Let's Tax the Rich

[poulgorm]

Some politicians, journalists and others exclaim; "It's just a tax cut for the rich!" -- and that claim is generally accepted to be fact, without questioning it. But what does that really mean?
Just in case you are not completely clear on this issue, the following might help:
Let's put tax cuts in terms everyone can relate to.
Suppose that every day, 10 men go out for beer and the bill for all ten comes to $100.
If they paid their bill the way we pay our taxes, it would go something like this:
The first 4 men [the poorest] would pay nothing.
The 5th would pay $1.
The 6th would pay $3.
The 7th would pay $7.
The 8th would pay $12.
The 9th would pay $18.
The 10th man [the richest] would pay $59.
So, that's what they decided to do.
The 10 men drank in the bar every day and seemed quite happy with the arrangement,until one day, the owner threw them a curve ball.
"Since you are all such good customers," he said, "I'm going to reduce the cost of your daily beer by $20. Drinks for the ten now cost just $80. The group still wanted to pay their bill the way we pay our taxes so the first 4 men were unaffected. They would still drink for free.
But what about the other 6 men; the paying customers?
How could they divide the $20 windfall so that everyone would get his 'fair share'?
They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink their beer.
So, the bar owner suggested that it would be fair to reduce each man's bill by "roughly" the same amount, and he proceeded to work out the amounts each should pay.
And so:
The first 4 men [the poorest] would still pay nothing.
The 5th man, like the first 4, now also paid nothing [100% savings].
The 6th now paid $2 instead of $3 [a 33%savings]
The 7th now paid $5 instead of $7 [a 28%savings].
The 8th now paid $9 instead of $12 [a 25% savings].
The ninth now paid $14 instead of $18 [a 22% savings].
The 10th now paid $49 instead of $59 [a 16% savings].

Each of the 6 was better off than before.
And the first 4 continued to drink for free.
But once outside the restaurant, the men began to compare their savings.
"I only got a dollar out of the $20" declared the 6th man.
He pointed to the 10th man," but he got $10!"
"Yeah, that's right," exclaimed the 5th man. "I only saved a dollar, too.
It's unfair that he got 10 times more than I did!"
"That's true!!" shouted the 7th man. "Why should he get $10 back when I got only two? The wealthy get all the breaks!"
"Wait a minute," yelled the first 4 men in unison. "We didn't get anything at all. The system exploits the poor!"
The 9 men surrounded the 10th and beat him up.
The next night the 10th tenth man didn't show up for drinks, so the 9 sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!
And that, boys and girls, journalists and college professors, is how our tax system works.
The people who pay the highest taxes get the most benefit from a tax reduction.
Tax them too much, attack them for being wealthy, and they just may not show up anymore.
In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

[rebelicecreamman]

4% of people pay 48% of tax in this country today.

[jd26]

But our tax system doesn't work like that. Because of the PRSI cap, the gross percentage you pay drops after you go above 56K.

Abolishing the PRSI cap is one thing that should be done in this budget, even if I would end up paying over a grand in extra tax.

[Rebel G]

Just what exactly defines someone as rich. Would it be over 100k? I would certainly not reckon that a family earning say 50k to 60k would be classed as rich.

[Now You're Hurling]

But our tax system doesn't work like that. Because of the PRSI cap, the gross percentage you pay drops after you go above 56K.

Abolishing the PRSI cap is one thing that should be done in this budget, even if I would end up paying over a grand in extra tax.

The PRSI cap was raised to €75k in the April budget. I'd say if it isn't abolished today, it will be raised again up towards €100k.

[jd26]

Forgot about the multiple budgets we had this year.

In that case I'd scarcely be affected. The cap should definitely be scrapped!

