SSIAs: robbing the poor to pay the rich

Time Magazine

bonkey wrote:

And the State also were the ones to pay into the SSIAs.

In both cases, the taxpayer is arguably the original source of the money. Where, specifically, in our tax system the money has come from isn't clear, which leaves us free to argue about whether or not VAT rates should be relevant and so forth.

As sceptre pointed out quite well, stepbar was quite happy to refer to tax only as PAYE and therefore my assumption was that "taxpayers" to her only count as people who pay "her tax", i.e. PAYE. They are not the only people paying for my education, that was my point.

So you should know about the benefits of encouraging saving to cut inflation.

I completely agree that inflation had gotten out of hand. (Incidentally, an economics student could have benefitted Minister McCreevey when he caused said inflation by cutting tax rates in times of 8% growth while growing the State's budget at the rate of 20% a year.) However, I would not suggest we curtail inflation by, say, forcibly increasing unemployment. My argument is that there were better ways of curtailing inflation - adding 25% to demand doesn't curtail inflation so much - and furthermore there are more equitable ways of doing it, too. To provide an example, the value of which is debatable but the inflationary effects are indisputable, we could have re-paid the external half of the national debt. Or we could have increased aid to the levels that we promised to. Or we could have got a foreign firm to build a new electricity inter-connector to the British grid. Or a thousand other things, take your pick.

You should also know that the only person the taxpayer pays their tax to is the State, who then decides what to do with the money.

And yet, despite being an economics student, you overlook these and other such issues in order to make your complaint.

See above; distinguishing exactly who the taxpayer is.

Which would come in at about 100 yoyos a month, which would be greater than the maximum amount obtainable from the govt as their contribution to an SSIA (25% "bonus" of the €254 yoyo max is €66 per month, or approximately 17.50 per week.

The keyword here is bonus. I work part-time jobs to feed myself and buy books but that income (which I will no doubt garner abuse for being a welfare sponger) excluded, the grant is the only source of living funds. There is no bonus from saving in addition to income earned, there is just that €6.50 disposable income after a bus ticket (which living 13.5 miles from the city centre requires).

Do you suggest I only moan if my grant drops to less than the SSIA return?

So when you get a small bit of cash, its nothing great.
When others get less, its practically a crime.

I never said it was practically a crime, I said it was inequitable. My personal situation aside, can you argue that it's somehow equitable?

The poor students like yourself who claim to argue that they'd be perfectly happy having their fees not paid, but at the same time cry a river that they don't get enough money off the government, whilst complaining that those who get less even though for an arguably valid reason are being given too much?

I simply could not afford to pay fees at the moment, but I'd be willing to get a loan (State or otherwise) and pay for it, with interest, afterwards. There is no contradiction here, only a time delay. As I mentioned in my post and you failed to pick up on, it's not self-interest that makes me bemoan regressive schemes. I am no less well-off because Boom money was put into SSIA instead of foreign aid, but I'd rather it had gone to the latter. I also work my ass off to be bordering on self-sufficient, it's my peers who are less fortunate in employment matters that I primarily cry the river for. And although it was "arguably a valid reason", it does not mean it was equitable or desirable. You have the opportunity of working today for €100 or €150 - although the former is fine you choose the latter. It's not Boolean, it's ordinal. The SSIAs were an ineffective way of curtailing inflation - they added 25% and put it in a latent state with altered MPCs of consumers (incidentally with another election looming) - while not targeting what are widely accepted to be significant failings with regard to social justice.

Or did you mean your parents? You later go on to point out tehy could afford an SSIA, so again, they're part of the group we shouldn't listen to.

My mother has since retired. Yet again you're overlooking time differentials. Another hypothetical situation, though perfectly reasonable to accetp, is the case of someone whose parent has recently become unemployed. I do assert that, ceteris paribus, we should listen to the poor about poverty before those in ivory towers in D4.

However, for clarification, my sarcastic inference that we shouldn't listen to the rich was in contrast to stepbar's inference that scrounging students have no right to bemoan the tax system.

Or did you just mean we should listen to those who don't want SSIAs over those who didn't seem them as the end of the world?

Yes, exactly.

"small, impending problem" + 25% == much larger problem.

Interesting math.

Interesting economics:

Take the MPC (marginal propensity to consume) of consumers when the SSIAs came into force as MPC1. This is directly proportional to its inflationary effect, as the MPC rises, so does the effect on inflation.

Now denote the investment of SSIAs as (I/Y). If there was an equivalent tax cut, do you think there would be websites set up called spendyourtaxcut.ie? Of course not. However, the expectation of the returns, coupled with the several years to consider "what yer gettin' with yer SSIA" lead to what could be defined as a windfall effect. Put in perspective, it's a bit like the fact that people always spend more of their first pay cheque than their second or third. In lingo, the MPC has risen. We now have MPC2, which has risen and thus is more powerful on inflation. Furthermore, (I/Y) has now become ((1.25)I/Y). So you're dealing with a 25% increase in one variable multiplied by a "windfall" increase in another.

Now that's interesting maths.

And the marginalised benefit the least from this sums. If you drew a graph of people on incomes of, say, €0-70,000 against their windfall from SSIA's, you'd get a pretty slippy slide.

Victor

So, something like a quarter of the people earning more than €1m per year pay less than 5% income tax. Others, earning more, pay no income tax. Why should these people then get a state subsidy?

Macker

All you SSIA folks should have had a word with your accountant ,I got a 48% bonus by putting the money in a pension ,E 254 in pension = 254 ....254 taxed = 120 odd take home ,you put your 120 in an SSIA and it grows to 150

MrPudding

Macker wrote:

All you SSIA folks should have had a word with your accountant ,I got a 48% bonus by putting the money in a pension ,E 254 in pension = 254 ....254 taxed = 120 odd take home ,you put your 120 in an SSIA and it grows to 150

Sweet, 48% is not to be sniffed at. And do you get that money in April?

MrP

Macker

MrPudding wrote:

Sweet, 48% is not to be sniffed at. And do you get that money in April?

MrP

No I'll get it when I need it ,and it's growing at an average of 11% for the last ten years

MrPudding

Macker wrote:

No I'll get it when I need it ,and it's growing at an average of 11% for the last ten years

So it's not really an alternative to an SSIA then is it? Pensions are great and the relief is fantastic, but not much use for a short term investment.

By the way, why is the OP not complaining about the amout of relief given to rich people for pensions? I would have though it is far more than SSIAs.

MrP

RainyDay

pete wrote:

Very true, but as an aside I'm sure i'm not the only person who knows of someone who opened SSIA accounts under the names of every member of their family (self, wife, child & parents) & contributed the maximum amount each month?

He probably cut them in with a little thank you present when he cashed out, but it was his money going in each month and it was he who benefited four or five times over. A tidy little sum I'm sure.

Easy solution - A quick phone call or email to the nice people at Revenue...