Including assets (in addition to income) in means testing

Stabshauptmann · 18-08-2012 12:22AM #1

This has specifically been mentioned in relation to the student grant, and I wouldn't be surprised if it is being considered in relation to child benefit (they are reviewing the possibility of means testing that at the moment).

I would love to talk about the fairness of using assets rather than purely income as a basis for means testing (for any form of state benefit).

I don't think its fair because
A) It unduly targets farmers who are asset rich but income poor. There may well be many self employed people, including farmers, who manipulate their income figures, but a move like this will throw the baby out with the bathwater. Its likely all farmers would immediately fail the means test.

I don't think it is fair to doubly tax / punish those who are prudent and thrifty. Lets say two families have the same income. One Scrimps and saves for the future, the other has the philosophy of spend it while you have it.
When little Johnny comes of age for college, it is the family who flittered away their income who get state support. It encourages recklessness, it is a moral hazard.

I can see the argument that its not an entitlement, its support to those who cannot otherwise afford to go to college. But I think we need to look at at if from the perspective of whether or not we think they ought to have been able to afford to go to college.

I think the fair way of looking at it is by looking at total income in the last 3 or 5 years. Did they earn enough to be putting money aside?

I see the argument that someone could sell some of their asset as being one of petty jealousy. People survive on their income, asking someone to sell their means of income i.e. farmland for a short term expense is, well, short sighted.
Telling someone who inherited the family home to sell it and downsize is cruel. Yes, we know your parents worked all their lives to pay for that house and it is fully paid for; but we cant allow you and your grandchildren live their because someone else would like to live there and is willing to pay for it. I dont care that you've already paid inheritance tax

I see taxes on income to be fair. You take from people based on what they earn, they pay tax once and they know what they are left with once they have paid that tax.
They have the freedom to choose whether to spend it now or later on whatever they want.
I dont see it as being fair to perpetually tax assets.

Godge · 18-08-2012 01:40AM

Stabshauptmann wrote: »

This has specifically been mentioned in relation to the student grant, and I wouldn't be surprised if it is being considered in relation to child benefit (they are reviewing the possibility of means testing that at the moment).

I would love to talk about the fairness of using assets rather than purely income as a basis for means testing (for any form of state benefit).

I don't think its fair because
A) It unduly targets farmers who are asset rich but income poor. There may well be many self employed people, including farmers, who manipulate their income figures, but a move like this will throw the baby out with the bathwater. Its likely all farmers would immediately fail the means test.

I don't think it is fair to doubly tax / punish those who are prudent and thrifty. Lets say two families have the same income. One Scrimps and saves for the future, the other has the philosophy of spend it while you have it.
When little Johnny comes of age for college, it is the family who flittered away their income who get state support. It encourages recklessness, it is a moral hazard.

I can see the argument that its not an entitlement, its support to those who cannot otherwise afford to go to college. But I think we need to look at at if from the perspective of whether or not we think they ought to have been able to afford to go to college.

I think the fair way of looking at it is by looking at total income in the last 3 or 5 years. Did they earn enough to be putting money aside?

I see the argument that someone could sell some of their asset as being one of petty jealousy. People survive on their income, asking someone to sell their means of income i.e. farmland for a short term expense is, well, short sighted.
Telling someone who inherited the family home to sell it and downsize is cruel. Yes, we know your parents worked all their lives to pay for that house and it is fully paid for; but we cant allow you and your grandchildren live their because someone else would like to live there and is willing to pay for it. I dont care that you've already paid inheritance tax

I see taxes on income to be fair. You take from people based on what they earn, they pay tax once and they know what they are left with once they have paid that tax.
They have the freedom to choose whether to spend it now or later on whatever they want.
I dont see it as being fair to perpetually tax assets.

Taxes on income only are the opposite of fair. Those who have acquired assets through inheritance and not off their own sweat and tears will benefit otherwise.

All means tests should be on the basis of assets as well as income. We all have heard of the farmers who have bought new tractors and combines in the year they were assessed for college grants in order to bring their income down.

The taxation of assets hits the rich. If you are someone who is the first of your poor family to go to college, you will not be hit by a tax on assets.

Those that will be hit are farmers and more especially the self-employed who wil not be able to hide the fact they earn so much.

ardmacha · 18-08-2012 01:50AM

I think the present discussion is only posturing. The way forward is a smoothed average of several years income for ongoing businesses to stop stunts to reduce income in one year.

