graduates compared to the rest of the developed world, we really need to consider introducing a student loan system for financing some of the costs of third-level education.

Hanley

EGaffney wrote: »

Not a lot of people/families earn that much money through the PAYE system though.

My point is tho, those who have worked hard thru school and college put themselves in a position to earn that sort of money. It's not fair to penalise them because of their work ethic. All it does is disincentivise education.

Given that Ireland has a very high proportion of graduates compared to the rest of the developed world, we really need to consider introducing a student loan system for financing some of the costs of third-level education.

Do we?? I wasn't aware of that. Can you supply some figures to back it up?? I'm actually genuinely interested. What about our proportion of graduates who have parents earning below the average industrial wage, how does that compare to other countries?

Time Magazine

Hanley wrote: »

Do we?? I wasn't aware of that. Can you supply some figures to back it up?? I'm actually genuinely interested.

The CSO report that 53,044 children were born in 1990. The CAO report that 56,315 people applied for Level 8 (degree) courses in 2008.

Sir Digby Chicken Caesar

he did say graduates, I've applied for many courses and graduated from none

Time Magazine

Yeah, but you mod AH :pac:

I know, but applications is a good indicator of the level of interest in pursuing further education and therefore the graduation rate.

EGaffney

Hanley wrote: »

My point is tho, those who have worked hard thru school and college put themselves in a position to earn that sort of money. It's not fair to penalise them because of their work ethic. All it does is disincentivise education.

It does disincentivise education, I agree. My point is that we already have lots of graduates, so it's not as serious a problem for us as it would be for other countries. There is an optimal level of graduates in an economy, and it might not be as high as ours.

Hanley wrote: »

Do we?? I wasn't aware of that. Can you supply some figures to back it up?? I'm actually genuinely interested. What about our proportion of graduates who have parents earning below the average industrial wage, how does that compare to other countries?

Sure: http://www.voxeu.org/index.php?q=node/1690 has the figures. There's a link to an academic paper on that page with the more intricate details. I don't know about any international comparisons of parental income, though I do know anecdotally from students' union people that enrolment of poor students has increased in Ireland thanks to free fees.

edanto

Seems like I wasn't the only one with the idea to increase taxes on the rich.


http://www.tribune.ie/news/article/2008/oct/12/budget-2009-high-earners-to-be-hit-by-tax-increase/

TOP earners in the €100,000-plus bracket will take most of the pain with hefty tax increases in Tuesday's budget, which is likely to be the most draconian in almost a quarter of a century.

The chronic state of the public finances means the government cannot simply rely on stealth taxes – leaving tax credits and bands unchanged – and there will be headline tax increases for at least some workers.

Finance minister Brian Lenihan is likely to scrap or considerably raise the PRSI ceiling, although the Sunday Tribune has learned there is concern in government that raising the top rate of tax might send out the wrong signal and depress consumer confidence further. More targeted but less politically sensitive tax increases like levies may be on the cards.

sweet.

asdasd

The first thing they can do with the PRSI ceiling is abolish the boondangle where civil sevants dont pay it. Otherwise this tax on "high" earners is a tax on the private sector, and is totally unjust. Second thing we can do is an immediate call for benchmarking, based on average income in the private sector. Since average income in the private sector is going to decline in the next two years at least we can benchmark immediately based on that supposition.

( That is, unless benchmarking is a total fraud, and is only to be used when private sector incomes are increasing. I can hardly believe that - can you?)

edanto

asdasd wrote: »

The first thing they can do with the PRSI ceiling is abolish the boondangle where civil sevants dont pay it.

You're dead right, that seems stupidly unjust.

asdasd

Particularly when. it just occurs to me, that with the banking sector bleeding jobs, IT still not recovered ( and outsourable etc.) the highest PAYE earners outside of rarefied private sector CEO land could well be government employees - the managers, consultants , judges etc.

FrankGrimes

asdasd wrote: »

The first thing they can do with the PRSI ceiling is abolish the boondangle where civil sevants dont pay it.

Is that true and what was the (shaky no doubt) rationale behind putting that in place? How much on average does this save a civil servant vs. a private sector employee on the same wage?

Any estimate on how much Lenihan could claw back on this in the budget if he chose to take such a stand?

asdasd

Is that true and what was the (shaky no doubt) rationale behind putting that in place?

I think the rationale is that they would never need social insurance, not being able to lose their jobs.

shnaek

edanto wrote: »

Seems like I wasn't the only one with the idea to increase taxes on the rich.


http://www.tribune.ie/news/article/2008/oct/12/budget-2009-high-earners-to-be-hit-by-tax-increase/


sweet.

The top 1% account for 23% of total income tax at the moment in Ireland.