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 Post subject: Re: Income Distribution & Tax Take
PostPosted: Sat Nov 03, 2018 8:18 am 
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ps200306 wrote:
TheJackal wrote:
I got a 1% pay rise in Oct. Of this I received only 38.2% net. Yes, I paid 61.8% tax.

But as you noted, 11% was pension contributions which are not tax. The highest marginal rate of deductions (tax, USC, PRSI) is a little over the 50% mark, unless you're a self-employed high earner and pay the 3% USC surcharge.



Jackal is clearly a public servant. Most of the pension contribution being made is the 'public service pension deduction' which confers no pension benefit whatsoever! The take is not hypothecated for public service pensions either. It's basically a special tax on public servants, so is relevant for calculation of marginal rate.

Otherwise Ireland is indeed a very poor deal for high earners. Marginal rates are very high while at the same time many of the benefits available in many European countries (health, decent unemployment benefits, pay-related state pensions, subsidised childcare) are not provided in Ireland.


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 Post subject: Re: Income Distribution & Tax Take
PostPosted: Sat Nov 03, 2018 12:12 pm 
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https://www.irishtimes.com/opinion/pat- ... -1.3684207

Pat Leahy in today's IT asks a basic question: what was the balance between tax cuts and expenditure increases? Remember the 2:1 ratio promised by the FG/FF confidence and supply agreement which is now being re-negotiated. To be exact the agreement promised
Quote:
To address unmet needs introduce budgets that will involve at least a 2:1 split between investment in public spending and tax reductions.

OK, "investment in public spending" always meant increased public spending, whether current or capital. But you would also be mistaken if you thought "tax reductions" meant less tax. It meant "tax cuts" i.e. any measures which would reduce anticipated tax revenues, although everyone knew that tax revenues were bound to rise in a buoyant economy. What a wonderful world for government when its citizens simply assume that the government are entitled to revenue increases whenever the economy improves.

So what was agreed was that government will increase spending by twice as much it "cuts taxes". But the latest budget fails even that test of "tax and spend" although you would never know it from the acres of newsprint devoted to the latest Budget and the preliminaries for an extension of "confidence and supply". Pat Leahy, one of the best informed Pol. Corrs. , has to do his own "back of the envelope" calculations (i.e. no one in the Dail has dared to ask) and he discovers that the recent Budget had
Quote:
a ratio of about 11:1 in favour of spending increases

He goes on to claim that, in this unannounced swing away from tax cuts, FG and FF
Quote:
have accommodated themselves to the winds of change.
Pity the IT's leading political commentator doesn't read his own paper's latest opinion poll
Quote:
Asked if the Government was right to favour public spending increases over tax cuts, 42 per cent say the Government was right, while 47 per cent would have preferred more tax cuts.
https://www.irishtimes.com/news/ireland ... -1.3664554
Or perhaps he just didn't read all the way to the bottom of the IT report where this gem was buried. I love how the minority opinion is quoted first and very affirmatively
Quote:
the government was right
while the more popular view is put second, and is expressed conditionally
Quote:
would have preferred more tax cuts

Just in case their readers might be confused about the "right" opinion. 8)


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 Post subject: Re: Income Distribution & Tax Take
PostPosted: Sat Nov 03, 2018 12:46 pm 
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Tax and spend figures are presented in a particularly confusing way.

There is no agreement on what a no-policy-change baseline is. Does it include demographic pressures? Do you adjust tax credits for inflation or for wage growth? Do you adjust for likely falls in unemployment spending due to rising employment? Do you adjust after the fact?

As a result, anyone can spin a budget as 'contractionary' or 'expansionary'. 2009 was a very interesting example - welfare policies which were designed to be contractionary were in effect expansionary. This was because inflation was negative when everyone had expected it to be positive.


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 Post subject: Re: Income Distribution & Tax Take
PostPosted: Sat Nov 03, 2018 1:14 pm 
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Skippy 3 wrote:
ps200306 wrote:
TheJackal wrote:
I got a 1% pay rise in Oct. Of this I received only 38.2% net. Yes, I paid 61.8% tax.

But as you noted, 11% was pension contributions which are not tax. The highest marginal rate of deductions (tax, USC, PRSI) is a little over the 50% mark, unless you're a self-employed high earner and pay the 3% USC surcharge.

Jackal is clearly a public servant. Most of the pension contribution being made is the 'public service pension deduction' which confers no pension benefit whatsoever! The take is not hypothecated for public service pensions either. It's basically a special tax on public servants, so is relevant for calculation of marginal rate.

You're right, I stand corrected.

Skippy 3 wrote:
Otherwise Ireland is indeed a very poor deal for high earners. Marginal rates are very high while at the same time many of the benefits available in many European countries (health, decent unemployment benefits, pay-related state pensions, subsidised childcare) are not provided in Ireland.

Tell me about it. That's partly why I stopped working as soon as I could afford to. The benefits of high earnings were not worth it compared to an extra twenty years of doing my own thing.

_________________
"Prediction is very difficult, especially about the future" – Niels Bohr


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 Post subject: Re: Income Distribution & Tax Take
PostPosted: Sat Nov 03, 2018 2:13 pm 
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Joined: May 21, 2017
Posts: 196
Skippy 3 wrote:
Tax and spend figures are presented in a particularly confusing way.

There is no agreement on what a no-policy-change baseline is. Does it include demographic pressures? Do you adjust tax credits for inflation or for wage growth? Do you adjust for likely falls in unemployment spending due to rising employment? Do you adjust after the fact?

As a result, anyone can spin a budget as 'contractionary' or 'expansionary'. 2009 was a very interesting example - welfare policies which were designed to be contractionary were in effect expansionary. This was because inflation was negative when everyone had expected it to be positive.


Budgetary maths can get very complicated but there's no way the latest budget met the 2:1 ration promised in the agreement with FF. Bad enough that almost no-one mentions this but now we have the IT pretending it was the Irish people's choice.


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