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 Post subject: Income Distribution & Tax Take
PostPosted: Fri Sep 02, 2011 8:55 pm 
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The revenue publishes an annual "Statistical Report" containing additional analysis of the tax revenue for the year.
The latest available is the 2009 report with data from 2008.
http://www.revenue.ie/en/about/publicat ... index.html

One of the reports is the 'Income Distribution Statistics"

This shows the number of tax units, their total income and the total income tax they paid for 2008.

I have tried to add PRSI and USC calculations to this based on the current rates. This is a long way from perfect as obviously incomes and other tax rates will have altered massively since then! but the best I can do with the data available.

Link to Google Doc link and summary of data below
https://docs.google.com/spreadsheet/ccc ... c&hl=en_US
Image

If you include Income Tax, USC and PRSI the maximum effective rate is 44.2% for those earning over €275,000. There are less than 10k tax units in this category and they pay 13.1% of all taxes on income.

The richest 1.5% (19k people) earn 13% of all income and pay 23.3% of all tax.

Almost one third of the tax units in the state survive on less than €17k.
The top 9% earn one third of the income.

The median tax unit income in 2008 was approximately €26k.


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 Post subject: Re: Income Distribution & Tax Take
PostPosted: Sat Sep 03, 2011 1:36 am 
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I am always amazed at these tables, bearing mind that they represent tax cases, whereby most dual income married couples are treated as a single case. For instance 4.2% of tax cases had an income over 100K. I thought every second person earned 100k in 2006, or at least pretended that they did.


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 Post subject: Re: Income Distribution & Tax Take
PostPosted: Sat Sep 03, 2011 10:38 am 
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I made a mistake, the data I actually posted was from 2007.

2008 Data is here
Image


Also the original data is based on Taxable Income, there is another table that shows Gross income.

This is probably a fairer measure as it becomes obvious that the richest are able to use far more allowances to reduce their taxable income. The tax rate for those earning over €275k drop their effective tax rate by over 12% and pay a lower effective rate than those earning between €150k and €275k

Image


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 Post subject: Re: Income Distribution & Tax Take
PostPosted: Sat Sep 03, 2011 1:05 pm 
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What the top tax statistics show in the second table (which is very interesting, thank you) is that as you go further up the income scale, your opportunities for gaming the tax system increase. If you are not willing or able to game the system, you are unduly penalised. Flat taxes with no exemptions would be:
a) more efficient to collect
b) more equitable in overall terms, even if they showed no great increase in income for the state

Are there other upsides? What are the downsides?

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 Post subject: Re: Income Distribution & Tax Take
PostPosted: Sat Sep 03, 2011 2:07 pm 
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yoganmahew wrote:
Are there other upsides? What are the downsides?


There is a reason the tax system is complex and full of loopholes, if it were not the taxation system would bring the country down on it's own. Friedman made the case for the flat tax, but it's not as straightforward a proposal as it seems on the surface, no more PRSI, no income level, no mortgage interest relief, no section 23, no claims on medical bills and the various allowances to special interest groups.

Quote:
The Distribution of Income -> http://en.wikipedia.org/wiki/Capitalism_and_Freedom

Friedman examines the progressive income tax, introduced in order to redistribute income to make things more fair, and finds that, in fact, the rich take advantage of numerous loopholes, nullifying the redistributive effects. It would be far more fair just to have a uniform flat tax with no deductions, which could meet the 1962 tax revenues with a rate only slightly greater than the lowest tax bracket at that time.

The book is here -> http://www.scribd.com/doc/22791641/Milt ... nd-Freedom


And the case against the flat tax -> http://www.scribd.com/doc/51096130/Murr ... troversies

Quote:
For the key to the flat taxers is that the uniform proportionate tax is to be levied on all net income. But what is net income? The answers are far from simple, and good arguments can be found on either side. The interesting and crucial fact is that, on each of these arguments, the flat taxers invariably come down against the harried taxpayer, and in favor of bringing ever more of our income and assets into the greedy maw of the taxing Leviathan State.
<snip>
The major argument of the flat taxers is that it is “fairness” that demands a swift forced march toward their ideal. “Fairness” is worth almost any cost. But it is strange that this ethical argument comes from a profession (academic economists) who have made a career of loudly proclaiming that all of their doctrines are “value-free science”that have nothing to do with ethics. So when did they become expert ethicists? Indeed, the fairness argument is generally and blithely assumed to be true, after which the reformers can gleefully denounce every resister to higher or broader taxes as embodiments of sinister “special” interests.

there is more


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 Post subject: Re: Income Distribution & Tax Take
PostPosted: Sat Sep 03, 2011 5:48 pm 
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yoganmahew wrote:
What the top tax statistics show in the second table (which is very interesting, thank you) is that as you go further up the income scale, your opportunities for gaming the tax system increase. If you are not willing or able to game the system, you are unduly penalised. Flat taxes with no exemptions would be:
a) more efficient to collect
b) more equitable in overall terms, even if they showed no great increase in income for the state

Are there other upsides? What are the downsides?



Playing with the numbers a little, a flat tax rate of 30% with the first €11k (close to social welfare level) tax free would generate the same tax revenue as the existing system of income taxes, USC and PRSI.

A flat 22.5% with no allowances would also generate the same amount.

