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Dublin: 10 °C Monday 20 May, 2013

Here’s how much money the government would raise if income tax went up

Fine Gael and Labour have repeatedly said that income tax won’t be increased in the Budget – but they’ve still crunched the numbers on just how much it could raise.

Mo' money, mo' problems
Mo' money, mo' problems
Image: JAN KOLLER/Czech News Agency/Press Association Images

IT’S (PROBABLY) NOT going to happen.

Fine Gael and Labour have repeatedly said that they will not increase income tax while they are in government. They’ve said it again and again and again. Just to make sure the message gets across, the programme for government explicitly states that the government will maintain the current rates of income tax, as well as bands and credits, for as long as it is in power.

That doesn’t mean that they haven’t crunched the numbers though.

Michael Noonan this week told the Dáil how much money could be raised with a 2 per cent increase on the top and standard rate of income tax. After checking with the Revenue Commissioners, these are the figures they came up with:

  • A 2 per cent increase on the top rate of tax (41 per cent) would bring in an estimated €923 million in 2013.
  • Meanwhile a 2 per cent increase on the standard rate (20 per cent) would bring in an estimated €385 million.

Noonan told the Dáil that the figures are estimated from the Revenue tax-forecasting model “using actual data for the year 2010 adjusted as necessary for income and employment trends in the interim,” adding: “They are, therefore, provisional and likely to be revised”.

A number of groups have called on the government to focus on increasing taxes to bring in money, rather than just focusing on cutting spending.

So that’s that – but what about a higher rate of income tax of 48 per cent on all pay over €100,000?

In response to a question from one Labour TD, Michael Noonan said that the estimated yield would be around €365 million in one year.

“However,” he noted, “given the current band structures, major issues would need to be resolved as to how in practice such a new rate could be integrated into the current system and how this would affect the relative position of different types of income earners”.

Michael Conaghan TD, who asked Noonan the question about a higher rate, said that bringing in a higher rate would be a fairer way to ensure people who can afford to pay, do.

He told TheJournal.ie:

This is 10 per cent of the entire necessary budget adjustment and would help ease the pressure in other areas such as Education, Health and Social Protection.

Read: Taxes on texts and junk food proposed by Social Justice Ireland >

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Comments (67 Comments)

  • May some they could do is reduce politicians pay at all levels from Town Council to TD. And ban unvouched expenses all together.

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  • Sure why not? I’m bored paying for gas electricity and food. I’ll just cut them out, no biggy.

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    • I’d really appreciate if they didn’t. I actually have this rare condition which means that if i dont eat – i could die!

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    • Thank God the bondholders are getting paid, AND their taxes are being cut.

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    • At present a worker pays 52% tax on all earning above €32,800 (41 income tax, 4 PRSI & 7 USC), that’s one of the highest marginal rates in OECD. It is already reducing the incentive to work, why should I do overtime at say €30 per hour if I only get €14.40 into my hand? Any increase in the top rate of 41% would make this situation worse. That said, we cant close the deficit by cuts alone so I’m in favour of a property tax. I just wish that the moaners would realise that we either tax property owners or tax employment, it really is that simple folks.

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    • Don’t do overtime then Seán. If there is more work in your company than employees to cover it, perhaps they might consider taking someone off the dole. This country is sinking. Taking a property tax from us will just do further damage to local economies. People quite simply don’t have any spare cash.

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    • @sean O rourke , can i ask why are there only two choices to raise additional money to tax employment or pay property taxes , why are you ignoring one of the fundamental problems in Ireland , that the income taxes are over 50% and one of the highest already but the corporation taxes are12.5 (effectively lower) , one of the lowest in Europe/ world , yet you say it’s really simple , we choose higher income tax or property tax , yet ignore the one blatantly obvious part of the equation which is perhaps raise the corporate tax to 13.5 or at the very least close some of the tax avoidance loopholes .we simply cannot keep raising the incomes taxes its too much of a disincentive and decent hard working people will not want to work/ run businesses especially in SME sector which we badly need to grow and encourage.

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  • why should TD’s get all these expenses and bonus.its a job they have just like any other job.i did not get all these when perks when i worked.nobody drove me to work,i did not get allowances for my food phone etc.what makes them any different to me or anyone else out there.

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    • all men are equal but same men are more equal than others .

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    • some men

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    • Most jobs have food, phone and travel allowences if you are on the road as part of your job.

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    • Any job that involves working away from the office will pay food, phone and travel allowances. Only government Ministers are driven to work, the rest of the TD’s drive themselves. If you didn’t get allowances in your last job then that’s your fault for either not asking for them or not being entitled to them ie. working in an office.

