Fixed rate income tax: why don't we have it?

EoghanConway

We have fixed rate taxes, CAT, VAT*, Corporation tax, DIRT etc.

Why not income tax? Why not a flat 20% or 25% on all earnings be it from salary, JA/JB, investments?

*Yes I know there are different VAT rates for certain essentials

Nody

Because people prefer the rich (i.e. anyone making more money then themselves) should pay more for things to be fair. After all if they make more money they can pay more tax as they would not miss it as much so that is fair.

I personally don't agree with it but that is a very quick summary of it. There are also certain affects at the lowest levels of less disposable income (i.e. why there are tax credits in the system) that could be argued around it.

thebman

Because a flat rate tax would be too obvious as to how much of your money goes to the state I imagine is one part of it.

If its complicated and hard to work out, people can't see it.

If I tell you 25% of your money is the states or 20% at this rate and if you earn over this amount, 40% but you get credits to discount some of it etc.. it becomes a mess and you can't tell exactly easily so are less likely to work it out or care.

ei.sdraob

To keep more bureaucrats and pen pushers in employment and to make life more difficult for businesses and citizens

irishh_bob

a flat tax , now that would be real equality , it would create a more responsible society due to the fact that everyone was proportionately contributing to the country

Jolly Red Giant

A flat tax is the same as all indirect taxes - regressive - and would lead to a massive transfer of wealth from the poor to the wealthy (even more than has already occurred).

EoghanConway

Jolly Red Giant wrote: »

A flat tax is the same as all indirect taxes - regressive

Income tax aka PAYE is a direct tax, surely.

Jolly Red Giant wrote: »

and would lead to a massive transfer of wealth from the poor to the wealthy (even more than has already occurred).

Isn't the current situation here that the tax take from the wealthy subsidises the poor (or more accurately, low-income earners and the unemployed)? Or are you talking about in other ways

thebman

Jolly Red Giant wrote: »

A flat tax is the same as all indirect taxes - regressive - and would lead to a massive transfer of wealth from the poor to the wealthy (even more than has already occurred).

eh how would this transfer wealth from the rich to the poor?

RichardAnd

The reason is as Nody put it. In the mind of a socialist, a man paying 25% tax on 200k a year and a man paying 25% tax on 25k a year are paying the same amount of tax.

djpbarry

RichardAnd wrote: »

In the mind of a socialist, a man paying 25% tax on 200k a year and a man paying 25% tax on 25k a year are paying the same amount of tax.

Surely in the mind of a socialist, the above individuals are not paying the same amount of tax?

RichardAnd

djpbarry wrote: »

Surely in the mind of a socialist, the above individuals are not paying the same amount of tax?

In my experience, looney leftys (not all left wingers) tend to take things at face value and face value alone.

Idbatterim

as discussed if we had a flat rate, the more you earned, the more you would contribute to the system, on top of this we have a system where they more you earn, the more your taxes increase, so you are contributing vastly more. On top of this those contributing the most by far, will be claiming the least by far from the state. There is no system here, whereby what you have contributed dictates what you can draw out of the system in event of unemployment or pension. The system is totally inequitable, and for those that work hardest and earn the most, not the other way around!

djpbarry

RichardAnd wrote: »

In my experience, looney leftys (not all left wingers) tend to take things at face value and face value alone.

Hmmm. In my experience, extreme socialists want higher earners paying higher rates of tax, closing the gap in take-home pay between the high and low-earners. As such, they would be opposed to a single, flat tax rate.

Idbatterim wrote: »

There is no system here, whereby what you have contributed dictates what you can draw out of the system in event of unemployment or pension.

Welfare is a separate issue, but I’d be a little wary of pegging “contributions made” to “magnitude of benefits available”.

RichardAnd

djpbarry wrote: »

Hmmm. In my experience, extreme socialists want higher earners paying higher rates of tax, closing the gap in take-home pay between the high and low-earners. As such, they would be opposed to a single, flat tax rate.
.

You really don't see the point I was making do you

djpbarry

RichardAnd wrote: »

You really don't see the point I was making do you

Apparently not - try again.

Padraig Mor

djpbarry wrote: »

Apparently not - try again.

It was fairly obvious TBH.

murphaph

djpbarry wrote: »

Apparently not - try again.

