Is higher taxation not an option?

bigstar

Why is an increase in the higher tax band not an option to help fund public spending? or even a new band for incomes in excess of €60k. seems like a decent solution to me.

Time Magazine

It is an option, and one that will probably be called upon.

There are problems, though. One is that it's obviously politically unpopular. Another is that taxes aren't simply a transfer from people to the government. They actually repel economic activity and therefore growth. If you're earning say €60k, you're already comfortable. If the government increase the tax rate, say to 50%, you're now only getting €150 of that €300 over-time pay instead of €180. Thus you mightn't do the over-time at all, and the government lose €120 of tax revenue.

Now I am not arguing that increasing the tax rate will lower tax revenue. That would be wrong. But the effect I outlined there does water the effect down. Maybe you won't stop working as many hours, but you're far less likely to work a few more -- and working a few more hours is the sort of thing that could drag us out of the recession.

So although it seems like an easy target, and it's probably the best one available, it's not all peaches and cream.

silverharp

they have got to cut budgets in prefernce to raising taxes. there are any number of gov. programs or agencies that have dubious economic benefit. Raising taxes would just put consumers in a worse off condition.

Fat_Fingers

yes, you increase taxes, people are spending less as results . Less money in economy, less taxes collected. This leads to redundancies and closures and even less taxes and more pressure on government services supporting unemployed.

Mind you we are on this road already and by taxing more government can speed up this process even more.

FGR

I still don't get this.

Wouldn't most people support a general taxation increase as opposed to another plethora of stealth taxes? Property Tax, Parking Levies and Water rates spring to mind.

techdiver

The should implement "choice" taxes. By this i mean increase or introduce taxes on non-essential items or activities such as increase the price of cigarettes and impose a higher tax on gambling. (These are just 2 examples).

People cannot fell hard done by, by these changes as you are not forced to indulge in these items/activities.

The above will only bring in a certain amount. In tandem, with the above we need to reign in spending and cut the public service bill.

We should cut funding for private schools, and as a gesture TD's and ministers should take at least a 15% pay cut to lead by example. They also need to abolish un-vouched expenses in the public sector also.

I'm not saying this will solve the issue, but it's a start.

Morlar

techdiver wrote: »

The should implement "choice" taxes. By this i mean increase or introduce taxes on non-essential items or activities such as increase the price of cigarettes and impose a higher tax on gambling. (These are just 2 examples).

People cannot fell hard done by, by these changes as you are not forced to indulge in these items/activities.

Cigarettes in Ireland are already among the most highly taxed on earth. In the last budget and just about every one before they are increased.

A little bit more imagination on the part of the govt might see more benefit. Also bear in mind that whether you agree or understand or not a large number of smokers DO rely on cigarettes and many are low income to begin with. What seems like an optional luxury to you may not be viewed that way by the people who smoke and already pay ridiculously over the odds. Also more taxes on cigarettes mean more and more people getting them black market instead.

There are far more savings to be made in for example the budget of the HSE, FAS etc. The literally countless myriad of 'voluntary organisations' which have their hand out for govt funding annually. Dole payments in Ireland are among the highest in europe and contribute to welfare tourism as it is. There are more meaningful savings to be made there in my view, either by reducing the amounts or drastically increasing the amount of investigation done to cut down on welfare fraud/increasing the penalties for those who are caught.

cavedave

techdiver

The should implement "choice" taxes. By this i mean increase or introduce taxes on non-essential items or activities such as increase the price of cigarettes and impose a higher tax on gambling. (These are just 2 examples).

Any discussion here should mention the laffer curve. From Ferris Bueller's Day Off

Economics Teacher: In 1930, the Republican-controlled House of Representatives, in an effort to alleviate the effects of the... Anyone? Anyone?... the Great Depression, passed the... Anyone? Anyone? The tariff bill? The Hawley-Smoot Tariff Act? Which, anyone? Raised or lowered?... raised tariffs, in an effort to collect more revenue for the federal government. Did it work? Anyone? Anyone know the effects? It did not work, and the United States sank deeper into the Great Depression. Today we have a similar debate over this. Anyone know what this is? Class? Anyone? Anyone? Anyone seen this before? The Laffer Curve. Anyone know what this says? It says that at this point on the revenue curve, you will get exactly the same amount of revenue as at this point. This is very controversial. Does anyone know what Vice President Bush called this in 1980? Anyone? Something-d-o-o economics. "Voodoo" economics.

