How It Effects Three Different Income Earners

cson

3 people; one minimum wage earner; one average wage earner and one high wage earner. All single people and PAYE workers for the purpose of this post.

Let's calculate their effective rate of tax;

Minimum Wage Earner

Income - €15,300

Income Tax - N/A

Social Levy @ 4% = €612

Effective tax rate = 4%

Average Wage Earner

Income - €32,000

Income Tax @ 20% = €6,400

Social Levy @ 7% = €2,240

Less Credits = (€3,300)

Net Taxation = €5,340

Effective tax rate = 16.69%

High Wage Earner

Income - €100,000

Income tax @ 20% = €7,280
@ 41% = €26,076

Social Levy @ 7% = €7,000

Less credits = (€3,300)

Net Taxation = €37,056

Effective tax rate = 37.06%

................................................................................................

Just food for thought there. Obviously the above is a simple way of showing things and each person will have different variables that effect that. But I think you can categorically say that high income earners have been hit.

Padkir

cson wrote: »

3 people; one minimum wage earner; one average wage earner and one high wage earner. All single people and PAYE workers for the purpose of this post.

Let's calculate their effective rate of tax;

Minimum Wage Earner

Income - €15,300

Income Tax - N/A

Social Levy @ 4% = €612

Effective tax rate = 4%

Average Wage Earner

Income - €32,000

Income Tax @ 20% = €6,400

Social Levy @ 7% = €2,240

Less Credits = (€3,300)

Net Taxation = €5,340

Effective tax rate = 16.69%

High Wage Earner

Income - €100,000

Income tax @ 20% = €7,280
@ 41% = €26,076

Social Levy @ 7% = €7,000

Less credits = (€3,300)

Net Taxation = €37,056

Effective tax rate = 37.06%

................................................................................................

Just food for thought there. Obviously the above is a simple way of showing things and each person will have different variables that effect that. But I think you can categorically say that high income earners have been hit.

Well done doing out the figures! I know, as you said, certain circumstances will vary but its a general estimate, yet people will still complain that its only the poor being hit. You can't win!

_michelle_

cson wrote: »

Just food for thought there. Obviously the above is a simple way of showing things and each person will have different variables that effect that. But I think you can categorically say that high income earners have been hit.

I take it from the tone of your post you have a problem with high earners being hit in the budget?? Like common sense will tell you that if you have more you pay more, only fair really! To be honest I think low earners have been hit alot harder than any other catagory. :mad:

_michelle_

Padkir wrote: »

Well done doing out the figures! I know, as you said, certain circumstances will vary but its a general estimate, yet people will still complain that its only the poor being hit. You can't win!

Yes it is the poor being hit worst as every € counts when you are barely surviving, as opposed to taking a hit on your nett disposable income left over every week!

leeroybrown

The figures are largely irrelevant without pre-budgetary figures for comparison.

confusticated

Well...the thing is that the min wage earner took a 12% pay cut recently too (roughly, €1 out of €8.65) so yeah they're being taxed less but they got hit in another way. Hard to win though, someone said on another thread here a few mins ago that it's not the high PAYE earner that's the problem and I think they're right, it's property developers etc who are using every loophole available to get out of tax...but it'll be all 3 groups of PAYE workers who pay for their mistakes.

cson

_michelle_ wrote: »

I take it from the tone of your post you have a problem with high earners being hit in the budget?? Like common sense will tell you that if you have more you pay more, only fair really! To be honest I think low earners have been hit alot harder than any other catagory. :mad:

I don't have any issue with high earners paying their fair share. There just seems to be this misplaced perception that they don't currently - which if you look at my calculations is far from the truth.

In any case my post and thread is an illustrative one for the purposes of showing how the effective tax rates of 3 different classes of worker.

Also a massive oversight on my part is the exclusion of 4% PRSI - I was under the impression it was included in the 7%. Not so it seems.

leeroybrown

confusticated wrote: »

Well...the thing is that the min wage earner took a 12% pay cut recently too (roughly, €1 out of €8.65) so yeah they're being taxed less but they got hit in another way.

That actually wasn't mentioned in the Budget speech, summary or appendices at all. It appears to be being left for the 2012 Budget so it won't affect next year's earnings.

