Tax Reform

JD_PN17 · 06-06-2017 7:27pm #1

The current income tax system in Ireland (in my opinion) currently penalises the higher paid, which is not a fair deal. It also excludes an awful lot of people from the system due to their lower earnings. Isn't it about time that everyone who earns money should pay something towards Revenue to alleviate the heavy burden the middle classes carry to fund social funds for the less well off?

It is my strong held belief that all forms of tax credits should be abolished, including the credit given to married couples (which has been extended to cohabiting couples). Each individual should be taxed on their earnings as a single tax unit, not lumped up with their partner/spouse. Tax credits make the system more complicated, when it doesn't need to be.

So along with the abolition of tax credits, so too should PAYE, USC and PRSI be chucked out. There should be four simple bands of income tax as follows;
* 10% charged on all income under €25,000
* 30% charged on income between €25,001 and €50,000
* 40% charged on income between €50,001 and €100,000
* 50% charged on all income over €100,001

This would ensure that all members of society who are in employment contribute to the system and continue the practice in which those who can pay more do. It would also ensure that no individual would pay more than .50c on each €1 earned and nobody would pay an effective rate surpassing 50%, thus making it fairer.

06-06-2017 7:28pm

I'm really sorry but I only made it to the end of your first line without laughing

wordofwarning · 06-06-2017 8:46pm

I don't think you are too familiar with the tax system. Income tax is a horrific tax relative to USC, as there are so many loopholes. USC is a new tax that is very effective, as there is very little loopholes with it. The Government does not want to remove USC, as it is such a good earner

Stheno · 06-06-2017 8:52pm

Between tax , prsi and usc people on over 100k pay 51-54% at the moment on income over 100k

And something like six percent of the working population pay well over eighty percent of all income tax.

How much do you think those on lower incomes would be willing to pay to change that?

JD_PN17 · 06-06-2017 9:15pm

@wordofwarning I'm fully aware of all the loopholes which can be claimed through the income tax system and I don't doubt that USC is effective. In essence what I'm campaigning is that essentially there should be a single payment system based on the USC model.

JD_PN17 · 06-06-2017 9:21pm

@stheno I personally don't think the less well off will be willing to pay anything at all. I outline that my belief is that people who earn under €25,000 per annum pay 10%. It's quite simple if you earn €5,000 per annum then you'll pay €500 in income tax, if you earn €25,000 per annum then you'll pay €2,500 in income tax.

It would in the long run incentivize individuals to gain promotion and go through further education or set up a business. Some people may be put off by such goals due to the high tax penalty put on high earners.

I personally am currently on social welfare, in receipt of BTEA so such a policy would in effect most likely be harmful to me financially. But I don't believe people should be unfairly taxed due to having a high income.

JD_PN17 · 06-06-2017 9:22pm

@snoopsheep I see you either don't agree that high earners carry the burden of funding the less well off or you genuinely believe high earners should fund the less well off.

Stheno · 06-06-2017 10:01pm

JD_PN17 wrote: »

@stheno I personally don't think the less well off will be willing to pay anything at all. I outline that my belief is that people who earn under €25,000 per annum pay 10%. It's quite simple if you earn €5,000 per annum then you'll pay €500 in income tax, if you earn €25,000 per annum then you'll pay €2,500 in income tax.

It would in the long run incentivize individuals to gain promotion and go through further education or set up a business. Some people may be put off by such goals due to the high tax penalty put on high earners.

So essentially you want the current system but with a token contribution from those earning less, so instead of those earning 18,000 paying nothing, they will pay 1800, and those earning 100k plus will pay 50 percent on that income.

Nothing really original there, I'd be interested to see you do a comparison of what is currently paid at those income levels, and what would be paid at your suggested levels.

johnnyskeleton · 06-06-2017 10:09pm

Deleted User wrote: »

I'm really sorry but I only made it to the end of your first line without laughing

Mod note:

Uncivil comments like this are against the charter. Please read it before posting here again.