Another thing to consider is areas that are completely outside the tax system currently. So in the Great Depression tax that could have been earned from alcohol was not due to prohibition. Something similar could be argued about the prohibition of cannabis. Not a pleasant vista but neither are medical cuts and you do have to balance evils on occasion.

What else is completely untaxed that might provide income?

techdiver

Morlar wrote: »

Cigarettes in Ireland are already among the most highly taxed on earth. In the last budget and just about every one before they are increased.

A little bit more imagination on the part of the govt might see more benefit. Also bear in mind that whether you agree or understand or not a large number of smokers DO rely on cigarettes and many are low income to begin with. What seems like an optional luxury to you may not be viewed that way by the people who smoke and already pay ridiculously over the odds. Also more taxes on cigarettes mean more and more people getting them black market instead.

There are far more savings to be made in for example the budget of the HSE, FAS etc. The literally countless myriad of 'voluntary organisations' which have their hand out for govt funding annually. Dole payments in Ireland are among the highest in europe and contribute to welfare tourism as it is. There are more meaningful savings to be made there in my view, either by reducing the amounts or drastically increasing the amount of investigation done to cut down on welfare fraud/increasing the penalties for those who are caught.

The cold hard facts of the matter is that the use of cigarettes result in a massive amount of expenditure within the health service for smoking related illness. Although I do agree that increasing the price too much would encourage illegal black market trading.

Anyway I was just putting some suggestions out there, I did say we need to target expenditure also.

Morlar

techdiver wrote: »

The cold hard facts of the matter is that the use of cigarettes result in a massive amount of expenditure within the health service for smoking related illness. Although I do agree that increasing the price too much would encourage illegal black market trading.

Anyway I was just putting some suggestions out there, I did say we need to target expenditure also.

Not to go even further off topic but perhaps if the govt revenue from tobacco products was directly pumped into the health service there might not be as much of a discrepancy ?

MG

bigstar wrote: »

Why is an increase in the higher tax band not an option to help fund public spending? or even a new band for incomes in excess of €60k. seems like a decent solution to me.

Not the preferred option to introduce disincentives to work and value generation. The long term effects would probably be negative. That said, there is probably room for a minor increase.

Likely to be deeply unpopular but a preferable route would be to bring more lower earners into the tax net or to reduce the minimum wage. I know many people will explode at this notion but a society which "rewards" failure to thrive (economically) is not on the long term path to prosperity. A fair increase in top rate of tax should be accompanied by a minium tax which would ensure everyone from the minimum wage earners to the tax exiles have a stake in the country.

There seems to be too many people out there who feel "entitled" to receive without any giving (both at the top (Fas, Bev Flynn) and at the bottom).

In any case, the notion of additional tax to fund public services is nonsense. May as well throw cash on a bonfire. The focus must be on efficiency. I've spent a fair bit of time in hospital lately and I've seen more staff than patients. Haven't seen anyone looking rushed either. Yet I've spent most of my time in hospital waqiting around, listening to staff complaing about how busy they were. I'm well trained in process efficiency methods and I was gobsmacked at the approach of hospitals which don't seem to have implemented any modern techniques to queue management etc.

Anyway, my main point is that we don't need to fund services, we need to reduce waste so that the same services can be provided for less.

Time Magazine

techdiver wrote: »

We should cut funding for private schools

Removing that few million pushes more kids into public schools where they have to be paid for anyway.

and as a gesture TD's and ministers should take at least a 15% pay cut to lead by example.

Our deficit is of the order of €13,000m. A 15% pay cut for ministers and TDs moves this down to about €12,995m. We really, really need to think bigger.

People don't quite grasp the scale of the problem here. €13bn - how much is that? Well the Gardaí's entire budget for 2008 is €1.6bn. The Department of Education spent €7.9bn in 2006. In 2007 the Department of Defence spent €817m. Still another €2.5bn to go. If we were to scrap the Department of Agriculture that saves us another €1.24bn, or about half the remainder. We spend about €870m on Development Aid, so now we're down to €400m.

So let's get this in context. If we give up fighting crime, stop funding education, disband the army, obliterate the Wesht, and renege on our international obligations to the third-world, then we're still €400m on our budget next year. A €100 collection per person in the State, maybe?