Uriel. · 18-08-2012 02:07AM

I personally, don't agree with targeting assets in such a way. (I don't have any assets worth mentioning unless you include a negative equity home).

An asset does not equal a general, consistent income stream.

Income streams need to be the focus of taxes as well as minimisation of benefits to those who don't need such benefits...e.g. none of this voluntary hand back your child benefit crap. The Gov need to take their balls off the carpet and just means test it.

But, like another poster outlined, it would not be fair/equitable to target a farmer for example, where assets maybe "rich" but in actual fact income is rather low/poor.

inheritance is already covered by other taxes where necessary in a non farming context, after that why should it be taxed further, including in a parent to child situation?

Dob74 · 18-08-2012 06:18AM

I am sick of supporting the children of the well off.
If you have a high net worth the taxpayer should not have to dole out the grant to your child.

If you want to go to college, the tap should not be on the taxpayer.

Farmer Pudsey · 18-08-2012 11:22AM

Dob74 wrote: »

I am sick of supporting the children of the well off.
If you have a high net worth the taxpayer should not have to dole out the grant to your child.

If you want to go to college, the tap should not be on the taxpayer.

In one way I disagree one of the most benifical thing that happened to the Irish economy was Universal Free Education ( iknow it is not completely free) to the end of 2nd level that happened in the 1960's by Donnagh O'Malley. When Rurrai Quinn introduced no fees it for 3rd level in the 1990's it allowed kids of blue collar workers access to 3rd level.

At present I think you get a full grant if you earn around 42K this is only 1.5 times the average industrial wage which discrimates against PAYE workers. At present access to 3rd level is an issue for these families and if they go on social welfare they are better off.

This Idea that anyone is supporting the kids of wealty inviduals is silly you allow the wealty to access these but increase their rate of tax. It is like CB at what rate do you means test at and how fast do you reduce the tables.

not yet · 18-08-2012 11:57AM

The way Australians or New Zealand do it, Loans from a government agency.

In Australia the figure jumps from 35% to 75% take up of college places by the lower paid. This system is so simple to implement, no bias, no inability to pay and fairness throughout the whole process. The college applicant applies for a loan to cover college fee's etc, then when their earning hit a certain point the start paying back the loan.

Now I cannot see any reason why this can't be implemented, looks like a win win for all concerned.

Farmer Pudsey · 18-08-2012 12:13PM

not yet wrote: »

The way Australians or New Zealand do it, Loans from a government agency.

In Australia the figure jumps from 35% to 75% take up of college places by the lower paid. This system is so simple to implement, no bias, no inability to pay and fairness throughout the whole process. The college applicant applies for a loan to cover college fee's etc, then when their earning hit a certain point the start paying back the loan.

Now I cannot see any reason why this can't be implemented, looks like a win win for all concerned.

there are two issue in ireland

1. High Imgration rate
2. It will be 10 years ++ before we see any return on money due to deficit it is not a runner

Idbatterim · 18-08-2012 12:29PM

I am sick of supporting the children of the well off.
If you have a high net worth the taxpayer should not have to dole out the grant to your child.

If you want to go to college, the tap should not be on the taxpayer.

what do you deem to be well off? and you do realise that it is them, that are paying far more than their fair share in tax? Im sick of supporting those that have no intention of ever supporting themselves...

BrianD3 · 18-08-2012 12:48PM

Are assets not already part of the JSA means test?

I do know that they are taken into account in the "Fair" Deal scheme for nursing home support. Not sure how farmland or business assets are treated but if you have savings, the HSE can take up to 5% per year of the capital and up to 80% per year of the net income (i.e. interest after DIRT)

Similarly if you have a NPPR that is rented out - 5% of the value of the asset, 80% of the net income.

Even the PPR is included, it is also 5% of its value per year but it is capped at 15%.

Are people who have savings "rich". Maybe they should just have not bothered saving and spent their money on lifestyle and crap instead and joined the "I have nothing" brigade.

AlekSmart · 18-08-2012 01:36PM

Farmer Pudsey wrote: »

At present I think you get a full grant if you earn around 42K this is only 1.5 times the average industrial wage which discrimates against PAYE workers. At present access to 3rd level is an issue for these families and if they go on social welfare they are better off.

Absolutely on the Nail Farmer Pudsey.

That 42K is also the gross figure with little clarity as to what reliefs can be applied by the ordinary "Contributing Class" member.