He's saying that to looney lefties, a man on 25k who pays (5k, 20% tax) would be paying the same as a man on 250k (50k , 20% tax) whereas to any sane person it is clear that the higher earner is paying 10 times as much tax. A loonie lefty wants the higher earner not just to pay 10 times the tax, but 20 or 25 times as much (so called "progressive tax codes" which are nothing of the sort as they discourage people from working harder to earn more as the more you earn, the more (proportionally) the government takes off you).

I have long argued for a flat tax whereby no credits and loopholes exist to weasel out of paying it (for rich and poor!).

Taxi Drivers

Jolly Red Giant wrote: »

A flat tax is the same as all indirect taxes - regressive - and would lead to a massive transfer of wealth from the poor to the wealthy (even more than has already occurred).

Do you know what a flat tax is?
Do you know what a regresive tax is?
Do you even know how a tax system works?
And finally, please explain how a tax can "lead to a massive transfer of wealth from the poor to the wealthy"?

irishh_bob

RichardAnd wrote: »

The reason is as Nody put it. In the mind of a socialist, a man paying 25% tax on 200k a year and a man paying 25% tax on 25k a year are paying the same amount of tax.

im not a socilist and i believe someone paying 25% on 200k is paying the same as someone on 25k per year paying 25%

Spudmonkey

irishh_bob wrote: »

im not a socilist and i believe someone paying 25% on 200k is paying the same as someone on 25k per year paying 25%

How do you make that out?

djpbarry

murphaph wrote: »

A loonie lefty wants the higher earner not just to pay 10 times the tax, but 20 or 25 times as much (so called "progressive tax codes" which are nothing of the sort as they discourage people from working harder to earn more as the more you earn, the more (proportionally) the government takes off you).

Ok, but isn’t that pretty much what I said? A progressive tax system is more equitable to socialists, whereas a flat tax system is more equitable to everyone else (using broad generalisations, of course).

Tipp Man

irishh_bob wrote: »

im not a socilist and i believe someone paying 25% on 200k is paying the same as someone on 25k per year paying 25%

The rate is obviously the same

The tax amount paid is obviously 8 times bigger, corresponding to a salary 8 times bigger

Every body pays the same rate - the only difference then is your salary level. A much fairer system and a system which promotes people to work a bit harder as the extra income isn't taxed to hell

BornToKill

My preference would be for the Drumm tax system reported in today's Irish Times:

"DAVID DRUMM earned more than €10 million during his period as chief executive of Anglo Irish Bank but paid less than €10,000 in income tax."

droidus

djpbarry wrote: »

Ok, but isn’t that pretty much what I said? A progressive tax system is more equitable to socialists, whereas a flat tax system is more equitable to everyone else (using broad generalisations, of course).

Broad generalisations that includes every major state in the world apart from Russia, some Eastern European nations and various island tax havens.

Sure, they must all be socialists.:rolleyes:

ei.sdraob

BornToKill wrote: »

My preference would be for the Drumm tax system reported in today's Irish Times:

"DAVID DRUMM earned more than €10 million during his period as chief executive of Anglo Irish Bank but paid less than €10,000 in income tax."

how the hell did he manage that :eek:

are you telling me I paid several times more tax last year than Drumm in all his time at top :eek:

jesus, they are right saying only fools pay taxes

Nody

ei.sdraob wrote: »

how the hell did he manage that :eek:

On the top of my head would be to be written outside of Ireland and/or routing earnings through legal structures that are not taxable in Ireland (i.e. minimum wage and rest paid to company written in Bahamas/Malta/Gibraltar as consulting fees or similar set up).

timbel

BornToKill wrote: »

My preference would be for the Drumm tax system reported in today's Irish Times:

"DAVID DRUMM earned more than €10 million during his period as chief executive of Anglo Irish Bank but paid less than €10,000 in income tax."

I heard this on the way to work this morning on the radio.
I'm surprised it doesn't have its own thread.

It is no wonder people are so angry in this country, when certain people can get away with this, while the PAYE worker gets hammered..