We really, really, really need to think bigger than 10% pay-cuts for TDs.

techdiver

The Economist wrote: »

Removing that few million pushes more kids into public schools where they have to be paid for anyway.



Our deficit is of the order of €13,000m. A 15% pay cut for ministers and TDs moves this down to about €12,995m. We really, really need to think bigger.

People don't quite grasp the scale of the problem here. €13bn - how much is that? Well the Gardaí's entire budget for 2008 is €1.6bn. The Department of Education spent €7.9bn in 2006. In 2007 the Department of Defence spent €817m. Still another €2.5bn to go. If we were to scrap the Department of Agriculture that saves us another €1.24bn, or about half the remainder. We spend about €870m on Development Aid, so now we're down to €400m.

So let's get this in context. If we give up fighting crime, stop funding education, disband the army, obliterate the Wesht, and renege on our international obligations to the third-world, then we're still €400m on our budget next year. A €100 collection per person in the State, maybe?

We really, really, really need to think bigger than 10% pay-cuts for TDs.

Excuse me, but I did make the comment "as a gesture", because what number crunching does not illustrate is the perception of the upper echelon by the middle and working classes.

I am not naive enough to think that a reduction in TD's pay will fix our economic woes, but it would give more fuel for the government when entering talks with the so-called social partners that they are doing there bit.

What you have to understand is that a person on a modest to low salary that has not reaped the benefit of the economic boom we experienced, is now being asked to fit the bill for our leaders mistakes. These people need to see that everybody is pulling their weight and not just the little man on the street.

MG

The Economist wrote: »

Removing that few million pushes more kids into public schools where they have to be paid for anyway.



Our deficit is of the order of €13,000m. A 15% pay cut for ministers and TDs moves this down to about €12,995m. We really, really need to think bigger.

People don't quite grasp the scale of the problem here. €13bn - how much is that? Well the Gardaí's entire budget for 2008 is €1.6bn. The Department of Education spent €7.9bn in 2006. In 2007 the Department of Defence spent €817m. Still another €2.5bn to go. If we were to scrap the Department of Agriculture that saves us another €1.24bn, or about half the remainder. We spend about €870m on Development Aid, so now we're down to €400m.

So let's get this in context. If we give up fighting crime, stop funding education, disband the army, obliterate the Wesht, and renege on our international obligations to the third-world, then we're still €400m on our budget next year. A €100 collection per person in the State, maybe?

We really, really, really need to think bigger than 10% pay-cuts for TDs.

Great post. If only more people understood the gravity of the situation.

Fighting Irish

bigstar wrote: »

Why is an increase in the higher tax band not an option to help fund public spending? or even a new band for incomes in excess of €60k. seems like a decent solution to me.

or maybe we could just cut the dole a bit, why target people who work hard?

MG

techdiver wrote: »

What you have to understand is that a person on a modest to low salary that has not reaped the benefit of the economic boom we experienced, is now being asked to fit the bill for our leaders mistakes. These people need to see that everybody is pulling their weight and not just the little man on the street.

I don't disagree that we all need to shoulder the burden from the Taoiseach to the lowest earner, nor do i disagree that a fair amount of the problems were caused by the Government but I have to say that the middle to low earners generally did well out of the "boom" - the average industrial wage rose to over 30k which is nicely above some of our European neighbours, the minimum wage is quite high and a large percentage of the workforce is not in the tax net. Moreover they are not exempt from adding fuel to the mania (including electing the government). I would say that in reality there are very few people in the country who are not implicated.

techdiver

MG wrote: »

I don't disagree that we all need to shoulder the burden from the Taoiseach to the lowest earner, nor do i disagree that a fair amount of the problems were caused by the Government but I have to say that the middle to low earners generally did well out of the "boom" - the average industrial wage rose to over 30k which is nicely above some of our European neighbours, the minimum wage is quite high and a large percentage of the workforce is not in the tax net. Moreover they are not exempt from adding fuel to the mania (including electing the government). I would say that in reality there are very few people in the country who are not implicated.

I agree we get the government we vote for. I think the perception that most did well from the boom may be slightly inaccurate. People may have started to earn more and the minimum wage was increased etc, but what was the "real" gain for people.