LuckyLloyd · 06-06-2017 10:23pm

The poor should pay nothing. I'm more than happy to pay more as someone comfortably in your 40% band. I'd also exempt low earners from a regressive tax like USC.

06-06-2017 11:03pm

johnnyskeleton wrote: »

Mod note:

Uncivil comments like this are against the charter. Please read it before posting here again.

Good grief!

I take it the "what's wrong with the site" thread is still locked due to negative feedback is it?

JD_PN17 · 06-06-2017 11:09pm

Stheno wrote: »

So essentially you want the current system but with a token contribution from those earning less, so instead of those earning 18,000 paying nothing, they will pay 1800, and those earning 100k plus will pay 50 percent on that income.

Nothing really original there, I'd be interested to see you do a comparison of what is currently paid at those income levels, and what would be paid at your suggested levels.

I'll lay out an example which covers each proposed tax band:

* John earns €20,000 per annum, he falls under the 10% band so therefore he will pay a total of €2,000 in income tax. 10% effective rate vs current 8.95% on same income, resulting in a net loss of €210 per annum.

* Marie earns €40,000 per annum, she falls under the 30% band so therefore she will pay 10% on her first €25,000 (€2,500) and 30% on the remainder of her income under €50,000 which is €15,000 (€4,500) she will pay a total of €7,000 in income tax. 17.5% effective rate vs current 22.075% on same income, resulting in a net gain of €1,830 per annum.

* Eamon earns €95,000 per annum, he falls under the 40% band so therefore he will pay 10% on his first €25,000 (€2,500) 30% on the next €25,000 (€7,500) and 40% on the remainder of his income under €100,000 which is €45,000 (€18,000) he will pay a total of €28,000 in income tax. 29.47% effective rate vs current 38.45% on same income, resulting in a net gain of €8,529 per annum.

* Aoife earns €200,000 per annum, she falls under the 50% band so therefore she will pay 10% on her first €25,000 (€2,500) 30% on the next €25,000 (€7,500) 40% on the next €50,000 (€20,000) and 50% on any remaining income over €100,000 which is €100,000 (€50,000) she will pay a total of €80,000 in income tax. 40% effective rate vs current 45.57% on same income, resulting in a net gain of €11,129 per annum.

All calculations for current income tax costings were calculated using the following site http://services.deloitte.ie/tc/

Also it is quite original considering the current tax system and I am not aware of any parties currently proposing such a tax system to workers.

JD_PN17 · 06-06-2017 11:15pm

LuckyLloyd wrote: »

The poor should pay nothing. I'm more than happy to pay more as someone comfortably in your 40% band. I'd also exempt low earners from a regressive tax like USC.

I would have in place benefits to help offset the losses which the poor would incur in being brought into the tax system. I understand it would seem such benefits would seem to negate the proposal to bring them in in the first place, but by doing such it would allow revenue to tax individuals who earn over €25,000 per annum 10% on the first €25,000 off their gross income.

I am not essentially proposing making the poor poorer. I should have included the benefits proposal along with my tax proposal.

Stheno · 06-06-2017 11:25pm

JD_PN17 wrote: »

I'll lay out an example which covers each proposed tax band:

* John earns €20,000 per annum, he falls under the 10% band so therefore he will pay a total of €2,000 in income tax. 10% effective rate vs current 8.95% on same income, resulting in a net loss of €210 per annum.

* Aoife earns €200,000 per annum, she falls under the 50% band so therefore she will pay 10% on her first €25,000 (€2,500) 30% on the next €25,000 (€7,500) 40% on the next €50,000 (€20,000) and 50% on any remaining income over €100,000 which is €100,000 (€50,000) she will pay a total of €80,000 in income tax. 40% effective rate vs current 45.57% on same income, resulting in a net gain of €11,129 per annum.

All calculations for current income tax costings were calculated using the following site http://services.deloitte.ie/tc/

Also it is quite original considering the current tax system and I am not aware of any parties currently proposing such a tax system to workers.