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    • @ Brian. You miss the writers point. Vouched is what we are demanding. I get expenses when I travel but they are designed to reimburse me for the expense. They are not a means of deriving a supplementary income by staying in my granny’s house and eating her food yet claiming allowances that I am not out of pocket for. That’s called the real world. One which it appears you do not live in. I can only assume you are a civil servant.

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    • @ Brian. You miss the writers point. Vouched is what we are demanding. I get expenses when I travel but they are designed to reimburse me for the expense. They are not a means of deriving a supplementary income by staying in my granny’s house and eating her food yet claiming allowances that I am not out of pocket for. That’s called the real world. One which it appears you do not live in. I can only assume you are a civil servant or some similar feckless Organisation. .

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    • @Simon
      Firstly there is no mention of vouched expenses in Nellysroom’s post.

      Secondly I worked for twenty years as a sales rep and had to vouch for every single bit of expenditure that I made. They were expenses that were part of my job and so had to be covered by the company because I sure as hell wasn’t going to pay for doing my job. So I do know how expenses work.

      Lastly, how you can deduce that I am a civil servant is beyond me given that I posted 2 comments and made no mention of what I am currently doing at the moment. But hey who am I to put down anyone’s wildly fantastical and way off the mark speculations. To condescendingly tell me that I should live in the real world while at the same time making baseless assumptions about what I do based on fantasy smacks of more than a little bit of irony.

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    • @ Brian. In that case I picked you up wrong. And respect to sales people. It’s a noble and not easy profession when those who do it are genuine sellers and not order takers.

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  • I run a business, doing ok and employing 14 people
    Between PRSI USC income tax my marginal rate is 54%. If these geniuses want to push that up to 60%+ one of two things will happen:
    Ill cut down my hours, or sell the business.
    Or buy a shack in Portugal, make sure I spend less than 180 days in any country, pay myself through company in Jersey and claim non-dom.

    54 % of something is better than 60% of nothing

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    • mike 07/10/12 #

      True.. The Govt don’t appear to understand the basic economic concept of The law of diminishing marginal returns. There is a point where an increase in tax rate would cause a decrease in the amount of tax collected.

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  • mike 07/10/12 #

    I would prefer if income tax was increased BUT all other taxes eg property, water,tv, septic tank etc were scrapped. That way we would know exactly how much we have to pay. This would also cost much less to collect.

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    • Mike, by putting all the taxes on employment the people who choose not to work will yet again not make a contribution. Also some wealthy self employed people can pay tax consultants to avoid paying a large amount of tax, Property taxes not linked to employment are the way to go.

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  • 2% why stop at 2%, now a 100% is how you fix an economy. Sure what would the worker drones want with money?

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    • I understand that Jim. My point is that it’s unfair to lower income people. The cycle to work scheme was another example of how people with higher incomes were able to purchase a bike for far less than someone on the lower rate of tax. Why does someone on low wages have less incentive to buy a bike than a higher earner?

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    • Rodrigo – your views are very robin-hood-like and are not thought out. It appears fair to me that high income earners receive relief at the higher tax rate given that they pay tax at that rate.

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  • I’d rather they just increased the rate of tax than all these other stealth charges that we will be hit with instead

    At least you’d know where you stood

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    • Fine Gael are not in this to take money from their wealthy cronies, so anyone unfortunate enough to be either on low to average wages, or in receipt of social welfare had better be prepared to take more catastrophic hits when Noonan stands up in the Dail in December.

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    • They did that though.. We pay higher rates of other taxes because the last time water charges were discussed people asked for the same solution that you have put forth – to just raise taxes.

      Now we have come to a point where people seem to have forgotten why our tax rate was higher – ie, to pay for all those services that we are now going to be taxed separately for, on top of the higher tax rate that we were already paying for them..

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  • We are already one of the most taxed countries on Earth, despite the spin.

    Income tax, USC, PRSI, NPPR, household tax, VAT, VRT, Waste charged, water charges, road tax, health levy, pension levy, carbon tax, DIRT, capital gains, stamp duty etc..

    They just put loads of different names on it so you don’t realise just how much you are bring robbed by the State.

    We all have an effective tax rate of 60-70% when everything is considered.

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  • What would happen with a 2% increase in the income levy? It would surely raise more and they could pretend they hadn’t touched taxes…

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  • the government never said they weren’t going to do something and then went ahead and did it……nope, never!