In some ways, certain people were screwed over by the boom times. Many years ago, a teacher/nurse/engineer were regarded as good paid jobs. Now people in professions such as myself, who on paper earn a decent living still cannot afford to purchase their own home, because the relative cost/afford-ability to earning ratio has decreased, thus the coined phrase - "Rip-off Ireland".

Time Magazine

techdiver wrote: »

Excuse me, but I did make the comment "as a gesture", because what number crunching does not illustrate is the perception of the upper echelon by the middle and working classes.

I am not naive enough to think that a reduction in TD's pay will fix our economic woes, but it would give more fuel for the government when entering talks with the so-called social partners that they are doing there bit.

What you have to understand is that a person on a modest to low salary that has not reaped the benefit of the economic boom we experienced, is now being asked to fit the bill for our leaders mistakes. These people need to see that everybody is pulling their weight and not just the little man on the street.

I don't disagree with any of this, and I apologise if you took offence. If I had my way I wouldn't be making our ministers take a 10% pay cut, I'd be giving them the sack. However I don't really value the "little things", I care about the fact that we're seriously looking at losing every cop and teacher in the country. Brian Cowen did an absolutely crap job in preparing for this downturn, but if he manages to pull us out of it I don't care if he keeps the government jet.

techdiver

The Economist wrote: »

If I had my way I wouldn't be making our ministers take a 10% pay cut, I'd be giving them the sack.

Amen to that.

andrewh5

The gombeens in government need to start at the top. A 20% cut in their salaries for starters! TDs here earn more than MPs in the UK and do far less!!

Then they need to weed out the public services. Far too many jobs for life, quangos etc.

Increasing taxes in any way will see them out of office sooner rather than later. Hang on a minute. Yeah do it then they will be out quicker!

MG

techdiver wrote: »

I agree we get the government we vote for. I think the perception that most did well from the boom may be slightly inaccurate. People may have started to earn more and the minimum wage was increased etc, but what was the "real" gain for people.

In some ways, certain people were screwed over by the boom times. Many years ago, a teacher/nurse/engineer were regarded as good paid jobs. Now people in professions such as myself, who on paper earn a decent living still cannot afford to purchase their own home, because the relative cost/afford-ability to earning ratio has decreased, thus the coined phrase - "Rip-off Ireland".

I agree, during the boom times certain people did well but it was mostly an illusion. I remember talking to my wife one day and while we looked at building labourers earning more than ourselves and saying, don't worry some day education will mean something again some day and our relative stock will rise. And so it came to pass. But most people still fed the boom instead of opting out of it (which was actually possible). The fact is that we'll all pay for the follies and maybe those who should pay more won't and those who did the right things will pay more than they should In my own case, falling interest rates are a case in point. Those who did the right thing are rewarded with falling deposit interest rates while those who overborrowed are given a break.

The problem is that we were all probably overpaid in the boom years, and we all need to move back a little. The construction workers are doing so in falling wage rates & unemployment - but the foolish sweetheart deals that Bertie did to keep his popularity high also need to be reviewed.

CDfm

The Economist wrote: »

It is an option, and one that will probably be called upon.

There are problems, though. One is that it's obviously politically unpopular. Another is that taxes aren't simply a transfer from people to the government. They actually repel economic activity and therefore growth. If you're earning say €60k, you're already comfortable. If the government increase the tax rate, say to 50%, you're now only getting €150 of that €300 over-time pay instead of €180. Thus you mightn't do the over-time at all, and the government lose €120 of tax revenue.

Now I am not arguing that increasing the tax rate will lower tax revenue. That would be wrong. But the effect I outlined there does water the effect down. Maybe you won't stop working as many hours, but you're far less likely to work a few more -- and working a few more hours is the sort of thing that could drag us out of the recession.

So although it seems like an easy target, and it's probably the best one available, it's not all peaches and cream.

Raising taxes is unhygenic and acts as a disincentive to work.

The ethos really must be to cut, slash and burn public expenditure especially wages. To quote from that great economist Wilkins Macawber

"Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

I have no doubt that the Public Service and Public Service Unions were aware of the effects their income increases would have on the economy in a recession.

So Im afraid reality bites- and the least palatable one is probably the one we need. THe Public Service Unions as always have the country over a barrell.

asdasd

If you're earning say €60k, you're already comfortable. If the government increase the tax rate, say to 50%, you're now only getting €150 of that €300 over-time pay instead of €180. Thus you mightn't do the over-time at all, and the government lose €120 of tax revenue.