EoghanConway

timbel wrote: »

I'm surprised it doesn't have its own thread

It has:

http://www.boards.ie/vbulletin/showthread.php?threadid=2056191669

irishgrover

The most simple reason why direct taxation is not generic and flat rated is to compensate for the fact that indirect taxation has a far greater negative impact *on people with lower incomes. Indirect tax, by it's very nature is unfairly and disproportionately unfair to lower incomes. For example if I earn 100000 and my neighbour earns 50000 and we had flat rate income tax of 30% I pay 30,000 tax per year and he pays 15,000 per year - on the face of it a fair and equitable solution. However for simplicity sake let's assume we both spend 30000 per year on living expenses, food, entertainment etc and for simpliciy sake assume that all that cost is indirectly taxed @ 20% - so the tax on that aspect of our lifestyle is 6000 each. So in total I'm paying 36k tax per year (36%) and my neighbour is paying 21k or 42% of his salary in tax. In effect the extra tax he is paying is subsidising me - which on the face of it is a tad unfair.
Plus in reality the indirect tax rate on essential and/or popular items that both of us would be buying (petrol, home heating, alcohol etc) is more like > 80% of retail price, so the reality is the the lower earner is much more heavily hit than in my example.

In theory, you could have flat rate income tax rates, but in reality you would first, at a minimum need to abolish every single indirect tax in existance, so the income tax rate would be ~>60 or 70%, although the price of goods, cost of living would good way down. But the result is that no one would work in ireland, as many as possible would work abroad, and send money home. Loads of foreigners would by things (land, houses, goods etc) in ireland cost prices would be so low, but workers would not be available to service the economy, tax intake would decline, so rates would increase, causing further escape from the economy, and eventually the economy would just completely collapse totally*

djpbarry

irishgrover wrote: »

For example if I earn 100000 and my neighbour earns 50000 and we had flat rate income tax of 30% I pay 30,000 tax per year and he pays 15,000 per year - on the face of it a fair and equitable solution. However for simplicity sake let's assume we both spend 30000 per year on living expenses, food, entertainment etc and for simpliciy sake assume that all that cost is indirectly taxed @ 20% - so the tax on that aspect of our lifestyle is 6000 each.

Why is your neighbour living the same lifestyle as you when he earns only half what you earn? People who earn more money will generally spend more money – larger houses, bigger cars, more expensive bars & restaurants – and, as such, will pay more in consumption-related taxes.

irishgrover wrote: »

In theory, you could have flat rate income tax rates, but in reality you would first, at a minimum need to abolish every single indirect tax in existance, so the income tax rate would be ~>60 or 70%, although the price of goods, cost of living would good way down. But the result is that no one would work in Ireland...

I’m not sure I would agree. If the decrease in take-home pay is matched by the decrease in the cost of living, then peoples’ standard of living will remain unchanged.

Spudmonkey

irishgrover wrote: »

The most simple reason why direct taxation is not generic and flat rated is to compensate for the fact that indirect taxation has a far greater negative impact *on people with lower incomes. Indirect tax, by it's very nature is unfairly and disproportionately unfair to lower incomes. For example if I earn 100000 and my neighbour earns 50000 and we had flat rate income tax of 30% I pay 30,000 tax per year and he pays 15,000 per year - on the face of it a fair and equitable solution. However for simplicity sake let's assume we both spend 30000 per year on living expenses, food, entertainment etc and for simpliciy sake assume that all that cost is indirectly taxed @ 20% - so the tax on that aspect of our lifestyle is 6000 each. So in total I'm paying 36k tax per year (36%) and my neighbour is paying 21k or 42% of his salary in tax. In effect the extra tax he is paying is subsidising me - which on the face of it is a tad unfair.
Plus in reality the indirect tax rate on essential and/or popular items that both of us would be buying (petrol, home heating, alcohol etc) is more like > 80% of retail price, so the reality is the the lower earner is much more heavily hit than in my example.

Sorry Irish Grover, but I don't accept your example. Why? Purely for the fact that you assume 30k is the necessary amount for a man to live on regardless of what they earn.

The reason is this. Who knows what is an adequate amount to live on. There are many things which some may refer to as necessities but which others may not. Therefore one man may live just as happily on 30k as someone on 15k.

The fairness behind a flat tax means that everyone has proportionally paid the same amount before they are paid their final wage into the their pocket and what they do with their money after that is their own business, not the governments