Should higher earners pay a higher rate of tax?

[XRoot]

Here is an excellent article by the erudite David McWilliams on Sinn Fein-nomics.

ETA - I think it is reasonably safe to ignore those parts which are speculative regarding the IRA's armed campaign situation. It was written in February.

[Pidge]

Here is an excellent article by the erudite David McWilliams on Sinn Fein-nomics.

That's a great one alright. For those in a hurry, the second half is more relevant to this discussion.

[michael1965]

Something like 60% of all income tax (anyone know the exact figure?) is paid by the top 10% of earners.

Why should this group be squeezed even more? The idea that the better-off don't pay their fair share is a myth.

There is a problem with some self-employed not paying the right tax. Solve that problem first IMO.

[rockofcashel]

It was reported in yesterday's Irish Times that Sinn Féin would introduce a new tier of tax, resulting in those earning €100,000 or more to pay 50% tax.

[quote:3ejlbpj6]
Not an original idea. It does, however, represent a step backwards, when we should be maturing and progressing at this stage. The impact fiscal policy has on general business activity and on incentives in general should not be underestimated. I think we should not be imposing higher barriers on those who are more successful. In fact, we should be encouraging success not taxing it. If the government wants to stop something (e.g. plastic bags), then taxation is a good idea. No sensible government would impose penalties on ambitious people. We should be looking at a flatter tax system, not a more "progressive" one, if that word is to be used to describe it.

[/quote:3ejlbpj6]

So what your suggesting MJ, is a move to "Reaganomics" and the Laffer Curve.

Do you believe that the American social system is better than the European ?

I happen to not think so, and given that it seems to only be championed by people of a Progressive Democrat background, I think 96% of the Irish voting population agree with me.

[rockofcashel]

Great - another SF economic policy which shows exactly where they are coming form - the victim mentality, the kind of people who follow the word 'rich' with 'w*a*n*k*e*r'.

Please explain where I mentioned "victimhood" in my piece ?

I have no problem with rich people either, God knows I'd love to be one.

I do believe a complete overhaul of personal taxation is in order all right and its very unequal at the moment, but this type of stupid mentality that punishes success is as bad as some of the IBEC loving policies that the PDs bandy about.

So we have something in common, we both want an overhaul of the tax system.

[Libero]

Well, Sinn Féin and most of those on the left often make the mistake of assuming something close to a linear progression when it comes to talk of increasing tax rates. In other words, they assume that a x% rise in a tax rate will result in a x% rise in the tax take.

This ignores the lessons of the Laffer curve, as high marginal rates discourage non-blackmarket economic activity. As tax rate approach 100%, the yield approaches zero (but only after the optimum point!)

On the other hand, those on the right or liberal end tend to place too much trust in the idea that cutting rates yields higher economic activity to offset the linear drop in tax take. Look at Reagan's deficits - now repeated (and then some) by Bush.

Also, something I find unsettling about the right/liberal approach is the blasé assumption that higher rates will lead to massive tax evasion. It is often stated as if it is an economic rule, rather than a result of a lax approach to enforcement and a tax code that was largely written by and for tax accountants and consultants.
Tax evasion is a crime, and not by itself a reflex action to higher tax rates. It's worth remembering that many of those who evade tax try to do so entirely, not so as to bring their liability down to a "fairer" lower rate.

[brenners']

Well I think the first thing I would do is make sure that those earning high wages make some contribution, currently many are able to avoid tax altogether and that is a major issue that must be sorted out.

I am a firm believer in the wealth of the nation being used for the betterment of all of the people and not just some.

It is disgraceful that people can avoid tax and grow wealthier while people lie on hospital beds, while our old age pensioners struggle to pay for fuel and the state allowance remains unchanged despite a 40% hike in the costs in the last few weeks. We are republicans, and believe in equality of opportunity with the state playing a central role in making that happen.

We know that a strong economy is essential and that any measures introduced needs to be fully cognisant of these concerns. But I do not see this proposal as potentially damaging. It is simply about creating fairness and equity in society.

I personally can see the massive change over the last few years in the economy, the movement from a skills based economy to a knowledge based one. If investment in education, transport and improvement in welfare and breaking the chains poverty is not a priority for government then this move towards technology based jobs cannot be sustained. At the moment I would see the position of the establishment parties as one concerned with the here and now rather than the position of Sinn Féin which has far greater emphasis on long-term prosperity and opportunity for all the citizens on this Island through real investment in public services and education. Such investment will have long-term benefits for the economy and its future sustainability.

If you take Tallaght as an example, a recent report stated that an investment of just €15 million could play a major part in breaking the cycle of exclusion in that area. And the sad reality is places like this are currently having to fight tooth and nail to get investment, but when you look at the costs if such programmes are not put in place you see the logic of the Sinn Fein position very clearly. Many of these kids will have been educated by the state for 12 years prior to leaving school with no examinations and no formal training, so despite a huge investment they will not have the potential to contribute to society. On top of this they may end up on social welfare, going through the criminal justice system and through drug related services. The cost of targeted intervention at a lower age is much less than the associated costs of social exclusion at a later stage. But the problem is this; there is not enough funding available at present to be forward thinking. The Government is happy to deal with the consequences of exclusion rather than raising the funds to stop it from happening. A truly progressive tax system which sets out to raise enough funds to give all on the island the chance to contribute to its prosperity will ultimately be most successful.