60K is comfortable but 58K is where the limit for affordable housing in parts of Dublin.

We cant tell anything from gross salary without knowing net worth, mortgage outgoings etc. Taxing people who are afraid of losing their jobs, and who are struggling with negative equity is not equitable.

A real tax on wealth in this country would take income and assets into account. In that scenario we may end up taxing the rich pensioners who were recently taken off the hook.

cavedave

cavedave wrote: »

What else is completely untaxed that might provide income?

Fat chicks, there should be a tax based on BMI. A pigovian tax if ever there was one.

CDfm

techdiver wrote: »

I agree we get the government we vote for. I think the perception that most did well from the boom may be slightly inaccurate. People may have started to earn more and the minimum wage was increased etc, but what was the "real" gain for people.

Yes but within certain parameters - our main political parties are Center Parties and all operate within the same taxation philosophy - give or take a bit. So what we vote for is "same dog -different hair".

Ireland is now a small open economy. Whether it had been Irish or non-Irish banks which lent to fuel the property boom. It would still have happened. Dont forget - we joined the Euro and no longer can control monetary or interest rate policies as we used to. Like it or not the housing boom was the result of a free market economy.

So the government have only 2 real weapons to deal with the crises. Cut expenditure or raise taxes. Cutting public service pay is attractive as it allows other expenditure on capital projects to continue. However other expendiure such as social welfare programmes etc will inevitably be cut.

We also now that increasing taxes will act as a real disincentive to work and the gap between families who work and those on welfare and public authority housing will also decrease.

Godge

Yes, higher taxation is an option but it is the type of taxation that we need to consider. A tax that reduces the incentive to work is not a good option. A tax on unproductive assets would be a good one.

For example, a tax on apartments built in the last ten years in Carrick-on-Shannon is a tax on unproductive assets. it wouldn't hurt the wider economy and only those people who were stupid enough to buy one would have to pay the tax anyway:).

CDfm

Godge wrote: »

Yes, higher taxation is an option but it is the type of taxation that we need to consider. A tax that reduces the incentive to work is not a good option. A tax on unproductive assets would be a good one.

For example, a tax on apartments built in the last ten years in Carrick-on-Shannon is a tax on unproductive assets. it wouldn't hurt the wider economy and only those people who were stupid enough to buy one would have to pay the tax anyway:).

And to a pensioner who had tried to supplement their pension and just lost their medical card you would say what.

I would means test all council tenants based on household income aggressively and charge market rents on the properties and refuse charges.

stepbar

Godge wrote: »

Yes, higher taxation is an option but it is the type of taxation that we need to consider. A tax that reduces the incentive to work is not a good option. A tax on unproductive assets would be a good one.

For example, a tax on apartments built in the last ten years in Carrick-on-Shannon is a tax on unproductive assets. it wouldn't hurt the wider economy and only those people who were stupid enough to buy one would have to pay the tax anyway:).

I've advocated in the past (during the boom time) that there should have been some type of property tax on people who have second, third etc homes. Who the fcuk needs 3 houses unless for investment purposes. In the case of one person I have dealings with he has 17 different properties. 17 fcuking properties. In addition to any income tax paid (which he doesn't), anybody who owns more than one property (i.e Private dwelling) should he taxed on an increasing scale.

BTW there's a Carrick On Shannon in every county on the island. Whilst Sction 23's were welcome at the time, all they served was to help the rich avoid tax which is a scandal in itself. I have heard of solicitors and other high net work individuals purchasing entire blocks of apt for the purpose of avoiding tax. There was one guy whio it was rumoured bought a block of 20 apts in a small Cavan town about 5 years ago for 4 mil so that he could do as decribed above. And believe me there was planty like him and some who are trying to back out of deals given the state of the economy. What ever about the other wastages, that was the real scandal, allowing legit tax avoidance schemes like Section 23.

P. Breathnach

stepbar wrote: »

I've advocated in the past (during the boom time) that there should have been some type of property tax on people who have second, third etc homes. Who the fcuk needs 3 houses unless for investment purposes. In the case of one person I have dealings with he has 17 different properties. 17 fcuking properties. In addition to any income tax paid (which he doesn't), anybody who owns more than one property (i.e Private dwelling) should he taxed on an increasing scale.

