Noonans Plans to Hike Tax for "High Earners"

techdiver

I just came across this and was wondering why it didn't get more attention:

http://www.independent.ie/business/personal-finance/michael-noonan-moves-to-hike-income-tax-for-270000-workers-34897948.html

Essentially he plans to phase out USC (good), but in turn wants to remove the PAYE Tax Credit from this earning over €70,000! This is ridiculous! Has the government now deemed €70,000 as the evil rich marker? It takes no account as everything with the current tax system whether this is a single income household or not. It will disproportionately hit the lower end of the scale in those earning €70,000 - €80,000 as it punishes them proportionally more than higher earners. This seems ill conceived and poorly thought out.

Tabnabs

A lot of employees in both State and semi-state sectors would fall into this category. They usually have a way of making these things go away... (Parking Levy in Urban Areas comes to mind).

Slydice

noonan? tax the rich?

hahaahahahahahahaahhahhaahahahaahahahahahahaahahahahahaahahahahaaaaaaaa

:D:D:D:D:D:D:D:D:D:D:D:D:D:D


*twitch*

*walks away*

But the Irish Tax Institute said this would see 270,000 workers being hit with a marginal tax rate of 70pc - one of the highest in the western world. The marginal rate is the income tax you pay on higher amounts of income.

Why does Ireland keep making it so difficult for us to come back?

I would be all for keeping USC and lowering Income Tax if there was the room for it.

Suryavarman

Good to see the Government repeating the same populist policies that got us into this mess in the first place.

suicide_circus

Removing USC is not "good". We need to pay for services and infrastructure. USC is (was) a good progressive tax method but fans of the magic money tree got their way.

Allinall

Has anyone bothered to actually read the article and do basic calculations.

The PAYE tax credit is €1,650 p.a.

This is all the extra tax earners over €70k will pay.

Talk of a marginal tax rate of close to 70% is sensationalist nonsense.

If USC is abolished, those earning over €70k will be much better off , as will those earning less.

techdiver

Allinall wrote: »

Has anyone bothered to actually read the article and do basic calculations.

The PAYE tax credit is €1,650 p.a.

This is all the extra tax earners over €70k will pay.

Talk of a marginal tax rate of close to 70% is sensationalist nonsense.

If USC is abolished, those earning over €70k will be much better off , as will those earning less.

You will still have people on €69,999 with more take home pay than those on €70,000!

Idbatterim

I'm delighted those being hammered will be better off... They deserve a break far more than anyone else!

Allinall

techdiver wrote: »

You will still have people on €69,999 with more take home pay than those on €70,000!

There will be marginal relief introduced to avoid that.

ancapailldorcha

Slydice wrote: »

noonan? tax the rich?

hahaahahahahahahaahhahhaahahahaahahahahahahaahahahahahaahahahahaaaaaaaa

:D:D:D:D:D:D:D:D:D:D:D:D:D:D


*twitch*

*walks away*

Please refrain from posting in this manner. Thanks.

Suryavarman

Allinall wrote: »

Has anyone bothered to actually read the article and do basic calculations.

The PAYE tax credit is €1,650 p.a.

This is all the extra tax earners over €70k will pay.

Talk of a marginal tax rate of close to 70% is sensationalist nonsense.

If USC is abolished, those earning over €70k will be much better off , as will those earning less.

It isn't sensationalist at all. People earning between €70,000 and €80,000 faces a marginal tax rate of 68.5%

techdiver wrote: »

You will still have people on €69,999 with more take home pay than those on €70,000!

No you won't. This isn't how this works.

techdiver

Allinall wrote: »

There will be marginal relief introduced to avoid that.

Suryavarman wrote: »

It isn't sensationalist at all. People earning between €70,000 and €80,000 faces a marginal tax rate of 68.5%



No you won't. This isn't how this works.

If you remove the tax credit once you reach €70,000 how will this not happen? There is no mention of relief, just the blunt instrument.....

Suryavarman

Suryavarman wrote: »

It isn't sensationalist at all. People earning between €70,000 and €80,000 faces a marginal tax rate of 68.5%.......

After USC is abolished?
Don't think so.

Allinall

Suryavarman wrote: »

It isn't sensationalist at all. People earning between €70,000 and €80,000 faces a marginal tax rate of 68.5%

I don't see how you figure that?