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    • mike 07/10/12 #

      True Wes… I would not be surprised in the least if it happens…

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    • @ Sean … ‘ those people who choose not to work ‘ . Get real Sean . I don’t know anybody who chooses not to work . Those who are on unemployment are expected to live on €188 per week and pay all their bills with this . I have worked and paid tax in this country for over 25 years . My last job finished up in June . On average I apply for 5-6 jobs per week and in most cases do not even receive the courtesy of a reply . My daughter who is in her early twenties is emigrating next week just to get a Job ! We are both university educated . Going to sign on for unemployment benefit is without doubt one of the most degrading experiences of my life . You seem to be as out of touch with reality as most of our Politicans !!!!

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    • mary you are the one out of touch. there are leeches out there who do not work and don’t want to either. wake up

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  • Gary 07/10/12 #

    2% on the lower and higher tax band? There has to come a time when we stop penalising people for working. If this tax was brought in a lot of people would be better off on the dole. Maybe just put up the higher tax band tstppenal

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  • I wonder if anyone has calculated how much would be raised if pension contribution tax relief was cut from 41% to 20%. How can it be fair that better off people can contribute more to a pension scheme at less than half the cost to someone earning less?

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    • If pension relief is cut, think about what happens:
      You pay approximately half the normal tax on your earnings tbefore it goes into a pension.
      Then the govt dips into your pension taking .5% every year levy
      Then at the other end you pay a full tax rate on your drawings (after your lump sum)
      That’s effectively a double taxation – so people are far less likely to contribe.
      Bingo! – you have managed to disincentivise saving for the future, whilst simultaneously creating pension crisis in 30 years

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    • @ Brian Ward . Expenses should be vouched for . And there should be a cap on them !!!!!

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    • @Mary where did I say that expenses shouldn’t be vouched for. In fact I have consistently said this since the whole in-vouched regime was brought in but you might have missed those posts. Anyway I’m glad to clear that up for you.

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  • I would be able to stomach paying an extra 2% but only if social welfare rates were lashed by 20% and public sector wages benchmarked back to private sector wages i.e. 20-30%. Then we might have some chance of providing a decent health and education service.

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  • 2c in a euro extra , why the f**** not , make it 5c in the euro i never minded raising income tax up to 5c in euro.. no biggie .im not on high wage but wont feel it . just stop all these other sly taxes. i know people wont agree with me..but then people need to realise yur paying one way or other.. id rather income tax up 5c in euro.

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  • There are 35,000 public servants getting paid over ?80,000 per year.. Why not tax the s#it out of them…,!!! If I can pay bills and support my wife and 2 kids on ?20k a year why cant they..??

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    • Dead right! If we can do it so can they! Problem is that these public servants would argue thatvthey live a more extravagant lifestyle to us, bigger houses, bigger cars, expensive schools for their kids etc! So there bills would be much higher! My argument to this is, why don’t they change their lifestyle? Move house, sell the car, stick the kids in a public school! Never gonna happen though! How would they separate the classes??

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    • While I agree that those that can afford it should pay more, this generalisation and public service bashing is tiring. For example – Clerical Officers – who make up over a third of the ‘Civil’ Service, start on around €22k p.a., rising to around €35k p.a. after 12 years service; they’re ordinary working people, hardly the fat cat civil / publics servants which are being demonised by some.

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    • Stephan, I don’t think we are having a go at those whom which you speak of… Tis the higher earners in the public sector that I believe are the topic here! ;)

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    • George. You are missing my point. Just answer this question. How is it fair that two people can make a pension contribution of let’s say €100 per week, and in real terms it costs the higher earning person approx €52 per week, and for the person earning far less, it actually costs him approx €73 per week. Jim Brady went on about pension levies and being taxed when the pension is drawn down, however people making the same contribution now, regardless of income, will pay the same rate of tax when said pension is drawn down, and the same pension levies will apply right now. So two people in, lets say 20 years time are in receipt of the exact same net pension, yet it has cost the person on the lower income around €30,000 more in contributions. So you tell me what’s fair about that George, because I’ll be damned if I can see it.

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    • Rodrigo – you are missing the point. High income earners are penalised in that they pay a higher marginal rate of tax.. As such, while pension contributions may result in higher tax savings for the high earner, the high earner pays more tax on a overall basis. As such, the system is equitable. Further, pension funds and saving funds are for the benefit of the economy as a whole – any incentivisation in this regard should be encouraged.

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  • tozyurt 07/10/12 #

    Check the effective corporation tax on large businesses and multinationals.
    It is less than 1%. so 12.5% is a myth none of them pays that. Even if we can increase it to 2%. that would be another 700-800 mil usd.