So if I had a second house (which I don't) and rented it to a family, that house should be subject to property tax? Even if I was completely honest (which, of course, I am) and declared my profits for income tax? I don't see that as fair. Why should a tenant-occupied property be taxed and an owner-occupied property be tax-free? Both are family homes.

I have a simpler idea. Tax all property. Give all those who paid huge lumps of stamp duty a remission for 10 or 15 years, as they have already paid a property tax.

nesf

The short answer: Yes. You must balance the budget somehow and taxation will almost certainly be used to achieve some of this but it cannot do it alone.

We can borrow a certain amount but we can't do it indefinitely. We already saw a public debt spiral in the 70s and 80s and (thankfully) enough people in the social partners and politics were around back then for them to be knowledgeable of the consequences (i.e. it'll make a 10% public pay cut look like a light tap on the wrist).

We need to cut spending, we can't tax our way out of this. This is far too big a deficit to be covered by a mere 2% bump up of the top tax rate. Simply speaking there are two types of spending to cut, capital and current. Capital spending in infrastructure is essentially investment. Cutting this will cost us in the medium to long term (for example, consider the huge infrastructure deficit we came out of the 70s/80s with in terms of roads etc).

Current spending is an awkward one. Essentially, paying a public servant this year requires paying them again next year. So we can't just worry about having enough money to pay them this year but pay them for the medium term too. This creates a very hard choice to be made, we essentially cannot expect 2006/2007 exchequer returns in the medium term or anything close to them. We need to balance the books, so we either cut public pay and/or fire public servants. We also need to reduce spending on services (this is one and the same thing really since most of the cost of providing a service generally is wages). This isn't going to be nice but it's going to have to happen.




Essentially, there is a tendency in countries that when the tax revenues are flowing in the public purse strings loosen and Governments tend to overspend, both in pay agreements with the public sector (compare public pay increases over the last decade with inflation and you'll see what I'm talking about) and taking on silly projects like the "Bertie Bowl" etc. Our problem is that we've had an extremely long boom, so the correction might be quite nasty indeed in real terms. Public sector pay cuts are only the beginning of the pain I feel (private sector wages will have to come down too). I'll be honest, I was quite surprised by how quickly and utterly the public finances disintegrated, I expected it to be a longer slide back to more reasonable levels of tax revenue and spending but a combination of international factors have turned a property bust into a much nastier incident. The only uncertainty here is how long it will take to "correct" the system or for the system to correct itself depending on how you look at it.

nesf

Actually, since this is an Economics forum, I'd just like to throw out some income tax extremes to break people's anchoring to our present tax rates.


Income tax pre-WWI was as low as 2% in the UK. During the 1970s the top tax band peaked at 83% during Old Labour's stint in power. That's bringing home 17 pence out of every pound you earned at the top level. The tax on investment earnings at the top marginal rate was 98%! There was almost no point in having earnings from investment above a certain level. Something even more interesting (to me) is that corporation tax was only introduce during WWI to help pay for the war.

ranger4

nesf wrote: »

Actually, since this is an Economics forum, I'd just like to throw out some income tax extremes to break people's anchoring to our present tax rates.


Income tax pre-WWI was as low as 2% in the UK. During the 1970s the top tax band peaked at 83% during Old Labour's stint in power. That's bringing home 17 pence out of every pound you earned at the top level. The tax on investment earnings at the top marginal rate was 98%! There was almost no point in having earnings from investment above a certain level. Something even more interesting (to me) is that corporation tax was only introduce during WWI to help pay for the war.

I sure hope no tax policy as droconian as that is ever introduced here, Would be serious unrest.

nesf

ranger4 wrote: »

I sure hope no tax policy as droconian as that is ever introduced here, Would be serious unrest.

I doubt it, when Thatcher cut the top rate after she got into power the total tax take from the top 1% of earners as a proportion of total tax take increased from 11% to 15%. The lesson hasn't been lost on people, no one seriously puts forward proposals for 70%+ top rates of taxation these days (in the EU anyway).

Lplated

bigstar wrote: »

Why is an increase in the higher tax band not an option to help fund public spending? or even a new band for incomes in excess of €60k. seems like a decent solution to me.

You must be kidding, right?

We should cut income tax to zero.