[morryah]

Totally against it. If anything, it should be lower tax.

"Redistribution of wealth"? What sort of crazy euphemistic nonsense is that? If someone wants more money, go work for it and don't rely on handouts from those who do.

Why should someone earning more pay more for government services? It's an unfair two-tiered system. Someone making more money doesn't cost the state more. Why should they pay more of say, a garda's wages than someone else? They already pay their share.

There's a standard rate of tax 42%. The whole idea of the lower tax for lower income is to provide an incentive. Then the standard applies. .

[mjcoughlan]

So what your suggesting MJ, is a move to "Reaganomics" and the Laffer Curve.

Do you believe that the American social system is better than the European ?

Call it what you like, but I'm approaching this subject from a viewpoint that taxation is a necessary evil and is one, the burden of which should be minimised. What I would suggest, insofar as it is reasonably possible - and I don't have figures - is a reduction in the top rate of income tax and a reduction in the lower rate of income tax if that is possible and I suspect it is. We should look at going about a flatter, simpler tax system which would reward Irish workers by letting them keep more of what they earn. Tax cuts work the same as pay rises.

But I think there is little use in looking at tax on it's own. Public spending also has to be looked at. More stringent controls should be placed on public spending and perhaps it might be an idea to place a cap on real government spending per capita.

I happen to not think so, and given that it seems to only be championed by people of a Progressive Democrat background, I think 96% of the Irish voting population agree with me.

Whether they agree with you or not is irrelevant. Since when do you judge what is right by what is popular anyway?

[rockofcashel]

A few questions here ?

First a clarification. The rate would apply at €127,000, not €100,000 as reported

rock, we mortals have to work off what the meeja reports. We don't get the interal SF memos.

Fine, but I beleive this has been corrected many times in the past.

1. How many people here earn more than €127,000 ?

[quote:2zhgj57k]
What has that got to do with the argument? Oh right, if they were earning over 127,000 that invalidates their right to participant in the discussion.

Not a whole lot, I just find it difficult to get my head around people who do not concentrate on the fact that proposal will benefit about 95% of the working population, but will impact on about 5% of the highest earners, and then argue the case for those who are most able to defend themselves.

2. Why do so many who earn less than €127,000 worry about the small number who do ?

I'll take the cheap shot first of asking why do you hate minorties so much? and then say perhaps it's because some of us might like to be able to earn that some day and also 100K or 127K between a couple earning in their 30s isn't an unbelievable sum of money. And since there are so few people on this on how much does SF calculate this would bring in? Or does SF propose this purely for fairness and points 4 and 5?

1. The figures relate to personal taxation, and therefore in the case of a couple, would be based on the couple earning €254,000+, not €127,000.

2. Shouldn't you wait until your a little closer to earning that amount before it exercises you as much as it does.

3. How many think that a 50% rate for earners over €127,000, means that that rate will apply on all income? This is incorrect, it applys on marginal income. If you don't understand what that means... ask about it

I know that the 50% will only be on those earnings above 100K or 127K level, however it is also the case that for married people in our tax code the situation is more complex. And how much does SF expect this to bring in?

1. I understand the complexity of the effect on married couples, and this is a direct result of individualisation. I personally would re-look at the policy of individualisation, as much from a social point of view, as an economic one, but that is a seperate argument.

2. No, we don't have the exact figures for how much extra this proposal will bring in. As you know KK, the Revenue do not provide the full broken-down figures for income tax to Opposition parties in advance of the Budget. This is also the reason why an Opposition party cannot produce an "alternative" Budget, similar to what the LD's do in the UK. Maybe its a possible policy position for "D'ailternative" in the future ?

4. Do people who disagree with this proposal understand the economic logic behind the proposal, including but not confined to the concept of marginal utility of income, and general redistribution of wealth

Redistribution of wealth sounds good in the sense of the wealth of the robber barons of the middle ages, not so much for those earning now.

Do you disagree with re-distribution of wealth ?

Does this mean you would stop unemployment benefits, pensions, widows pensions, FIS etc etc etc

5. Do people understand the concept of the circular flow of income, and what increased consumption and increased savings do to the overall level of National Income ?

Are you going to organise a lecture? Savings aren't always the greatest thing in the world ask the Japanese.

I'd love to organise a lecture on it KK. It might help some peoples understanding.

You see you missed my point completely. I know full well savings aren't the best thing in the world. Thats why a policy such as this would lower savings, by re-distributing wealth to those most likely to actually spend the money (consumption income rather than savings), and hence (so long as the money is spent on home goods) increase National income. (Again assuming the goods are available to be bought, and that the increased consumption expenditure doesn't create inflation, as alluded to by Pidge futher on)

6. Do people see no anomoly in the fact that those earning 4 times the average industrial income, pay income tax at the same rate as those on the average industrial wage?

That's an argument for raising the bands so that those on the average industry are paying most of their tax at the lower rate. Not necessarily for creating a new rate.

As you see, the SF proposal carries through the argument for increasing bands. We simply also argue for a higher band on (very) high income earners. Its all a matter of policy really. Very few here can make a real argument against the principle of re-distributive taxation (except MJ and the Laffer curve)

Now this thread has the potential to be an interesting economic debate, but please, don't look at the simplistic report in isolation, and make an uneducated answer to the poll.

[/quote:2zhgj57k]

And some actually seem interested in taking up the challenge