And again can you see Paul Murphy supporting this?

JD_PN17 · 06-06-2017 11:37pm

Stheno wrote: »

And again can you see Paul Murphy supporting this?

I don't care for the likes of Paul Murphy. His policies would run the country into the ground. Once again I am not proposing on making the poor poorer, I'm simply broadening the tax base and would have benefits in place to subsidise the incomes of the poor.

Also may I say, my proposals aren't final. I'm open to ideas of amendment in where it would make sense to possibly increase or reduce tax for earners.

Peregrinus · 07-06-2017 2:50am

JD_PN17 wrote: »

I'll lay out an example which covers each proposed tax band . . .

Essentially, what you're proposing is {relatively) modest tax increases for the lower paid, plus significant tax reductions for the higher paid.

What's missing from your analysis is any attempt to measure how much total tax your system would raise, and a comparison of that amount with the current total take from income tax + PRSI + USC. Without that, it's impossible to know whether your system is realistic.

The other factor you have to take into account is that, by increasing tax for lower earners, you'll bring more people into a situation where their net income is low enough to qualify for means-tested benefits. So to compare your system with the present one you also need to model the increased benefits bill that will result.

Barney92 · 07-06-2017 3:44am

Peregrinus wrote: »

Essentially, what you're proposing is {relatively) modest tax increases for the lower paid, plus significant tax reductions for the higher paid.

What's missing from your analysis is any attempt to measure how much total tax your system would raise, and a comparison of that amount with the current total take from income tax + PRSI + USC. Without that, it's impossible to know whether your system is realistic.

The other factor you have to take into account is that, by increasing tax for lower earners, you'll bring more people into a situation where their net income is low enough to qualify for means-tested benefits. So to compare your system with the present one you also need to model the increased benefits bill that will result.

From the examples given it does seem like only those on lower incomes would have increases in their level of tax. I'm guessing the examples also take into account current tax credits. I too would like to see a comparison of estimated total tax revenue under the two systems, because it seems to me that it would fall a fair amount. I haven't had time to go through more examples. Maybe not having tax credits for couples etc. might offset the fall in tax for those on very high salaries but I doubt it.

07-06-2017 3:56pm

LuckyLloyd wrote: »

The poor should pay nothing. I'm more than happy to pay more as someone comfortably in your 40% band. I'd also exempt low earners from a regressive tax like USC.

As a low earner I'd rather it was a bit more stepped tbh. It's a bit of a kick in the nads going from about 3% to 25% and then 48% for the lucky ones.

JD_PN17 · 07-06-2017 5:09pm

Peregrinus wrote: »

Essentially, what you're proposing is {relatively) modest tax increases for the lower paid, plus significant tax reductions for the higher paid.

What's missing from your analysis is any attempt to measure how much total tax your system would raise, and a comparison of that amount with the current total take from income tax + PRSI + USC. Without that, it's impossible to know whether your system is realistic.

The other factor you have to take into account is that, by increasing tax for lower earners, you'll bring more people into a situation where their net income is low enough to qualify for means-tested benefits. So to compare your system with the present one you also need to model the increased benefits bill that will result.

Essentially yes, but I would be getting rid of all tax credits which would no longer allow people to claim tax back for medical expenses which in essence would then cost them more money on medical bills which would be covered through the higher reductions they would receive.

Individuals on lower incomes would indeed be eligible to means tested benefits, but I would propose a radical overhaul of the welfare system also.

In relation to a comparison on my model vs the current one I have done such calculations and found the following:
* FYE2017 projected total revenue is €20.8B (current model)
* FYE2017 projected total revenue is €21.5B (proposed model)

JD_PN17 · 07-06-2017 5:13pm

Barney92 wrote: »

From the examples given it does seem like only those on lower incomes would have increases in their level of tax. I'm guessing the examples also take into account current tax credits. I too would like to see a comparison of estimated total tax revenue under the two systems, because it seems to me that it would fall a fair amount. I haven't had time to go through more examples. Maybe not having tax credits for couples etc. might offset the fall in tax for those on very high salaries but I doubt it.