EDIT - See my posts below. It appears it will be dropped by €1 by ministerial order shortly.

cson

leeroybrown wrote: »

The figures are largely irrelevant without pre-budgetary figures for comparison.

2010 Average Earner

32,000 @ 20% = 6,400

Levy @ 2% = 640

Credits (3,660)

Net Tax = 3,380

Effective tax rate = 10.6%

I'm only going to do out one as the above can be applied to the other two. I've also excluded PRSI as I did for 2011.

Padkir

_michelle_ wrote: »

Yes it is the poor being hit worst as every € counts when you are barely surviving, as opposed to taking a hit on your nett disposable income left over every week!

Higher income earners are paying a significantly higher percentage of their wages on tax than lower income earners, its a fact. Do you want everyones income to be the same, at €30000? Apart from a few who are just lucky, most people who earn 50 or 60 grand a year have worked hard for it, going through years and years of college, paying reg fees, accomodation, etc. so i think after that work they are entitled to not have more than half their wages taken in tax. Someone who spent years in college to improve themselves deserves to be earning more than once and a half someone on the dole. Simple as.

johnnyskeleton

CSON, to amend your figures slightly for self employed:

Also, you didn't include PRSI, which is not being abolished. Self employed have no exemption from PRSI and get half the tax credits of an employee.

Minimum Wage Self Employed
Income - €15,300

Income Tax - €1410

Social Levy @ 4% = €612

PRSI @ 4% = €612

Effective tax rate = 17.2% (compared to 4% for PAYE worker)

Average Wage Earner

Income - €32,000

Income Tax @ 20% = €6,400

Social Levy @ 7% = €2,240
PRSI 4% @ 4% = €1280

Less Credits = (€1650)

Net Taxation = €8,270

Effective tax rate = 25.84% (compared to c. 20% when PRSI is included in Employee's on your figures)

High Wage Earner

Income - €100,000

Income tax @ 20% = €7,280
@ 41% = €26,076

Social Levy @ 7% = €7,000
PRSI @4% = €4,000

Less credits = (€1,650)

Net Taxation = €42,706

Effective tax rate = 42.7% (compared to c.41% when PRSI is included for PAYE)

There's a massive difference between self employed and PAYE, especially at the lower end. It is very hard for people who have lost their jobs to decide to go out on their own, when they are so disadvantaged.

cson

Yeah Self Employed don't get the PAYE credit.

I left out PRSI because I was initially under the impression it was being taken under the umbrella of the USC of 7% and was included in that. I'm absolutely astounded to learn that it isn't. That's an incredible gouging of the middle class but that's an argument for another thread.

Edit: also Johnny - Self Employed cannot as far as I'm aware apply for Job Seekers benefit or at least the standard level of? I'm open to correction on this.

confusticated

leeroybrown wrote: »

That actually wasn't mentioned in the Budget speech, summary or appendices at all. It appears to be being left for the 2012 Budget so it won't affect next year's earnings.

Apologies, assumed (yeah I know, not a great idea today!) that since it had been announced a couple of weeks ago that it'd be put into practice as soon as possible.

Nozebleed

cson wrote: »

3 people; one minimum wage earner; one average wage earner and one high wage earner. All single people and PAYE workers for the purpose of this post.

Let's calculate their effective rate of tax;

Minimum Wage Earner

Income - €15,300

Income Tax - N/A

Social Levy @ 4% = €612

Effective tax rate = 4%

Average Wage Earner

Income - €32,000

Income Tax @ 20% = €6,400

Social Levy @ 7% = €2,240

Less Credits = (€3,300)

Net Taxation = €5,340

Effective tax rate = 16.69%

High Wage Earner

Income - €100,000

Income tax @ 20% = €7,280
@ 41% = €26,076

Social Levy @ 7% = €7,000

Less credits = (€3,300)

Net Taxation = €37,056

Effective tax rate = 37.06%

................................................................................................

Just food for thought there. Obviously the above is a simple way of showing things and each person will have different variables that effect that. But I think you can categorically say that high income earners have been hit.