Most Farmers will usually leave all the work to their accountant,who will be guaranteed to reduce any Farming Families reckonable income to €41,999.99,with no questions asked.......it's one of the reasons for our wildly biased and unrepresentative 3rd level student body,and in a major way also contributes to the none-too-impressive ranking of Irish 3rd Level Institutions in the league tables.

Stabshauptmann · 18-08-2012 05:12PM

Godge wrote: »

Taxes on income only are the opposite of fair. Those who have acquired assets through inheritance and not off their own sweat and tears will benefit otherwise.

With inheritance, A) The deceased paid tax on their income and

I pay tax on what I inherit.

Explain to me the fairness of taxing something in perpetuity.

All means tests should be on the basis of assets as well as income. We all have heard of the farmers who have bought new tractors and combines in the year they were assessed for college grants in order to bring their income down.

We have all heard rumours and scare mongering, yes. But annecdotal evidence doesnt really have much place in a proper debate. Take an average of income over several years as I suggested, surely thats fairer than disqualifying every farmer.

The taxation of assets hits the rich. If you are someone who is the first of your poor family to go to college, you will not be hit by a tax on assets.

You are demonstrating your ignorance of farmers. The uptake of third level amongst the farming community is lower than the general population. I know many families who never sent anyone to college, and would be disqualified from a grant if their assets were to be assessed.

Those that will be hit are farmers and more especially the self-employed who wil not be able to hide the fact they earn so much.

Ah, I wish you'd just started your post with this, Godge believes all farmers should be hit.

Stabshauptmann · 18-08-2012 05:15PM

Dob74 wrote: »

I am sick of supporting the children of the well off.
If you have a high net worth the taxpayer should not have to dole out the grant to your child.

If you want to go to college, the tap should not be on the taxpayer.

I agree with your sentiment, but I think you are being misled to believe everyone with an asset is "rich".
To put it as simply as I can, take the example of a man with one cow.
His income is the money he gets from selling milk. The only fair way to judge whether or not he is "rich" is to look at the income he gets from milk.

Now, you might argue that he could sell the cow for a lot more than he gets for milk. True, but then how will he earn any income in the future?

Stabshauptmann · 18-08-2012 05:18PM

Farmer Pudsey wrote: »

In one way I disagree one of the most benifical thing that happened to the Irish economy was Universal Free Education ( iknow it is not completely free) to the end of 2nd level that happened in the 1960's by Donnagh O'Malley. When Rurrai Quinn introduced no fees it for 3rd level in the 1990's it allowed kids of blue collar workers access to 3rd level.

At present I think you get a full grant if you earn around 42K this is only 1.5 times the average industrial wage which discrimates against PAYE workers. At present access to 3rd level is an issue for these families and if they go on social welfare they are better off.

This Idea that anyone is supporting the kids of wealty inviduals is silly you allow the wealty to access these but increase their rate of tax. It is like CB at what rate do you means test at and how fast do you reduce the tables.

I dont have the statistics to hand but I did this in a debate in college, the overall participation rate in college increased as a result of free fees, and the number of "working class" people going to college increased, but proportionatly it was middle class homes who increased their participation the most.

But to disucss this any further would be to detract from the discussion of assets as a fair basis for means testing.

PeadarCo · 18-08-2012 06:43PM

AlekSmart wrote: »

Absolutely on the Nail Farmer Pudsey.

That 42K is also the gross figure with little clarity as to what reliefs can be applied by the ordinary "Contributing Class" member.

Most Farmers will usually leave all the work to their accountant,who will be guaranteed to reduce any Farming Families reckonable income to €41,999.99,with no questions asked.......it's one of the reasons for our wildly biased and unrepresentative 3rd level student body,and in a major way also contributes to the none-too-impressive ranking of Irish 3rd Level Institutions in the league tables.

Farmers and all self employed need an accountant to calculate their tax unless they are a qualified tax professional. Have you looked at farming incomes compared to average wage. According to John Comer, President of ICMSA farmers on average earn 18,000 less than the average wage.

http://www.irishtimes.com/newspaper/letters/2012/0817/1224322325430.html

While some level of manipulation(very small amounts) is possible you can't manipulate out 18,000 when the average income is only €24,461. A amount like this would be noticed by Revenue and also bring into question the person who calculated it. Given those figure it would no surprise they have higher representation they have a lower income.

On the overall topic it seems strange that there have been calls in increase the amounts of indigenous businesses but at the same time this measure would be a penalty on those who would be prepared to set up their own business particularly capital intensive industries. You need assets to operate a business. In the case of farmers they require large amounts of land (and growing) to run a viable business. That's the nature of the industry.

