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Poorest People Most Highly Taxed!

 

Despite recovery, Ireland remains a hugely unequal society

Economic inequality is worsening despite the recovery and, for those experiencing inequality, particularly children, Ireland is a very harsh place.

Dr Rory Hearne,Tasc,Irish Times Wednesday, August 24, 2016,

The fact that the number of homeless children in the capital exceeds 2,000 for the first time since current records began is further evidence Ireland is a deeply unequal country. Economic inequality is worsening despite the recovery and, for those experiencing inequality, particularly children, Ireland is a very harsh place.

Economic inequality has become a defining global issue since the 2008 crash. The rise in wealth of the super-rich while the majority suffer austerity, debt and stagnant wages has led to intense political and economic attention. Here in Ireland we have experienced similar trends.

The share of gross income going to the top 1 per cent of earners increased from 34 per cent in 2011 to 39 per cent this year. And over half of the increase in total income (€21 billion) over the last five years has gone to the top 10 per cent of earners. The bottom 50 per cent of earners received just 6 per cent of that increased income. This highlights an inequality in employment and wage growth in the recovery, with a more polarised work force, an rise in low-paid jobs, low-hours employment and precarious work.

The minimum wage, for example, remains 20 per cent lower than the living wage of €11.50 per hour. Ireland’s progressive income tax and social protection spending does reduce this “gross” income inequality (the highest in the EU) and results in a net income inequality at the EU average. However, Ireland’s net income inequality has also risen in recent years, and an accurate assessment of economic inequality requires inclusion of other measures (such as wealth, poverty, public services, taxation, cost of living) which Tasc provides in our recent report Cherishing All Equally 2016.

In relation to the distribution of wealth, Ireland has also become much more unequal. Over the last three decades, the top 10 per cent have increased their proportion of net wealth from 42 per cent to 54 per cent, while the share of net wealth held by the bottom 50 per cent has halved (from 12 per cent to 5 per cent).

Austerity period

The recession and austerity period resulted in a dramatic increase in poverty and, despite the recovery, these levels remain very high. At 36 per cent, child deprivation is double the 2007 rate, while 58 per cent of lone parents suffer deprivation, up from 35 per cent in 2007. This means more than one-third of Irish children live in households experiencing two or more types of material deprivation such as being unable to afford to heat their homes, buy new clothes, have sufficient food or socialise with friends and family.

Economic inequality has a profoundly damaging impact on children’s educational development and wellbeing. At age nine months, the level of household income a child is born into has no correlation with their inherent cognitive potential.

However, by just three years of age, children in higher-income families perform better with a 1 per cent increase in household income predicted to lead to a 5.1 per cent increase in educational test scores. By nine, there is a strong negative correlation between children’s self-image and their social class background, as children from more disadvantaged backgrounds are more anxious, less happy and report poorer behaviour.

By 13, children have internalised their inequality by reducing their expectations. Only 36 per cent of children aged 13 from the bottom-income decile expect to achieve a third-level education in contrast to 65 per cent from the top-income decile. Children growing up in disadvantaged areas face multiple inequalities while inequalities in relation to health and housing are also significant.

Women in Ireland are also disproportionately affected by inequality, with a concentration of women in low-paid, part-time work and unpaid care work. Gender inequalities result in women being underrepresented in more senior positions. Another important factor is the inadequate provision of quality and affordable public services and infrastructure in housing, childcare, transport, healthcare and education. Ireland’s government expenditure as a percentage of gross domestic product is now the joint-lowest (with Lithuania) in the EU.

Ireland’s high level of economic inequality results from structural issues shaped by the type of economic policies pursued in recent decades. We have followed a variety of capitalism that is deregulated, neoliberal and free-market in orientation. In contrast, the Nordic countries have pursued a more regulated social economy model resulting in greater equality and lower poverty.

Policy shift

To reduce inequality in Ireland, particularly child poverty, requires a significant shift in policy and political decisions that prioritise equality. Proofing budgetary measures for their impact on economic inequality is essential. Would reducing inheritance tax, abolishing a progressive tax such as the universal social charge, failing to raise the minimum wage or the lack of a wealth tax pass such a proofing?