To be honest the numbers are irrelevant...the rich are not paying nearly enough. you have the high earners in our society with a huge chunk of disposible income to spend at the end of the week.. and then you have people like me now living on €180 a week..€100 of which goes on food and bills.

leeroybrown

confusticated wrote: »

Apologies, assumed (yeah I know, not a great idea today!) that since it had been announced a couple of weeks ago that it'd be put into practice as soon as possible.

Actually. I may be the wrong one. I may have missed the mention when I listened to the speech.

Budget Speech wrote:

In the measures I am presenting today, those on the new reduced minimum wage will not be brought into the tax net. The top marginal tax rate will be kept at 52% for all taxpayers.

There appears to be no details in the Budget documents but the decrease has been referenced. That's a bit strange given the huge impact of such a cut.

EDIT - See my post below. It appears it will be dropped by €1 by ministerial order shortly.

Padkir

Nozebleed wrote: »

To be honest the numbers are irrelevant...the rich are not paying nearly enough. you have the high earners in our society with a huge chunk of disposible income to spend at the end of the week.. and then you have people like me now living on €180 a week..€100 of which goes on food and bills.

Not at you in particular; Now I'm no expert, but is this chunk of disposable income not being poured back into the economy through spending? It will make more of a positive impact coming through economic spending than through taxation.

cson

Nozebleed wrote: »

To be honest the numbers are irrelevant...the rich are not paying nearly enough. you have the high earners in our society with a huge chunk of disposible income to spend at the end of the week.. and then you have people like me now living on €180 a week..€100 of which goes on food and bills.

Not to have a go at you personally but if you say €100 of your JSA [This an assumption on my part but feel free to correct me] is going on bills then you have 80% disposable income. Broadly similar to a high earners net disposable income of 63% [before food and bills but we'll assume they only spend a similar amount thus it's negligible. forget about that bit to be fair.

Questions for you;

1. What is rich? [i.e. Ballpark figure]
2. How much should they pay? [i.e. Give me a tax rate for the answer to Q1]
3. Are they entitled to disposable income they have earned?
4. Why should they subsidise sections of society further than they already do?

Cheers.

ParkRunner

How it will affect people differently is well made out in the annexes to the budget:

http://budget.gov.ie/budgets/2011/Documents/Part%20C%20-%20Annexes%20to%20SBM%20FINAL.pdf

namloc1980

Nozebleed wrote: »

To be honest the numbers are irrelevant...the rich are not paying nearly enough. you have the high earners in our society with a huge chunk of disposible income to spend at the end of the week.. and then you have people like me now living on €180 a week..€100 of which goes on food and bills.

Who are the rich may I ask? At what level of income does someone become "rich"??

Nozebleed

cson wrote: »

Not to have a go at you personally but if you say €100 of your JSA [This an assumption on my part but feel free to correct me] is going on bills then you have 80% disposable income. Broadly similar to a high earners net disposable income of 63% [before food and bills but we'll assume they only spend a similar amount thus it's negligible. forget about that bit to be fair.

Questions for you;

1. What is rich? [i.e. Ballpark figure]
2. How much should they pay? [i.e. Give me a tax rate for the answer to Q1]
3. Are they entitled to disposable income they have earned?
4. Why should they subsidise sections of society further than they already do?

Cheers.

1. Rich.,house owner,car owner able to put food on the table and heat the home. €50K.
2. they should pay what is needed. the country is on its knees. 60%. taxed until they are on social welfare rates. how about that?
3. Yes of course. but the country comes first.
4. Im not saying i need more money. i can survive on €180 a week.
2.

Laminations

namloc1980 wrote: »

Who are the rich may I ask? At what level of income does someone become "rich"??

When after paying tax they have over €100,000 left over - I'd call that rich.

These discussions always try and compare effective rates of tax - i.e. how much someone is paying, while they overlook how much someone had to start off with and how much they have in the end.

By the same logic I could argue that a dead man pays no tax while a living person pays some percentage so the dead man is better off.

4% of very little, leaves you with very little.
40% of a lot, leaves you with a lot.

cson

Wow; I'd love you to put it to a 50k earner with what you've described [House/Car/Food(!)] and tell them they were rich.

namloc1980

Nozebleed wrote: »

1. Rich.,house owner,car owner able to put food on the table and heat the home. €50K.
2. they should pay what is needed. the country is on its knees. 60%. taxed until they are on social welfare rates. how about that?
3. Yes of course. but the country comes first.
4. Im not saying i need more money. i can survive on €180 a week.
2.