Icepick · 18-08-2012 06:55PM

If you are asset rich and income poor, you should sell assets if you need more money.
It's quite ironic that Irish socialists use this asset rich, income poor excuse all the time.

Ted_YNWA · 18-08-2012 07:07PM

Icepick wrote: »

If you are asset rich and income poor, you should sell assets if you need more money.
It's quite ironic that Irish socialists use this asset rich, income poor excuse all the time.

But if you need them assets to generate income, you are selling off your income streams for the foreseeable future ... . The revenue from the sale could only be 4x / 5x what it derives in income annually. Any self employed person plans to work in his/her chosen business for longer than this...

Icepick · 18-08-2012 08:14PM

Ted_YNWA wrote: »

But if you need them assets to generate income, you are selling off your income streams for the foreseeable future ... . The revenue from the sale could only be 4x / 5x what it derives in income annually. Any self employed person plans to work in his/her chosen business for longer than this...

That's their decision, but other taxpayers should not be disadvantaged because of this.

nagel · 18-08-2012 08:29PM

a farmer or seff employed in most cases have to employ the services of an accountant to complete their accounts and have to pay for this service , where as the paye section dont have this expense but they get a tax credit of 1650 just becasue they are using paye
as for buying tractors and combines these items are capital expenses and are are not included in the calculations look at the application form

bbam · 18-08-2012 08:45PM

Its interesting...
If there was a push to include the value of houses in the means test I'd doubt as many here would be calling for it to be done... Negative equity or not.. Damn near all farms are currently collateral for loans to run the business, stocking loans, land improvement, machinery, improved housing to help with animal welfare.. So most farmers couldn't sell assets to send children to college as its tied up in the business...

Farming is a business where indeed huge asset values are tied up. But its also a business where huge hours are worked and for most the returns are small, €3-4 an hour would be a typical hourly income for a farmer. There have been farmers or rather land owners who coined it with the last system of EU supports, "armchair farmers". The current changes to the system will weed many if not most of this practice out..

As for farms using accountants to guide them when to buy machinery etc in order to minimise tax exposure... Really, this standard practice in EVERY successful business, not just farming.. As for the whole "new tractor" remarks, a tractor is the central piece of equipment on a farm, used day in - day out, few tasks can be done without one, farmers need tractors, its a fact that only an idiot couldn't understand. It would be like giving out about a plumber cos he bought a new wrench !

It sickens me to hear such people on here moaning about farmers at every corner.... If farming went the way most average folk want then food prices would rocket, food quality would suffer, and we'd be even more at the control of large multinational super markets..

Farmer Pudsey · 18-08-2012 09:44PM

Icepick wrote: »

If you are asset rich and income poor, you should sell assets if you need more money.
It's quite ironic that Irish socialists use this asset rich, income poor excuse all the time.

Very few buisness could operate on the margin farming operate on it is a tough unforgiving buisness,I know a lot of hard nosed self employed people who find the going tough at there part time farming. This was Eddie Hobbs argument during the boom that all farmers should sell there land and either live on the money or invest in somthing else. Some did and lost there shirt on bank shares.

However I do believe that means tests disadvantages PAYE workers however it is not impossible to put in place a fairer system. Also it has to be remember most farmers do not have pensions funds and may well mean to use there farm to fund part of their retirement.

Should the value CS and private pensions be use in the calculation for means testing or an captital allowance allowed where inviduals have none and intend to use property to fund their retirement.

Icepick wrote: »

That's their decision, but other taxpayers should not be disadvantaged because of this.

It is not really their decision this is how they earn their living it would be like a tradesman selling his tools. Farmers more than any other sector have an issue with a wealth means test however a fairer system than what is there at present need to be put in place

nagel wrote: »

a farmer or seff employed in most cases have to employ the services of an accountant to complete their accounts and have to pay for this service , where as the paye section dont have this expense but they get a tax credit of 1650 just becasue they are using paye
as for buying tractors and combines these items are capital expenses and are are not included in the calculations look at the application form

This is a red herring being floated by the IFA about the PAYE tax credit every now and again. It is equivlent to about 8K before tax however no PAYE earner can write off the cost of there car or fuel bills that they use for getting to and from work and also they pay there tax from the start of the year. Self Employed have their own tax money for about 12 months which is worth a few bob as well.

bbam · 18-08-2012 10:09PM

Farmer Pudsey wrote: »

however no PAYE earner can write off the cost of there car or fuel bills that they use for getting to and from work

Surely your not equating buying and running a tractor for a farmer to a PAYE worker buying and running a car... That would just be an absurd comparison.