We should then look at public spending through a new prism - for every euro that it is suggested it is necessary to spend (and thus funded by tax), the question should be asked - Is it right to attack people's wages in order to fund this particular bit of expenditure.

Simplistic? Sure. But I bet you'd find it hard to justify retaining a state interest in an airline, ditto having investments in greyhounds or race horses, ditto first or business class fares for anyone travelling by the state.

There is probably a 'base-line' of services that people could generally agree would be kept, i.e. education and public health (although neither in its current form), but beyond that, do we need nine organisations to promote the Irish language? What do we have an army for? etc etc....

As a people, we should be fighting to retain our own money (ie that which we have earned). We should force government to justify every cent it takes from us. Its time for a revolution people.

stepbar

P. Breathnach wrote: »

So if I had a second house (which I don't) and rented it to a family, that house should be subject to property tax? Even if I was completely honest (which, of course, I am) and declared my profits for income tax? I don't see that as fair. Why should a tenant-occupied property be taxed and an owner-occupied property be tax-free? Both are family homes.

I have a simpler idea. Tax all property. Give all those who paid huge lumps of stamp duty a remission for 10 or 15 years, as they have already paid a property tax.

I never said a tenant should be taxed. The owner of the property should.

nesf

stepbar wrote: »

I never said a tenant should be taxed. The owner of the property should.

On thing though, property taxes are expensive to implement (you've got to hire a lot of people to survey and maintain an accurate database of all property in the country so the tax can be levied correctly each year). One of the reasons that taxes at source, like stamp duty, are used is that they are a lot cheaper to implement. For instance, in Britain in a survey (I can get the details if you want, I don't have them on me) it was found that the cost of VAT was 1% of the tax intake from VAT while the cost of income tax was 2% of the tax intake due to much higher degree of complexity and trouble of enforcement involved.

It's one thing to theoretically discuss options in taxation but the cost of implementing different taxes needs to be central to any discussion of what avenues to pursue.

CDfm

stepbar wrote: »

I never said a tenant should be taxed. The owner of the property should.

What if the property was being rented out at a loss and had a mortgage that exceeded its resale value. Thats a wealth tax where wealth does not exist.

Do we still tax the private sector owner?

I think its fairer to tax the tenant as its the tenant which uses the actual local services.

P. Breathnach

stepbar wrote: »

I never said a tenant should be taxed. The owner of the property should.

So if I ran a business hiring out cars, it would be sufficient if I paid income tax on the profits, but if I ran a business hiring out apartments, I should also pay a property tax? That doesn't seem fair.

asdasd

Thats a wealth tax where wealth does not exist.

maybe we should tax houses as they increase in equity. So as your mortgage decreases in real terms ( due to inflation) the tax increases. People would have to factor this into their repayment calculations. In negative equity you pay nothing.

This means the property rich are taxed on their unearned wealth.

The downside might be that this is another tax that falls in a recession ( but what doesnt?)

asdasd

So if I ran a business hiring out cars, it would be sufficient if I paid income tax on the profits, but if I ran a business hiring out apartments, I should also pay a property tax? That doesn't seem fair.

Road tax is a property tax.

nesf

asdasd wrote: »

maybe we should tax houses as they increase in equity. So as your mortgage decreases in real terms ( due to inflation) the tax increases. People would have to factor this into their repayment calculations. In negative equity you pay nothing.

This means the property rich are taxed on their unearned wealth.

The downside might be that this is another tax that falls in a recession ( but what doesnt?)

We already capture much of that "unearned wealth" when the house is sold on though (if it's not their main residence). So if you remove any tax liability on selling such houses when you introduce such a tax?

Boston

techdiver wrote: »

Excuse me, but I did make the comment "as a gesture", because what number crunching does not illustrate is the perception of the upper echelon by the middle and working classes.

Too many gestures already, whats needed are actions which actually make a difference.

P. Breathnach

asdasd wrote: »

Road tax is a property tax.

Good try.

It's a tax on an activity. You don't have to pay road tax on a car that you don't take on to the public roads. Mind you, such a restriction might scupper a car-hire business.

So I'll switch to hiring out boats. Cabin cruisers, with accommodation.

asdasd

So I'll switch to hiring out boats. Cabin cruisers, with accommodation.

OK, if it appreciates in value - i.e, equity you pay tax.