So someone earning €50k is rich?? and you want to tax them 60% and bring them down to social welfare rates. With economics like that why bother working????

Nozebleed

there's a difference in not being able to pay more and not wanting to pay more..and everyone seems to think they have nothing more to give..when in fact they have plenty. i have nothing on Social Welfare and yet im taking a hit. this budget is a piss take...this country is going to ****e because the people are greedy bastards..not to mention the corrupt governance. Its pure greed.

JamesBond2010

is rich when u own a top series bmw(not 3 or 5) & a massive house and a boat as well. and still have money for the holidays.

Nozebleed

namloc1980 wrote: »

So someone earning €50k is rich?? and you want to tax them 60%!!! Dear god

hang on...i get 8K a year from Social welfare and you want me to take 5% cut this year? and 14% over 4 years!!

cson

Laminations wrote: »

When after paying tax they have over €100,000 left over - I'd call that rich.

These discussions always try and compare effective rates of tax - i.e. how much someone is paying, while they overlook how much someone had to start off with and how much they have in the end.

By the same logic I could argue that a dead man pays no tax while a living person pays some percentage so the dead man is better off.

4% of very little, leaves you with very little.
40% of a lot, leaves you with a lot.

Thus the 40% payee subsidises for the 4% payee in the grand scheme of things.

The pound of flesh mentality is astounding from certain elements. You do know and understand that if you initiate an effective tax rate of the 60% proposed in this thread, the vast majority of earners liable for that threshold will leave? i.e. 60% of nothing is nothing.

leeroybrown

I did a little digging and it appears that the Minimum Wage will likely just be dropped to €7.65 by ministerial order at some stage quite soon. It doesn't need to be included in the Budget in any way.

Nozebleed

cson wrote: »

Thus the 40% payee subsidises for the 4% payee in the grand scheme of things.

The pound of flesh mentality is astounding from certain elements. You do know and understand that if you initiate an effective tax rate of the 60% proposed in this thread, the vast majority of earners liable for that threshold will leave? i.e. 60% of nothing is nothing.

certain elements?

cgc5483

Nozebleed wrote: »

hang on...i get 8K a year from Social welfare and you want me to take 5% cut this year? and 14% over 4 years!!

Why are you talking about over 4 years?

Laminations

cson wrote: »

Thus the 40% payee subsidises for the 4% payee in the grand scheme of things.

The pound of flesh mentality is astounding from certain elements. You do know and understand that if you initiate an effective tax rate of the 60% proposed in this thread, the vast majority of earners liable for that threshold will leave? i.e. 60% of nothing is nothing.

Exactly, and where is the 'all shoulders to the wheel' attitude in that then? People should pay more, and I include myself, to get the country out of this problem. People with large disposable incomes (who are less likely to spend it every week out of necessity) should pay more than those already pinned at the collar

Nozebleed

4 year plan..intention is to cut welfare benefit by 14%...no? as far as im aware..could be wrong.

namloc1980

Nozebleed wrote: »

hang on...i get 8K a year from Social welfare and you want me to take 5% cut this year? and 14% over 4 years!!

So you propose taxing the sh*t of the working population (i.e. the people who pay for the social welfare in the first place) to the point where it no longer is worthwhile in them working leading to either more people on the dole or people emigrating (i.e. less tax income). Good economic thinking there.

cgc5483

Nozebleed wrote: »

4 year plan..intention is to cut welfare benefit by 14%...no? as far as im aware..could be wrong.

What social welfare benefit are you on?

cson

Laminations wrote: »

Exactly, and where is the 'all shoulders to the wheel' attitude in that then? People should pay more, and I include myself, to get the country out of this problem. People with large disposable incomes (who are less likely to spend it every week out of necessity) should pay more than those already pinned at the collar

The shoulder to the wheel attitude doesn't work in practice; you tax people at 60% and they will leave.