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  • Rather pay the 2%than the household charge which no one seems to know what services are going to be provided by paying it eg bins fire brigade ambulances are we still going to have to pay for these if household charge gets paid and how much it’s going to stop at

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    • Of course you’re still gonna have to pay for all that stuff Gavin. Property tax will be used to pay for the bailout, plain and simple. Only in democratic countries like the UK are property taxes used to pay for local services, like bin collection and stuff!

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    • I know that but ya think the joke(government) would think of putting that into it would calm the storm about paying it no such luck the joke are acting exactly as I’ve called them but its not funny to ordinary people

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  • @jim , I don’t disagree with your main point , but if you are running a business with 14 people and doing ok I don’t understand why you won’t instead take money as a profit rather than an income as corporation tax rates are 12.5% in Ireland , which raises another question , if we are looking at the tax rates that are so sacrosanct , shouldn’t we ask the corporations to face up to the reality that an extra 1 or 2% might be needed to operate in Ireland or at least close some of the loopholes that actually mean they are paying even lower , I’m not sure they’ll all uproot to other euro locations as most if th em are at 15% anyway.

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    • @Dave, company directors pay the exact same taxes as employees. It’s simple, if a director takes money out of a business it’s taxed with income tax, Parsi, levies, USC etc, same as everyone else. If you leave the money in the business, it’s taxed at corporation tax rates, and it belongs to the business. If you take the profit out later, it’s still taxed as normal, even though its already been taxed by way of corporation tax.

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    • I get that Andy but when he talked about choosing to sell the business if the personal rate went up i was suggesting maybe staying open and letting the business accumulate profits would be better option ( than closing) , my main point was that its seems govt are edging towards a possible tax increase on income but steering wide of corporate taxes , which we know are lowest in Ireland but keep getting told the corporations will up and leave if they rise 1% , I just find it odd that we are quick to want to push taxes n charges up to 60% as Jim said but not look at maybe raising the corporate rate to 13…

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  • Increasing tax is always an option but one of the main issues in Ireland at present is confidence in the market to spend. The only issue with increasing direct taxes is that we still have a high level of indirect taxes (USC, household, NPPR, etc etc) If you want to generate growth in an economy you need a balanced way of addressing the confidence. You cannot and will not get out of recession by just cutting you need to generate internal growth & consumer spending. If we balanced direct v indirect taxes you might be able to address this but by doing both you are taking more money out of each persons pocket. If you reduced indirect taxes & increased direct taxes people may look to spend more money as consciously the tax is taken from wages & they are not writing annual cheques for such things as septic tanks, property tax, NPPR taxes etc The current system of taxing on both ends will not work and is only prolonging the issues.

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    • I agree. They also need to focus on taxing the rich. These are the people with tons of money stashed on the sidelines. We need to close crazy tax breaks to companies such as tax refunds on new company cars.

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  • A third rate is the only way, full stop. It will have a minimum effect on the domestic economy, much less than further taxing the low paid.

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  • why not.. seems fair enough whats another 2%.

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    • Maybe if you’re on the scratcher it seems fair enough…not for us taxpayers who are funding those said scratchers with approx 51% of our salaries through PAYE, PRSI, USC and still have to pay mortgages, childcare, commuting costs etc etc…..so no 2% is a big deal!

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  • Corporation tax needs to be raised. We cannot afford tax breaks.

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  • Raise all taxes as there are people taking holidays while others are hungry. Councillors should not be paid it could be voluntary like the old days. FF introduced wages for councillors. Senators should be voluntary and no expenses for either. Like the local scouts let the people who Are really interested join. We are BROKE. They should practice their civic duty.

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  • Why would I want to justify extortion when I’m paying property tax twice over? I’m not too sure if you are a tax payer but I can assure you I am and I’m not happy about this situation either. You have a point though. How come we got stuck with the bills of the Anglo Irish bank collapse?

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    • Good point. That’s why the opposition parties propose a wealth tax where anyone with assets under €1 million gross won’t be extorted. You will benefit from this proposal.

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  • The reality is that there is enough money to pay back the public debt and not enough to keep the welfare state going in it’s present state. No politician wants to be seen to make bitter choices as he/ she will be vilified. So they let the IMF and the German funded banks make the wicked decisions. This shows that there are few politicians other than Mr. Kenny to make these hard decisions. This is putting Ireland in a much better light than the likes of Greece which is virtually ungovernable. Greece gave us democracy but it also gave us the word “chaos”! They will take their share of the castor oil or they’ll be left to themselves with no one else to blame. If Irish rulers keep on the current track after a few more tough and unpopular years things will improve.

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    • “hard decisions” ?!

      Just pay off the bondholders with that €70 billion you took from the IRISH PEOPLE. I love the way you blueshirts try to justify your extortion.

      Reply

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