Policymakers should remember the message from the public in the general election: investment in quality public services (health, housing) should be prioritised before tax cuts. This centenary year should give the economic equality dimension of the 1916 Proclamation, which declared “equal rights and equal opportunities” to all citizens, the required political and policy attention it merits.

Dr Rory Hearne is a senior policy analyst with Tasc and lead author of Cherishing All Equally 2016. tasc.ie/publications/ cherishing-all-equally-2016/

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LABOUR DECEPTION ON TAX TO PROTECT THE RICH

Fintan O’Toole: The myth of Ireland’s progressive tax system

The top 10% pay 29% of their incomes in tax. The bottom 10% pay 28%

Irish Times Tue, Sep 29, 2015, 05:45

Fintan O’Toole

“The sleight-of-hand is more Tommy Cooper than Penn and Teller”.

 “The point of all the repetition is to suggest that those at the top need a break from all this world-beating fairness, while those at the bottom have nothing at all to complain about.

The funny thing about this truth is that it’s not true at all. It is, literally, not even a half-truth.”

If you got a euro every time you turned on the radio or opened a newspaper to be told that Ireland has one of the most progressive tax systems in the world, you’d be rich.

Except you wouldn’t be because Ireland has one of the most progressive tax systems in the world so the Government would take nearly all the money away from you and give it to the poor.

Repeat after me: “Ireland has one of the most progressive tax systems in the western world.” (Sunday Times editorial last Sunday)

“The deputy mentioned a progressive tax system but we have one of the most progressive tax systems in the world in Ireland (Enda Kenny, November 2014).

“We have the most progressive tax system in the OECD” (Michael Noonan, November 2014).

“We have one of the most progressive taxation systems in the world” (Chris Johns, The Irish Times, June 2014).

“Internationally, we have one of the most progressive tax systems in the world.” (Brian Hayes MEP, May 2015)

“[Ireland] has one of the most progressive tax systems in the world” (Alan Kelly, October 2014).

“The tax reforms of recent years mean that Ireland now has the most progressive tax system in the European Union” (Martin Phelan, president of the Irish Tax Institute, The Irish Times, November 2012).

“It should be acknowledged that Ireland has one of the most progressive tax systems in the world” (Michael Noonan, July 2014).

“Ireland now has one of the most progressive tax systems in the developed world” (Eamon Gilmore, October, 2013).

Deceptions

This is one of those memes that reproduces itself in a perfectly closed loop. It is that most dangerous of deceptions: a truth universally acknowledged. And therefore the logic that flows from it – that anyone who even talks about making the taxation system fairer by shifting the burden from the poor to the rich is an idiot – seeps into the groundwater of conventional wisdom, especially, as now, when a budget is in the offing.

The point of all the repetition is to suggest that those at the top need a break from all this world-beating fairness, while those at the bottom have nothing at all to complain about.

The funny thing about this truth is that it’s not true at all. It is, literally, not even a half-truth. In the way it’s expressed in each of the above quotes, it is a simple trick of language. If you ask the people who keep saying it what their evidence is they’ll always refer you to figures produced by the Organisation for Economic Co-Operation and Development (OECD). But the OECD figures they cite don’t actually refer to “tax systems” at all. They use a very narrow measure – income tax paid by someone earning €55,000 compared to someone earning €22,000. Be that as it may, they undeniably refer solely and specifically to income tax. A “tax system” means corporate, capital, income, property, wealth, value added and every other form of taxation. Income tax in Ireland is, in terms of the revenue raised, just 41 per cent of the tax system. A claim about that 41 per cent is being systematically converted into a “truth” about the whole system.

The sleight-of-hand is more Tommy Cooper than Penn and Teller, but it works because it tells the right people what they want to hear. Hence the substitution of “tax system” for “income tax” has become almost automatic.

Last week’s report from the Irish Tax Institute, for example, actually reads: “Ireland has one of the most progressive income tax systems in the OECD”. This becomes, as reported in the Irish Independent on September 23rd, “The institute claims Ireland’s tax system is one of the most progressive in the developed world.” See what happened there?

Why does this matter? Because it distorts a key reality of Irish life: people at the bottom pay as much of their incomes in tax as those at the top. To hide something as outrageous as this you actually need two linguistic tricks. One is the ideological autocorrect that turns “income tax” to “tax system”.