[Jaco]

Some politicians, journalists and others exclaim; "It's just a tax cut for the rich!" -- and that claim is generally accepted to be fact, without questioning it. But what does that really mean?
Just in case you are not completely clear on this issue, the following might help:
Let's put tax cuts in terms everyone can relate to.
Suppose that every day, 10 men go out for beer and the bill for all ten comes to $100.
If they paid their bill the way we pay our taxes, it would go something like this:
The first 4 men [the poorest] would pay nothing.
The 5th would pay $1.
The 6th would pay $3.
The 7th would pay $7.
The 8th would pay $12.
The 9th would pay $18.
The 10th man [the richest] would pay $59.
So, that's what they decided to do.
The 10 men drank in the bar every day and seemed quite happy with the arrangement,until one day, the owner threw them a curve ball.
"Since you are all such good customers," he said, "I'm going to reduce the cost of your daily beer by $20. Drinks for the ten now cost just $80. The group still wanted to pay their bill the way we pay our taxes so the first 4 men were unaffected. They would still drink for free.
But what about the other 6 men; the paying customers?
How could they divide the $20 windfall so that everyone would get his 'fair share'?
They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink their beer.
So, the bar owner suggested that it would be fair to reduce each man's bill by "roughly" the same amount, and he proceeded to work out the amounts each should pay.
And so:
The first 4 men [the poorest] would still pay nothing.
The 5th man, like the first 4, now also paid nothing [100% savings].
The 6th now paid $2 instead of $3 [a 33%savings]
The 7th now paid $5 instead of $7 [a 28%savings].
The 8th now paid $9 instead of $12 [a 25% savings].
The ninth now paid $14 instead of $18 [a 22% savings].
The 10th now paid $49 instead of $59 [a 16% savings].

Each of the 6 was better off than before.
And the first 4 continued to drink for free.
But once outside the restaurant, the men began to compare their savings.
"I only got a dollar out of the $20" declared the 6th man.
He pointed to the 10th man," but he got $10!"
"Yeah, that's right," exclaimed the 5th man. "I only saved a dollar, too.
It's unfair that he got 10 times more than I did!"
"That's true!!" shouted the 7th man. "Why should he get $10 back when I got only two? The wealthy get all the breaks!"
"Wait a minute," yelled the first 4 men in unison. "We didn't get anything at all. The system exploits the poor!"
The 9 men surrounded the 10th and beat him up.
The next night the 10th tenth man didn't show up for drinks, so the 9 sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!
And that, boys and girls, journalists and college professors, is how our tax system works.
The people who pay the highest taxes get the most benefit from a tax reduction.
Tax them too much, attack them for being wealthy, and they just may not show up anymore.
In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

I have seen this email and its complete bollox.
Where will all these rich boys and there money trees head too?
Its the usual scare tactics from the rich and if you believe it you are an idiot

[Haro]

Yes, it makes much more sense to tax the people who can't afford it. Hurr.

[Mr. Monty]

The flaw in this is that many of the richest in this country pay little or no tax...

[de mange]

The flaw in this is that many of the richest in this country pay little or no tax...

4% of people pay 48% of tax in this country today.

right lads - someones telling a big porky here.. which one of you is it?

[Mossybanks]

I have seen this email and its complete bollox.
Where will all these rich boys and there money trees head too?Its the usual scare tactics from the rich and if you believe it you are an idiot

Monaco, Switzerland, the Caribbean.
Look at Denis O' Brien or John Magner or JP McManus.

Or U2.

Or many others. Once you reach a certain wealth level it pays to shop around for the best place to be domiciled. You can still live in Ireland but only for a certain number of days per year.

[rebelicecreamman]

right lads - someones telling a big porky here.. which one of you is it?



That would be Monty, I'm afraid. Our tax system is progressive. My figures come from the Dept of Finance report from October. Of course there are 'headline' tax avoiders here like Denis O Brien and JP McManus, but they are non-residents. Of course what they are doing leaves a very sour taste, but it is virtually impossible to stop them. Furthermore, even if their likes were taxed here, it would not raise that much in the scheme of things. These cases are largely symbolic, and used by the likes of Jack O Connor and Joe Higgins to whip up the gullible masses.

PS. I see Lenihan has imposed a 200,000 per annum tax on their holding of an Irish passport. Sounds like a good idea to me.