Equally farmers cannot write off their car cost nor private running costs against tax liability....

Its very important we compare apples with apples

aaabbbb · 18-08-2012 10:25PM

In relation to the student grant, I really think your necessary expenses should be taken into account also, such as mortgage, travel to college/work etc . I also don't think those who are under 23 should be stuck being assessed under their parents and deemed "financially dependant" especially if they don't even normally live with their parents.

Farmer Pudsey · 19-08-2012 10:32AM

bbam wrote: »

Surely your not equating buying and running a tractor for a farmer to a PAYE worker buying and running a car... That would just be an absurd comparison.

Equally farmers cannot write off their car cost nor private running costs against tax liability....

Its very important we compare apples with apples

bbam you want to have a chat with your accountant.

Stabshauptmann · 19-08-2012 11:40AM

Icepick wrote: »

That's their decision, but other taxpayers should not be disadvantaged because of this.

You're not actually responding to any points put to you. Would you care to explain why they should sell their assets, particularly in the context and scenarios other posters have described. Something better than a one line piece of mantra would be welcome.

Stabshauptmann · 19-08-2012 11:44AM

aaabbbb wrote: »

In relation to the student grant, I really think your necessary expenses should be taken into account also, such as mortgage, travel to college/work etc . I also don't think those who are under 23 should be stuck being assessed under their parents and deemed "financially dependant" especially if they don't even normally live with their parents.

Can you please expand - why do you think those things, the reasons are not self evident.

coolshannagh28 · 19-08-2012 12:22PM

This is a stunt raised by Labour and Quinn designed to send Fine Gael scurrying so that they can continue with their real agenda ,protecting the insiders of the PS ,intellectual and political elite whom they represent so effectively.

sock puppet · 19-08-2012 12:29PM

AlekSmart wrote: »

it's one of the reasons for our wildly biased and unrepresentative 3rd level student body,and in a major way also contributes to the none-too-impressive ranking of Irish 3rd Level Institutions in the league tables.

I wasn't aware that "occupation of undergrads' parents" is a criteria under which universities are ranked. In fact I'm pretty sure undergraduate teaching counts for only a tiny percentage of a university's score.

View · 20-08-2012 10:25AM

Farmer Pudsey wrote: »

Farmers more than any other sector have an issue with a wealth means test however a fairer system than what is there at present need to be put in place

Net wealth is usually calculated (for investment purposes) using the formula:

Net wealth = Asssets - Liabilities

Such a formula would distinguish between the farmers who are genuinely wealthy as opposed to those about to go bankrupt. Likewise, it would distinguish between urban dwellers also.

Italia · 20-08-2012 10:52AM

I'd really like to know how the grant system actually works.
I have 3 kids. 1 is in 2nd year (I paid out of my pocket last year), the other should start college this year (had his offer) and the last is starting secondary school.

I applied for a grant for this year, as the idea of bursaries or student loans seems a foreign concept here in Ireland, and was denied as we 'earn too much'. No discussion, end of story.

Both myself and OH work and our individual incomes are well within the average wage range. However, when applying for the grant, nowhere was it possible to state what expenses /mortage, etc we had.
I live in a modest 3 bed house in the commute belt and I'd say we have no luxuries (deffo no holidays in Fuerteventura etc) bar the basic Sky package.
Do the people who work these grants really think that salary earned = disposable salary?
How many people on an average working salary actually have a disposable amount of almost €5000 after all their deductions / bills etc?

I understand that 3rd level education is not a given right, but trying to find a job without some sort of 3rd level qualification is extremely difficult (also given the state of the economy).
I'd really like to know if there are any other options available.

creedp · 20-08-2012 10:56AM

PeadarCo wrote: »

Farmers and all self employed need an accountant to calculate their tax unless they are a qualified tax professional. Have you looked at farming incomes compared to average wage. According to John Comer, President of ICMSA farmers on average earn 18,000 less than the average wage

.

I would have thought the high number of part-time farmers who have another income but like to keep on the family farm or run a small herd as they grew up on a farm and have a great interest in the business significantly reduces the average farm income. Comparing the av. industrial wage (which is a full time wage) with the av. farm income is apples and oranges I would have thought.

Including assets (in addition to income) in means testing

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