I've provided a comparison above. Yes of course it would bring those on lower incomes into the tax system and the abolition of tax credits would also significantly reduce the reduction in revenue with relation to higher earners. There is an actual net increase in revenue by essentially bringing in lower paid earners and also abolishing the tax credit allowance for married/cohabiting couples. The increase is somewhat modest compared to overall terms, it would be a projected c. €700 million.

JD_PN17 · 07-06-2017 5:17pm

Deleted User wrote: »

As a low earner I'd rather it was a bit more stepped tbh. It's a bit of a kick in the nads going from about 3% to 25% and then 48% for the lucky ones.

The current system or the one I would be proposing?

As a low earner I understand if you were earning under €25,000 you would most likely be negatively affected under my proposal, but with means tested benefits playing a role your income would be subsidised.

Peregrinus · 08-06-2017 1:57am

JD_PN17 wrote: »

Essentially yes, but I would be getting rid of all tax credits which would no longer allow people to claim tax back for medical expenses which in essence would then cost them more money on medical bills which would be covered through the higher reductions they would receive.

I doubt that it would. Under a tax credit/tax deduction system, the effective subsidy for medical expenses goes to those who actually incur medical expenses. Any benefits under your system are spread across all taxpayers, regardless of whether they incur any medical expenses or not.

The conclusion must be that (a) everybody will get tax benefits equivalent to the tax benefits currently received by those who incur medical expenses, which must make your system massively expensive, or (b) those who incur medical expenses will be worse off under your system.

I get that abolishing tax credits/tax deductions simplifies the system, which is good. But it inevitable tends to shift the tax burden (relative to where it currently falls) onto those who currently get credits/deductions - those with medical expenses, those buying a home on mortgage, those incurring educational expenses, older persons, one-parent families, PAYE workers, those contributing to a pension scheme, the recently-bereaved, etc.

Obviously, all that has policy implications which go beyond pure revenue considerations.

JD_PN17 wrote: »

In relation to a comparison on my model vs the current one I have done such calculations and found the following:
* FYE2017 projected total revenue is €20.8B (current model)
* FYE2017 projected total revenue is €21.5B (proposed model)

Can you show your workings? Your current model figures seem to me to omit PRSI/USC amounts, which would significantly undermine the usefulness of the comparison.

JD_PN17 · 09-06-2017 11:47pm

Peregrinus wrote: »

I doubt that it would. Under a tax credit/tax deduction system, the effective subsidy for medical expenses goes to those who actually incur medical expenses. Any benefits under your system are spread across all taxpayers, regardless of whether they incur any medical expenses or not.

The conclusion must be that (a) everybody will get tax benefits equivalent to the tax benefits currently received by those who incur medical expenses, which must make your system massively expensive, or (b) those who incur medical expenses will be worse off under your system.

I get that abolishing tax credits/tax deductions simplifies the system, which is good. But it inevitable tends to shift the tax burden (relative to where it currently falls) onto those who currently get credits/deductions - those with medical expenses, those buying a home on mortgage, those incurring educational expenses, older persons, one-parent families, PAYE workers, those contributing to a pension scheme, the recently-bereaved, etc.

Obviously, all that has policy implications which go beyond pure revenue considerations.

Can you show your workings? Your current model figures seem to me to omit PRSI/USC amounts, which would significantly undermine the usefulness of the comparison.

There would be no benefits under my system though. All tax benefits/credits would be completely cut and not reinstated in any shape or form. I don't have any figures to hand but I would imagine that there are many people who do avail of medical tax benefits in this state.

As I previously stated no tax benefits or credits, inclusive of medical benefits. If someone incurs a medical expense it would come out of their net pay packet.