[jd26]

That tax isn't based on holding an Irish passport or not, it's based on where you're domiciled.

They can avoid it by saying that they have gone to permanently live abroad. There would be no restriction on them later changing their mind. It's a PR exercise of a tax, which will probably raise no money, but will increase the burden on the revenue.

[rebelicecreamman]

That tax isn't based on holding an Irish passport or not, it's based on where you're domiciled.

They can avoid it by saying that they have gone to permanently live abroad. There would be no restriction on them later changing their mind. It's a PR exercise of a tax, which will probably raise no money, but will increase the burden on the revenue.

From my brief reading of it, they will have to pay to retain the passport, regardless of where they live. If true, it will test their patriotism in a clever way.

[jd26]

This is the text from the budget speech.

Our tax treatment of non-resident individuals is broadly in line with that of most other OECD countries. But, we must ensure that every wealthy Irish domiciliary who pays little or no income tax makes a contribution to the State, especially during times of economic and fiscal difficulty.

For this reason we will introduce measures which will impose on all Irish nationals and domiciled individuals, whose worldwide income exceeds €1 million and whose Irish-located capital is greater than €5 million, a requirement to pay an Irish domicile levy of €200,000 per annum regardless of where they are tax resident. The full details will be set out in the Finance Bill.

It's a bit confusing as it makes several references to domicile, but does make one reference to nationality.

However, I'd question how implementable it would be to put it on nationality. Anybody who is the child of an Irish parent is technically an Irish national. On this basis, it would theoretically affect a lot of people in Britain, the US, Australia, Canada etc., some of whom have never even been to Ireland. So the framing will have to be tighter than the loose words from Lenihan's speech.

We'll have to see the text of the act.

[Mossybanks]

It's a bit confusing as it makes several references to domicile, but does make one reference to nationality.

However, I'd question how implementable it would be to put it on nationality. Anybody who is the child of an Irish parent is technically an Irish national. On this basis, it would theoretically affect a lot of people in Britain, the US, Australia, Canada etc., some of whom have never even been to Ireland. So the framing will have to be tighter than the loose words from Lenihan's speech.

We'll have to see the text of the act.

whose worldwide income exceeds €1 million and whose Irish-located capital is greater than €5 million


I think the above sentence is the most relevant. If you have €5 million in capital located here then you have to pay.

[o_2_b_a_rebel]

That tax isn't based on holding an Irish passport or not, it's based on where you're domiciled.

They can avoid it by saying that they have gone to permanently live abroad. There would be no restriction on them later changing their mind. It's a PR exercise of a tax, which will probably raise no money, but will increase the burden on the revenue.

Correct. This is defined as a min of 181 days out of the country. They will need to change how they live though if they are currently sending less days away otherwise they are potentially exposed to repay the tax + penalties and charges if they cannot prove otherwise under a tax audit.

[i_didnt_do_nawtin]

Just what exactly defines someone as rich. Would it be over 100k? I would certainly not reckon that a family earning say 50k to 60k would be classed as rich.

That would be a question for Union Leaders

heh x 7

[ubernerd]

That would be a question for Union Leaders

heh x 7

I believe the answer is (union leader's pay + 1).

[Now You're Hurling]

Correct. This is defined as a min of 181 days out of the country. They will need to change how they live though if they are currently sending less days away otherwise they are potentially exposed to repay the tax + penalties and charges if they cannot prove otherwise under a tax audit.

You're confusing residence and domicile here. You could have left Ireland 50 years ago and never come back and still be domiciled here. You actually have to make a conscious decision to abandon domicile, and it would involve at the very least giving up your Irish passport and any Irish residence and probably most, if not all, of your Irish assets.