Once earnings go over €71,650 the marginal rate of tax is no different to what it is now.

blackwhite

Allinall wrote: »

Has anyone bothered to actually read the article and do basic calculations.

The PAYE tax credit is €1,650 p.a.

This is all the extra tax earners over €70k will pay.

Talk of a marginal tax rate of close to 70% is sensationalist nonsense.

If USC is abolished, those earning over €70k will be much better off , as will those earning less.

Not really true.

The impact would be as follows - assuming no other changes from 2016 rates, bands, etc. other than the flagged changes to PAYE tax credit and complete removal of the USC:

Income from €33,800 - €70,000 - Marginal Rate 49.5% less 5.5% USC =44%
Income from €70,000 - €80,000 - Marginal Rate 68.5% less 8% USC =60.5% (currently 52%)
Income from €80,000 upwards - Marginal Rate 52% less 8% USC = 44%

Which means that incomes over €80k have a lower marginal rate applied to them. There's less incentive for someone earning €69k p.a. to work hard and push for a €5k raise than there is for someone earning €100k to push for a €5k raise.

Doesn't really make a whole lot of sense.

faceman

blackwhite wrote: »

Not really true.

The impact would be as follows - assuming no other changes from 2016 rates, bands, etc. other than the flagged changes to PAYE tax credit and complete removal of the USC:

Income from €33,800 - €70,000 - Marginal Rate 49.5% less 5.5% USC =44%
Income from €70,000 - €80,000 - Marginal Rate 68.5% less 8% USC =60.5% (currently 52%)
Income from €80,000 upwards - Marginal Rate 52% less 8% USC = 44%

Which means that incomes over €80k have a lower marginal rate applied to them. There's less incentive for someone earning €69k p.a. to work hard and push for a €5k raise than there is for someone earning €100k to push for a €5k raise.

Doesn't really make a whole lot of sense.

That was my take on it too, was hoping I was wrong. We must be missing something, Noonan wouldn't pass this as is.

blackwhite

techdiver wrote: »

If you remove the tax credit once you reach €70,000 how will this not happen? There is no mention of relief, just the blunt instrument.....

The quotes from Noonan were that it would a phased reduction, with someone on €70k getting the full €1,650 credit, down to anyone getting €80k having €0 tax PAYE credit.
With the impact being an effective marginal rate of 68.5% on incomes between €70-80k.

Until the details of how the proposal would actually be implemented in practice are revealed, these are the only numbers we have to go off.

Suryavarman

techdiver wrote: »

If you remove the tax credit once you reach €70,000 how will this not happen? There is no mention of relief, just the blunt instrument.....

Read the article before you comment in future:

Irish Tax Institute president Mary Honohan said that if the PAYE tax credit is removed at a salary of €70,000, and is tapered out for income earned between €70,000 and €80,000, the marginal rate of tax on every euro of income earned in this €10,000 band will be 68.5pc.

Augeo wrote: »

After USC is abolished?
Don't think so.

USC isn't being abolished, nobody has have proposed abolishing it. Just the lower rates are being abolished.

Allinall wrote: »

I don't see how you figure that?

Once earnings go over €71,650 the marginal rate of tax is no different to what it is now.

Read the article again:

Irish Tax Institute president Mary Honohan said that if the PAYE tax credit is removed at a salary of €70,000, and is tapered out for income earned between €70,000 and €80,000, the marginal rate of tax on every euro of income earned in this €10,000 band will be 68.5pc.

Allinall

Suryavarman wrote: »

Read the article before you comment in future:





USC isn't being abolished, nobody has have proposed abolishing it. Just the lower rates are being abolished.



Read the article again:

I don't care what the article says.

Every extra € earned will be taxed @ 40%
USC @ 8%
PRSI @ 4%

This is a marginal tax rate of 52%.

Suryavarman

Allinall wrote: »

I don't care what the article says.

Every extra € earned will be taxed @ 40%
USC @ 8%
PRSI @ 4%

This is a marginal tax rate of 52%.

You're forgetting about the credit phaseout.

Allinall

Suryavarman wrote: »

You're forgetting about the credit phaseout.

That doesn't affect the marginal tax rate.

Suryavarman

Allinall wrote: »

That doesn't affect the marginal tax rate.