The other intertwined claim, also repeated ad nauseam, is that huge numbers of people are completely “outside the tax net”, “pay no tax” or “contribute nothing to the national coffers”.

But everyone pays tax. There’s an apparently little-known tax called VAT. There are other indirect taxes. Almost all the tax paid by the bottom 30 per cent of households is indirect. Taxes on consumption are disproportionately paid by people on low incomes who have to spend all their money.

Regressive

The bottom 10 per cent of people pay nearly 30 per cent of their incomes in indirect taxes; the top 10 per cent pay 6 per cent, according to the Nevin Institute. The whole claim to having the most progressive “tax system” depends on ignoring the highly regressive nature of indirect taxes . What do you get if you count them back in? The top 10 per cent pay 29 per cent of their incomes in tax. The bottom 10 per cent pay 28 per cent. That’s progressive in the same sense that most of the discussion about this is honest.

 

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Seamus Healy TD Slates Labour Ministers on Misleading Tax Statements to Protect the Super-Rich

Contribution to Dáil Debate

Dáil Éireann – 01/Oct/2015 Finance (Tax Appeals) Bill 2015: Second Stage (Resumed) (Continued)

Deputy Seamus Healy:   I thank the Acting Chairman and welcome the opportunity to contribute to the Second Stage debate on the Finance (Tax Appeals) Bill 2015. The Irish tax system is grossly unfair. The poorest people are the most highly taxed in Ireland. It is not surprising, therefore, to find we are discussing a Bill today which confines legal recourse in tax disputes to the High Court and excludes the right of appeal to the Circuit Court. This means that only the wealthiest can challenge decisions of the appeal commissioners. Taxpayers on low and middle-incomes and small, self-employed, sole traders are effectively excluded from taking an appeal given the huge cost associated with a High Court case and the exclusion of the possibility of an appeal to the Circuit Court.

The Government, Ministers, journalists and some academics are involved in systematic deception in relation to the taxation system. Fairness or equity in taxation is based on the answer to the following question: what proportion of their own income, wealth or assets does each stratum of the population pay in tax? Research from the Nevin Economic Research Institute shows that poorer people are paying out more of their income in tax as a result of indirect taxation such as VAT and excise duties. The institute states that the poorest 10% of people pay a larger share of their income in tax than the richest 10%. In other words, poorer people pay a larger share of their income than the super-rich in our society. The poorest 10% are paying 29.93% in indirect taxation as against the figure of 5.7% paid by the richest 10% of people. Over the past 12 months, we have had Ministers and journalists attempting to deceive the public into believing the opposite is the case. The trick is to pretend that income tax is the only tax and to omit the huge portion of VAT and other indirect taxes paid by the poorest in our society. There is a line of people available to spin this one, the idea and hope being the more they spin it, the more people will believe it.

The Minister for the Environment, Community and Local Government, Deputy Alan Kelly, tells us we have one of the most progressive tax systems in the world while the Minister of State at the Deputy of Justice and Equality, Deputy Ó Ríordáin, tells us that the top 6% are paying 44% of the entire tax take. The Taoiseach tells us we have one of the most progressive tax systems in the world while the Minister for Finance, Deputy Noonan, tells us we have the most progressive tax system in the OECD. It goes on and on. The fact of the matter is this is spin. Significantly wealthy, super-rich people are not paying their fair share of tax. The taxpayers on low and middle-incomes and the poor pay in tax a greater share of their income than the super-rich.

Income tax constitutes only approximately 41% of all taxation.

I believe the exclusion, particularly by Labour Party Ministers, of the VAT on the poor which was increased by this Government makes that party’s statements absolutely misleading and shows it is part of a Government that is governing for, and on behalf of, the wealthy.

The reason people on large incomes pay a high proportion of all income tax, but not of their incomes, is that they have a grossly unfair proportion of all income. In fact, in reply to a parliamentary question the Minister told me that the top 10,000 income earners had an average annual income of €595,000. That was in 2012, and it has increased since then. The Minister gave further figures which showed that the top 10% of income recipients, 216,500, had a gross income of approximately €30 billion, or an average of €136,700. Their effective rate of tax was 24%. To add insult to injury, in the last budget the Minister gave a total of €7 million in tax relief to the people on an average annual income of €595,000. He gave €150 million in tax relief to the top 10% of earners in the country. This was confirmed by the press officer of the Department of Finance in a letter to The Irish Times at the time.