We already capture much of that "unearned wealth" when the house is sold on though (if it's not their main residence). So if you remove any tax liability on selling such houses when you introduce such a tax?

No do both. Capital gains is a tax on the receiver. Property tax is a tax on the holder.

nesf

asdasd wrote: »

No do both. Capital gains is a tax on the receiver. Property tax is a tax on the holder.

Eh, when someone sells a second home they are liable for capital gains from the proceeds for the sale. So this is a form of double taxation.

stepbar

CDfm wrote: »

What if the property was being rented out at a loss and had a mortgage that exceeded its resale value. Thats a wealth tax where wealth does not exist.

Do we still tax the private sector owner?

I think its fairer to tax the tenant as its the tenant which uses the actual local services.

Hardly the problem of the Government. If your'e dumb enough to purchase an asset that doesn't even make a proper yield (aside from capital appreciation) then you deserve all you get.

P. Breathnach wrote: »

So if I ran a business hiring out cars, it would be sufficient if I paid income tax on the profits, but if I ran a business hiring out apartments, I should also pay a property tax? That doesn't seem fair.

It would stop property speculators / property developers / banks from playing the market. It's very fair. Anyhow, the market's fcuked anyhow, 10 years too late for a proposal like this.

nesf

stepbar wrote: »

Hardly the problem of the Government. If your'e dumb enough to purchase an asset that doesn't even make a proper yield (aside from capital appreciation) then you deserve all you get.

His point was more to do with the taxation of "wealth" than as a sop to people in negative equity. If you're taxing people on the appreciation of value on their home, which was what was originally suggested, then are people with negative equity still liable for some form of tax?

stepbar wrote: »

It would stop property speculators / property developers / banks from playing the market.

Define playing the market.

P. Breathnach

stepbar wrote: »

It [property tax] would stop property speculators / property developers / banks from playing the market. It's very fair. Anyhow, the market's fcuked anyhow, 10 years too late for a proposal like this.

I recognise that people playing the market can distort it, and that is especially true of our property bubble. But I think that a property tax of the order of €500 or €1000 per unit per annum would not have deterred people who were expecting gains of €50,000 in two or three years. It might, however, be enough to deter the long-term investor who treats rental property as a personal pension scheme. In other words, a tax created to guide economic activity away from speculation might not have the intended effect, but have an unintended effect that could be socially undesirable.

stepbar

P. Breathnach wrote: »

I recognise that people playing the market can distort it, and that is especially true of our property bubble. But I think that a property tax of the order of €500 or €1000 per unit per annum would not have deterred people who were expecting gains of €50,000 in two or three years. It might, however, be enough to deter the long-term investor who treats rental property as a personal pension scheme. In other words, a tax created to guide economic activity away from speculation might not have the intended effect, but have an unintended effect that could be socially undesirable.

It wouldn't be socially undesirable if an exemption was given on the first property that a person owns. It would only apply if said person goes on to purchase a second and third etc which could be argued one does not need.

Godge

A property tax could look like this.

A valuation of under €500,000 pays €500.
€500,000 to 1 million pays €1,000.
1 miilion to 3 million pays €3,000.
And so on.

There would be less of a problem with maintaining correct valuations as they would only arise at the margins i.e. a dispute over which band a property falls into. The previous rates regime needed constant valuation, this tax would not.

Tender for the valuation system. It wouldn't be caught up in unnecessary bureaucracy. There are plenty of estate agenets - Remax, Sherry fitzgerald - with nationwide networks and nothing to do who would love the business.

All property, commercial, residential, land and farm to be included. Initially, for the first year based on self-evaluation (say 1 October 2008 payment date) with significant penalties for under-valuation/evasion. tax to be paid by owner, whether individual or company, tax resident or not.

Surcharge for zoned but undeveloped land. Extra surcharge for inner city eyesore sights.

exemption where household income is below €30,000 and single property is owned valued at less than 1 million.

Abolish stamp duty at the same time.

CDfm

stepbar wrote: »

Hardly the problem of the Government. If your'e dumb enough to purchase an asset that doesn't even make a proper yield (aside from capital appreciation) then you deserve all you get.



It would stop property speculators / property developers / banks from playing the market. It's very fair. Anyhow, the market's fcuked anyhow, 10 years too late for a proposal like this.

Thats hardly fair to penalise someone who is making a loss. It could be an ordinary Joe without a pension.