This is not true. By cutting tax credits/benefits it removes the ability for those who can afford private health insurance or to pay for their own medical costs to avail of such credits. The majority of people in the workforce would still have a net gain under my proposal. Those individuals who are worse of would be able to apply for certain benefits relevant to their situation but could still also be required to pay for their medical costs.By the way the ability to buy a home on mortgage is a luxury, not a necessity. Irish people need to lose the feeling they deserve to own a home, that is a whole other topic though and would rather stay on topic which is in regards to income tax.

True and I would in greater detail at some point in the future lay out the knock on effect such proposals would and what I would do to tackle them.

All my workings are based off information I have received from the relevant authorities. What exactly would you be looking for?

noodler · 09-06-2017 11:48pm

[Deleted User] wrote: »

I'm really sorry but I only made it to the end of your first line without laughing

Why?

noodler · 09-06-2017 11:49pm

LuckyLloyd wrote: »

The poor should pay nothing. I'm more than happy to pay more as someone comfortably in your 40% band. I'd also exempt low earners from a regressive tax like USC.

Its silly to have people pay nothing.

09-06-2017 11:56pm

OP did you post this a few months ago? I remember a very similar thread a few months ago and at the time I did calcs and I'd be €600 a month better off, which is the same as doing calcs on rates in your post.

Obviously with that in mind I'd be very much in favour of this as long as it didn't reduce the total tax take as the national debt isnt going away too soon

wordofwarning · 11-06-2017 7:27pm

LuckyLloyd wrote: »

I'd also exempt low earners from a regressive tax like USC.

What is regressive about USC? A tax that requires you to pay more as you earn more is a progressive tax. USC is a progressive tax

Peregrinus · 12-06-2017 2:32am

JD_PN17 wrote: »

All my workings are based off information I have received from the relevant authorities. What exactly would you be looking for?

I'm looking to see how you calculate the 20.8 bn figure for the current model. In particular I want to see whether that's just income tax, or whether it also includes PRSI and USC. Your proposes new model will replace all three revenue streams, so its imporant to compare the revenue your new model will generate with the revenue from all three stream under the existing model.

JD_PN17 · 15-06-2017 1:13am

368100 wrote: »

OP did you post this a few months ago? I remember a very similar thread a few months ago and at the time I did calcs and I'd be €600 a month better off, which is the same as doing calcs on rates in your post.

Obviously with that in mind I'd be very much in favour of this as long as it didn't reduce the total tax take as the national debt isnt going away too soon

It actually increases total tax take. I didn't post this specific tax proposal but if memory serves me correctly, yes I did previously post something similar. The more money which flows into the economy, the more jobs which will be available, which in turn helps to bring down the national debt.

Each decision has a knock-on effect.

JD_PN17 · 15-06-2017 1:24am

Peregrinus wrote: »

I'm looking to see how you calculate the 20.8 bn figure for the current model. In particular I want to see whether that's just income tax, or whether it also includes PRSI and USC. Your proposes new model will replace all three revenue streams, so its imporant to compare the revenue your new model will generate with the revenue from all three stream under the existing model.

To come to this figure I compiled a list of all tax units within each tax band, thus getting an average income per unit. I then compiled all units together in each tax band and then finally compiled each tax band to come to a total figure, of which I arrived at €20.8B

As regards to PRSI and USC, I requested information on both from Revenue and they sent me several links with regards to finding totals for both taxes. So to answer your question to the best of my knowledge with information provided to me by revenue and the Department of Finance, all of my calculations allow for PAYE, PRSI and USC.

I understand the importance on comparing both models. I have put a lot of time and effort into my calculations. Several other proposals didn't make the cut, thus leading me to settle on the four band (no tax credits) income tax system.

Idbatterim · 15-06-2017 2:13am

Property taxes are farcical. Whack them up, lower the marginal rate and increase the entry point. Get the legions paying as good as nothing in income taxes in, to start contributing more. Basically stop levying insane anti enterprise and employment levels of income tax, i.e. The marginal rate. I'm in total agreement op!

Tax Reform

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