A lot of be said for the pure simplicity of the system.


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 Post subject: Re: Income Distribution & Tax Take
PostPosted: Sat Sep 03, 2011 5:59 pm 
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Estonia has a flat rate tax on everything at 20% it seams fair and easy to administer. It's set low enough that the higher earners don't try to avoid it and the lower earners are not penalised too much (although they clearly pay a lot more than in Ireland). It's fair as every one expects every one top to bottom to pay it.

Contrast Ireland where everyone from a painter to politician is expected and indeed assumed to be avoiding as much tax as possible.

I woudlnt exclude any one from a flat rate tax. Everyone is a socialist until they pay tax. True socialism is where everyone contributes equally to the common good.

If you earn €1 you should pay tax on it at the same rate as someone earning €1,000,000 IMHO.

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 Post subject: Re: Income Distribution & Tax Take
PostPosted: Sun Sep 04, 2011 9:32 am 
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While I wouldn't necessarily be in favour of a single rate flat tax, a two-rate system where everyone pays the low rate and those above a certain level pay the higher rate would seem equitable. Like Terra Incognita, I feel that everyone should pay some tax, however low the rate.

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 Post subject: Re: Income Distribution & Tax Take
PostPosted: Sun Sep 04, 2011 3:33 pm 
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I guess that my gripe is that I pay 56% of my income in tax. I then have to pay someone the guts of 10k to get that down to the 33ish % that is listed in these tables.

What pisses me off is that without knowing anything about my personal financial circumstances (a lot of debt, modest house + boom time mortgage) someone who pays no or litte tax decides that I "can pay and should pay more"

All that I earn comes from working, when I hear statements like this it sounds like they are saying I want you to work more so I don't have to pay tax.

Baisicly if tax goes up I will by choice cut back on my work and spend more time with my wife and kids rather than pay more tax.

A flat rate tax puts everyone on an equal footing. Everyone knows what everyone is contributing it's the only fair system. It's kind of like when proposing every guy is expected to spen one months gross salary on the ring, it hurts the same and puts every guy on an equal footing.

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 Post subject: Re: Income Distribution & Tax Take
PostPosted: Sun Sep 04, 2011 9:19 pm 
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Terra Incognita wrote:
I guess that my gripe is that I pay 56% of my income in tax. I then have to pay someone the guts of 10k to get that down to the 33ish % that is listed in these tables.

What pisses me off is that without knowing anything about my personal financial circumstances (a lot of debt, modest house + boom time mortgage) someone who pays no or litte tax decides that I "can pay and should pay more"

All that I earn comes from working, when I hear statements like this it sounds like they are saying I want you to work more so I don't have to pay tax.

Baisicly if tax goes up I will by choice cut back on my work and spend more time with my wife and kids rather than pay more tax.

A flat rate tax puts everyone on an equal footing. Everyone knows what everyone is contributing it's the only fair system. It's kind of like when proposing every guy is expected to spen one months gross salary on the ring, it hurts the same and puts every guy on an equal footing.


I believe that the 56% tax rate is your marginal rate.

Your effective tax rate is as follows (1-net pay/gross pay).


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 Post subject: Re: Income Distribution & Tax Take
PostPosted: Sun Sep 04, 2011 11:18 pm 
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Terra Incognita wrote:
What pisses me off is that without knowing anything about my personal financial circumstances (a lot of debt, modest house + boom time mortgage) someone who pays no or litte tax decides that I "can pay and should pay more"

They don't decide that you pay more tax. They en-masse vote for parties which promise not to tax them more. when the bill comes at the end of the night someone has to pay it. not everyone can do a runner. They vote democratically but not fairly to pay less tax.


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 Post subject: Re: Income Distribution & Tax Take
PostPosted: Sun Sep 04, 2011 11:26 pm 
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Updated to include the likely distributional effects of VAT

The ESRI published a paper during the summer on the distributional effect of VAT and potential changes to the VAT regime on taxes paid by income decile
http://www.esr.ie/vol42_2/06%20Tol%20article_ESRI%20Vol%2042-2.pdf

Not sure what definition of disposal income the ESRI use therefore it may not be correct to simply add the % of VAT spent and the % of income taxes paid to get a total tax % for each income bracket.

However this is the graph showing the % of income that different income brackets spend on VAT.
Image

As expected the highest income brackets pay far less of their income on VAT that the lower income brackets.

I have tried to manually read off the VAT tax burden for the various income brackets and add them to income taxes to see what the total burden is for each income bracket.

This significantly flattens the tax burden graph

Image

Image


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 Post subject: Re: Income Distribution & Tax Take
PostPosted: Mon Sep 05, 2011 12:24 am 
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Dreaded Estate excellent work.

Apologies to everyone if this is a dumb question.

Why do lower income brackets pay more of their disposable income as VAT?

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 Post subject: Re: Income Distribution & Tax Take
PostPosted: Mon Sep 05, 2011 12:34 am 
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They have less income to dispose of.

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 Post subject: Re: Income Distribution & Tax Take
PostPosted: Mon Sep 05, 2011 12:54 am 
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Open Window wrote:
They have less income to dispose of.


Is it that simple?

Surely the basics are all VAT exempt ie

Health and medical services
Children's clothing
Food
Rent

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