Yes it does. How could it not effect the marginal tax rate?

suicide_circus

You want your tax base to be as wide as possible EVERYONE should contribute SOMETHING no matter how small. It's important for society that everyone is in some way invested in the state.

sword1

suicide_circus wrote: »

You want your tax base to be as wide as possible EVERYONE should contribute SOMETHING no matter how small. It's important for society that everyone is in some way invested in the state.

You mean like a property tax,water charge or USC.This is the problem, everyone is against all these taxes, but when you get rid of them it all goes to income tax meaning fewer have to pay more .

Allinall

Suryavarman wrote: »

Yes it does. How could it not effect the marginal tax rate?

See my earlier post.

The marginal tax rate is the % tax you pay on every extra € earned.

Tax credits are irrelevant to the marginal rate.

Suryavarman

Allinall wrote: »

See my earlier post.

The marginal tax rate is the % tax you pay on every extra € earned.

Tax credits are irrelevant to the marginal rate.

You might want to read over the article again because you clearly don't understand how this policy would be implemented.

Allinall

Suryavarman wrote: »

You might want to read over the article again because you clearly don't understand how this policy would be implemented.

I have read the article.

Can you articulate how the marginal tax rate will be circa 68%?

The method of implementation of the policy has no bearing on its effect.

Suryavarman

Allinall wrote: »

I have read the article.

Can you articulate how the marginal tax rate will be circa 68%?

The method of implementation of the policy has no bearing on its effect.

Take the example of somebody earning €70,000 per year that gets a raise to €71,000. On the extra €1,000 of income they would pay the following:

40% income tax = €400
4% PRSI = €40
8% USC = €80
10% of €1,650 tax credit = €165
Total = €685

€685/€1,000 * 100 = 68.5%

blackwhite

Allinall wrote: »

I have read the article.

Can you articulate how the marginal tax rate will be circa 68%?

The method of implementation of the policy has no bearing on its effect.

Above €70k, until you hit €80k, every additional euro earned results in the PAYE credit being reduced.

Whilst legally, the State will say the rate is still the same, the impact of the credit being reduced is an increase in the effective marginal rate.

You're either being deliberately obtuse or incredibly uninformed if you don't understand that

Bass Reeves

faceman wrote: »

That was my take on it too, was hoping I was wrong. We must be missing something, Noonan wouldn't pass this as is.

We have a similar situation on earning at present between 16-20K At 16K you pay about 280 in USC however at 20K you pay neary 1900 in Tax, USC, and PRSI which is a 41% rate on that income. So a person working part time earing 14-16K would be slow to go fulltime to earn 20K.

Godge

suicide_circus wrote: »

You want your tax base to be as wide as possible EVERYONE should contribute SOMETHING no matter how small. It's important for society that everyone is in some way invested in the state.

sword1 wrote: »

You mean like a property tax,water charge or USC.This is the problem, everyone is against all these taxes, but when you get rid of them it all goes to income tax meaning fewer have to pay more .

Not just those taxes but a lot of people pay no income tax at all.

There should be a low rate - 1 -3% - on all income, as originally envisaged by the USC.

Godge

http://www.nerinstitute.net/research/how-does-irelands-income-tax-compare/


Very interesting study by NERI - the left-wing economic think-tank.

"At all but the highest income levels assessed here, effective rates of taxation were significantly below OECD and EU15 averages. At the highest income levels for single earners and couples, Irish tax rates were slightly above the OECD average, but remained lower than the average effective tax rate across the EU15. "

They agree with the analysis that lower incomes are very undertaxed while higher incomes are averagely taxed by reference to other jurisdictions.

Amazing that a left-wing economic think-tank made this conclusion. Normally they would just be a "tax the rich" mouthpiece. Saying the opposite takes courage,

Suryavarman

Godge wrote: »

http://www.nerinstitute.net/research/how-does-irelands-income-tax-compare/


Very interesting study by NERI - the left-wing economic think-tank.

"At all but the highest income levels assessed here, effective rates of taxation were significantly below OECD and EU15 averages. At the highest income levels for single earners and couples, Irish tax rates were slightly above the OECD average, but remained lower than the average effective tax rate across the EU15. "

They agree with the analysis that lower incomes are very undertaxed while higher incomes are averagely taxed by reference to other jurisdictions.

Amazing that a left-wing economic think-tank made this conclusion. Normally they would just be a "tax the rich" mouthpiece. Saying the opposite takes courage,

It's a pity Ireland's left-wing parties don't occupy the same reality as the NERI Institute.