This is all against a background where a recent report by the Central Statistics Office, the Survey on Incomes and Living Conditions, SILC,showing that there are 400,000 children living in households experiencing multiple forms of deprivation, with 135,000 children suffering daily deprivation. The number of children living in consistent poverty, meaning that they both are living at risk of poverty and experience deprivation, doubled from 6% to just under 12% between 2008 and 2013. What is this Government proposing to do? It is now proposing to give even more tax relief to very wealthy people in the forthcoming budget, while fuel and heating allowances are continuing at levels that were reduced by the Labour Party leader as we face into another winter.

Another issue is wealth tax. We have no wealth tax on wealthy people. Indeed, during a recent appearance on RTE, the Minister of State at the Department of Justice and Equality, Deputy Ó Ríordáin, made much of the introduction of the local property tax on domestic dwellings as a move towards tax fairness. This is another spin. Even those with negative wealth – mortgage debt, credit card debt and car loan debt – must pay the so-called property tax. The Central Statistics Office has shown that financial assets, which exclude homes, farms and buildings, have increased by €93 billion from 2008 to 2013 and are now at €165 billion. That is €25 billion above the boom level. Not a penny in wealth tax is due on these gains, while families in negative equity must pay the so-called property tax. Of course, the distribution of wealth is grossly unfair in this county. This has been shown again in a recent Central Bank report. The top 10% of households, or 165,820 households, own 53.8% of all net household wealth or a total of approximately €300 billion, which is almost €2 million each. The vast bulk of that wealth is free of wealth tax.

At this stage, there is no point in further appeals to the Labour Party to deal with this scandal. I appeal to the trade union movement, academics and journalists to expose the scandalous deception being visited on Irish people by the Government, and particularly by Labour Party Ministers, about taxation in the service of the super-rich. I commend Mr. Fintan O’Toole on a very good beginning in this regard in yesterday’s The Irish Times. The fact is that the poorest 10% of people in this country pay a bigger proportion of their income in tax than the wealthiest, super-rich 10%. That must stop. It must change, and that should start now

Update Sept 30,2015

OCT 10     Fr Peter McVerry Budget Briefing Breakfast

“I’m absolutely dismayed at idea that the tax cuts are going to be at the top rate of tax. That horrifies me. I really can’t express how outraged I would be at that,” he said.

OCT 8 Taoiseach Confirms Government Plan to Reduce the top Rate of Tax.

Mr Noonan has confirmed in a Dáil reply that the top 10,000 income recipients have an average declared income of 595,000 Euro per year each. A reduction of 1% in the top rate of tax would give them back 5600 Euro each per year. A couple on unemployment benefit will pay an extra 280 Euro per year in water charges and receive no benefit from a reduction in the top rate of tax!!!!

Sept 15 Social Justice Ireland has shown that the Government plan to increase lower rate tax band would disproportionally benefit the rich   http://www.socialjustice.ie/content/some-budget-income-tax-proposals-would-favour-rich-expense-lower-income-workers

Fr Sean Healy, Director Social Justice Ireland,  said:“If money is available for tax reductions then making tax credits refundable would be the fairest and best option to take. By making tax credits refundable the full value of the tax credit goes to everybody who has an earned income” (Irish Examiner Sept 15)

Report in Irish Times Sept 15

“Yesterday, the director of Social Justice Ireland Fr Seán Healy published the result of a study of six possible changes in the budget. It showed that three would produce what it called a fair outcome – increasing the personal tax credit, reducing the lowest USC rate by 1 percentage point or reducing the middle USC rate by 2 percentage points.

The study found that three of the changes would produce what it said was an unfair outcome by disproportionately benefiting the better off – reducing the top tax rate to 40 per cent, increasing the standard rate band and reducing the 7 per cent USC rate.”

Sept  13   Irish Times

“Tánaiste Joan Burton has identified reform of the USC as one of her priorities, but Mr Kenny said he and Ms Burton have already set out “the fact that as we prepare for budget 2015 and budgets subsequent to that, we would start the process of a reduction of the extent of tax of 52 per cent being paid by people”.”