Padkir

@Nozebleed, I'm interested to hear your thoughts on my question above which you never answered. Do you not agree that any chunk of disposable income a high income earner has would be better spent in the economy than taxed? I haven't been studying economics too long but even I know that an increase in Consumer spending is a lot better than an increase in tax.
Everyone is saying the country wont recover until people start investing again, so why is your solution to take the money off the people who can affors to invest?

JamesBond2010

lads lets all go to the pub and get pissed. ye are getting 2 stressed here!!

Nozebleed

namloc1980 wrote: »

So you propose taxing the sh*t of the working population (i.e. the people who pay for the social welfare in the first place) to the point where it no longer is worthwhile in them working leading to either more people on the dole or people emigrating (i.e. less tax income). Good economic thinking there.

what? we wouldn't have to emigrate if you paid proper levels of tax. Good economic thinking..im hardly responsible for the mess were in now am i?

namloc1980

Nozebleed wrote: »

what? we wouldn't have to emigrate if you paid proper levels of tax. Good economic thinking..im hardly responsible for the mess were in now am i?

Nor are the working people responsible. If the working population of Ireland were forced to handover 60% of their income in tax, as you propose, then you can be assured a large swathe of them would emigrate. How would you replace their tax? Tax the remaining people at 90% perhaps??

Nozebleed

Padkir wrote: »

@Nozebleed, I'm interested to hear your thoughts on my question above which you never answered. Do you not agree that any chunk of disposable income a high income earner has would be better spent in the economy than taxed? I haven't been studying economics too long but even I know that an increase in Consumer spending is a lot better than an increase in tax.
Everyone is saying the country wont recover until people start investing again, so why is your solution to take the money off the people who can affors to invest?

Look if you pile all that lovely tax money into the coffers the country can pay its way out of this mess in a shorter time frame..sure people aren't spending their disposable income are they? they're sticking it in the bank in hope that all this goes away..if the high earners just pay the tax and we can get on with it..but they wont..its pure greed.

veXual

Nozebleed wrote: »

what? we wouldn't have to emigrate if you paid proper levels of tax. Good economic thinking..im hardly responsible for the mess were in now am i?

I suppose the "rich" people earning 50k are? There are a lot of people who have worked hard to earn that level of income and has been mentioned before what if these are single income households with children?

Ah sure their earning 50k tax the beejaysus of of them sure that's waaay to much money to be getting.

:rolleyes:

cson

Padkir wrote: »

@Nozebleed, I'm interested to hear your thoughts on my question above which you never answered. Do you not agree that any chunk of disposable income a high income earner has would be better spent in the economy than taxed? I haven't been studying economics too long but even I know that an increase in Consumer spending is a lot better than an increase in tax.
Everyone is saying the country wont recover until people start investing again, so why is your solution to take the money off the people who can affors to invest?

Shortsightedness would perclude certain posters from acknowledging the clear merits of what you've suggested. Put simply; the mentality is that if you earn a high income then you should be taxed at levels which reduce your high income to at least average levels. Nevermind that you may have invested heavily in educating yourself and working hard to attain a high paying position. You'll more than likely be very talented at your position too in order to have attained such a high level of remuneration.

Let's drive out graduates that the Irish Taxpayer has paid to educate. Because that is what taxing high income earners will do. If talented graduates can see no tangible benefit to their skills they will go somewhere that will offer them such.

friendface

Few specific examples from Budget 2011 Show on RTE if anyone is interested

€250,000 p.a. - Married Couple, 4 Children, One-Earner

Tax = €1386
PRSI = €6816
Universal Social Charge = (€5011)
Child Benefit = (€600)

OVERALL = (€3791 p.a.) = (€75 p.w.)


€70,000 p.a. and €200,000 mortgage - Married Couple, 4 Children (2 In College), One Earner

Tax = €1386
PRSI = €0
Universal Social Charge = (€61)
College Fees = €500
Child Benefit = (€240)

OVERALL = (€2065 p.a.) = (€40 p.w.)


€Minimum Wage - Married Couple, 2 Children, One Earner

Gross Pay = (€2080)
Tax = €0
PRSI = €0
Universal Social Charge = €4
Family Income Supplement = €1032
Child Benefit = (€240)

OVERALL = (€1292 p.a.) = (€30 approx. p.w.)