This confirms that tax relief in the coming budget will give nothing to the poorest 70% of the population and most to the rich-see detailed discussion below -PH

Sept 03,2014

Joan Burton, Labour Party Leader, on RTE this morning, said” We are not yet in a position to reverse social welfare cuts”. This was in the context of  government revenue being 1 billion ahead of target at the present time. She had been asked what the poorest, who are not in the income tax net (but pay the highest proportion of their income in taxation generally) would get in the budget: would heating allowances, child benefit, disability allowances etc be increased in the budget?  The answer was “NO”. But “any leeway there is should be focused on those on low and middle incomes” she said. All the indications are that she is working to the Fine Gael agenda of income tax relief which was set out by Minister Coveney last week. BUT…….

All 3 tax proposals by Minister Coveney in Irish Examiner to-day(August28) Would GiVE Maximun BENEFIT TO THE RICH and NOTHING AT ALL TO THOSE ON LOWER INCOMES

Simon Coveney  Irish Examiner to-day

“Three choices are open to the Government, he said. These include cutting the universal social charge, changing the tax bands, and lowering tax rates”.

1 Reducing the USC: This would Give the top 10,000 INCOME EARNERS on 595,000E each(PQ REPLY NOONAN) maximum benefit

All those on incomes below 12,000 E per annum would get no benefit

2 Changing tax bands by raising the threshold at which tax payers come into the higher tax band: This would give no benefit to those on incomes under 32,500 per year which amounts to 705 of the citizens (ML TAFT UNITE NOTES ON THE FRONT) Those on highest incomes would get maximum relief at 41% of the increase in the Threshold

3   Lowering tax rates. This is the most unfair of all. High Income recipients would get full benefit. All those below 16,000 would get no benefit at all including the lowest 10% of population

Will Government Give Most Tax Relief to Rich in Budget? Will Labour Agree to this?

Poor People Pay most Tax—-NERI   Aug  28, 2014

NEW research from the Nevin Institute (funded by Trade Unions claims poorer people are forking out more in tax because of indirect taxes like VAT. It says that because of indirect taxes and/or excise, the poorest 10pc pay a larger share of their income than the richest 10pc. However, Ireland’s income tax system works on a more you earn, the more you pay basis -the rate is 23pc for the top 10pc and 0.3pc for the bottom, according to Nevin. The figures also show that, on average, 24pc of gross income is taken up by tax. But when you combine direct and indirect taxes a different result is produced, Nevin’s Dr Micheal Collins found.According to his research, the bottom 10pc of the population paid just over 30.5pc of their income in direct, indirect and total household taxation (as a percentage of gross income).In the top decile, the figure was 29.6pc

THE RESEARCH MEANS THAT THE POOREST PEOPLE PAY MOST TAX!

Read also Super-Rich Irish AWASH WITH MONEY on this Blog 

Nevertheless, Government spokespeople including Labour Ministers are flagging tax changes in the forthcoming budget which confine changes to increasing the threshold at which income recipients come into the higher tax bracket.

Those crossing the threshold of 32,500 Euro are indeed entitled to some tax relief as are all low and middle income earners. But the Government proposal is grossly unfair and regressive and reliefs should be provided in other ways and confined to those on low and middle incomes.

Let us take a concrete proposal to increase the income tax threshold  by 5,000 Euro

This is grossly unfair on a number of grounds:

1. The poorest 10% who pay the highest proportion of their income in  tax would receive no benefit as their income is approximately 10,000 Euro per year

2. THe  proposal would have no effect on indirect taxes which impact most heavily on those on low and middle incomes

3 Economist Michael Taft in his blog UNITE NOTES ON THE FRONT  has shown that 70% of citizens would receive no benefit.

4 Very high income earners, such as the top 10,000 earning units who have average annual incomes of 595,000 Euro(Reply to PQ) would get the full benefit (21% of 5000=1050Euro)

5. A person  exceeding the threshold by less than 5000 Euro would get less benefit than those on 595,000. For example a person on 595,000 per year would receive 1050 euro whereas a person on 35,000 would get haf that figure or  525 Euro

6. The proposal gives the biggest benefit to the very rich and no benefit to the very poor and is therefore grossly unfair

There are many ways to provide tax relief in a way that would only benefit those on low and middle incomes as is weel understood by government advisers.  But does the Government want to know?

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