€55,000 Pension - Retired Public Sector Worker, Married Couple

Pension Reduction = (€3510)
Tax = (€143)
PRSI = €0
Universal Social Charge = (€457)


OVERALL = (€2910 p.a.) = (€60 approx. p.w.)

Nozebleed

JamesBond2010 wrote: »

lads lets all go to the pub and get pissed. ye are getting 2 stressed here!!

yeah i agree a few pints and we can sing a couple of tunes and then ring joe duffy in the morning to complain about stuff.

Nozebleed

cson wrote: »

Shortsightedness would perclude certain posters from acknowledging the clear merits of what you've suggested. Put simply; the mentality is that if you earn a high income then you should be taxed at levels which reduce your high income to at least average levels. Nevermind that you may have invested heavily in educating yourself and working hard to attain a high paying position. You'll more than likely be very talented at your position too in order to have attained such a high level of remuneration.

Let's drive out graduates that the Irish Taxpayer has paid to educate. Because that is what taxing high income earners will do. If talented graduates can see no tangible benefit to their skills they will go somewhere that will offer them such.

well im only suggesting this until the country pulls through this mess.

Padkir

Nozebleed wrote: »

Look if you pile all that lovely tax money into the coffers the country can pay its way out of this mess in a shorter time frame..sure people aren't spending their disposable income are they? they're sticking it in the bank in hope that all this goes away..if the high earners just pay the tax and we can get on with it..but they wont..its pure greed.

Pure greed???:mad:
It's NOT FEASIBLE to tax someone at 60 or more!! They got where they are by working hard, apart from maybe a small minority! Everyone seems to think they just got to where they are by showing up and going through the motions! Paying for 4-5 years through college, maybe another few years on a traineeship and god knows how many years after that of gaining experience and developing themselves! They deserve a good living, and you have no right to slaughter them with unreasonable, ridiculously high tax rates!

cson

@ Friend Face

The tax element in the first example is plainly wrong from RTE.

A married couple with one income earner get an extended standard band of 72,800 and tax credits of 4,950;

72,800 = 14,560
Balance = 72,652
Credits = (4,950)

= 82,262

No way they are paying less than 2k in income tax even with every relief available. That is completely disingenuous from RTE.

Padkir

cson wrote: »

Shortsightedness would perclude certain posters from acknowledging the clear merits of what you've suggested. Put simply; the mentality is that if you earn a high income then you should be taxed at levels which reduce your high income to at least average levels. Nevermind that you may have invested heavily in educating yourself and working hard to attain a high paying position. You'll more than likely be very talented at your position too in order to have attained such a high level of remuneration.

Let's drive out graduates that the Irish Taxpayer has paid to educate. Because that is what taxing high income earners will do. If talented graduates can see no tangible benefit to their skills they will go somewhere that will offer them such.

If I could have given that 5 thumbs up I would have!!!;)

Nozebleed

Padkir wrote: »

Pure greed???:mad:
It's NOT FEASIBLE to tax someone at 60 or more!! They got where they are by working hard, apart from maybe a small minority! Everyone seems to think they just got to where they are by showing up and going through the motions! Paying for 4-5 years through college, maybe another few years on a traineeship and god knows how many years after that of gaining experience and developing themselves! They deserve a good living, and you have no right to slaughter them with unreasonable, ridiculously high tax rates!

no i agree 60 is too much..put there should be some effort on the part of the highest earners..a little more tax wont hurt that much.

Padkir

Nozebleed wrote: »

well im only suggesting this until the country pulls through this mess.

Then if I was earning that much money I'd go travelling for a while until its sorted out, its not feasible, no matter what way you put it!!

namloc1980

JamesBond2010 wrote: »

There is no jobs here so they are going to emmigrate anyway.

What about the existing working population? If you tell someone on 75k that they have to handover 60% of their income i.e. 45k, then these people will leave Ireland in droves. Not to mention that they will leave behind debts and mortgages etc, which will impact further on our banjaxed Banks, and in turn will impact on the public finances.

Penal tax rates on the working people to support bloated public spending is an economic strategy that has never worked (see Ireland in the 80's) and never will.