[The Magnificent Specimen]

I have seen this email and its complete bollox.
Where will all these rich boys and there money trees head too?
Its the usual scare tactics from the rich and if you believe it you are an idiot

I like the way the scenario was put in 'buying pints' so the little guy would get it.Like the budget.
It all depends on what you call rich.Define it.A lot of people seem to suspect a lot of well paid professionals as rich tax dodgers while they turn a blind eye to the mega rich.
Is a doctor earning 200k a year rich when he's paying 49% tax,on top of his overheads.
Or would the likes of Vincent O Brien,John Magner and Desmond O Byrne be rich from the millions of euros worth of tax free horse coverings they make whilst being subsidised by the ordinary tax payer.The latter lives in tax exile and still doesn't want to pay tax on coverings done in Ireland.

Does your doctor do house calls in a Citation private Jet?Does he live in the Bahamas.Is he wined and dined by sheiks and sultans.No,no and no.

I know horse racing is an industry that employs a lot of people both directly and indirectly.But that doesn't give a handful of it's princes the right to use it's demise as a threat against the government, to protect the crazy money they are making.We are talking hundreds of millions here.

The trio of breeders above threatened to relocate the Irish bloodstock industry to Kentucky where they are also well established and probably not paying a cent in tax either.The government backed down.Nobody said a thing.Because we're all afraid.We'll accuse self employed professionals and middle level earners of just about anything but never the big fish.

[o_2_b_a_rebel]

You're confusing residence and domicile here. You could have left Ireland 50 years ago and never come back and still be domiciled here. You actually have to make a conscious decision to abandon domicile, and it would involve at the very least giving up your Irish passport and any Irish residence and probably most, if not all, of your Irish assets.

Oh right. So they are going to tax those domiciled here but tax resident elsewhere is it!!! Good luck to em with that. Where is the line between spending extended holidays somewhere and being 'domiciled' there?

Good point by JD that it is a pr exercise. A feeble attempt to show the lower paid civil servants that the rich are being taxed too...

[jd26]

It's actually very easy to change domicile. I've done it myself

At birth, your country of domicile is the country where your father is domiciled (or your mother if your father isn't on your birth cert). In my case, this turned out to be the UK (even though I wasn't born there and my father isn't British). I hadn't even thought about it until I had to get my taxes done by an accountant a few years ago and they started asking questions.

All I had to do was make a declaration to the Irish and British tax authorities announcing my intention to change domicile and it was done. I would easily switch back to UK-domicile if circumstances dictated it. There was no implication in terms of losing my passport or nationality (I have both British and Irish of both).

[Now You're Hurling]

Oh right. So they are going to tax those domiciled here but tax resident elsewhere is it!!! Good luck to em with that. Where is the line between spending extended holidays somewhere and being 'domiciled' there?

Good point by JD that it is a pr exercise. A feeble attempt to show the lower paid civil servants that the rich are being taxed too...

It is possible to do, depends on how well they can enforce it. The US taxes US domiciled people on their worldwide income, pretty much the same as their residents. Again though, how will the Revenue Commissioners know what a non-resident is earning? Also, how many non-resident Irish domiciled people earn more than €1m per year and have more than €5m in Irish assets? I would imagine if you could get 20 people to pay this levy a year, you would be doing well. That €4m is going to make a big difference in the deficit.

Also FYI, there is a big difference between domicile and taking extended holidays somewhere. Your domicile is by default where you were born or, in some cases, where your parents were born, and as I said earlier, you have to make a conscious choice to take up domicile in another country which involves giving up your Irish passport and residence amongst other things. If you have more than €5million in assets based in Ireland, which is where this levy comes in, then it would be difficult to say that your are no longer domiciled here.

Edit: just saw JD's post there, it was easy for you to give up your British domicile because you probably have had little or no connection with the UK from a tax perspective. The Revenue Commissioners would not be as quick to accept the declaration that the likes of Denis O'Brien was not domiciled here if they still had significant Irish assets.

[starchaser]

4% of people pay 48% of tax in this country today.

yeah.. i've come across that figure too. entirely correct.

another figure is about 50% of the working population dont pay ANY income tax. ( or rather, some of them do, but they get more back in tax credits and benefits..)

[starchaser]

I think the above sentence is the most relevant. If you have €5 million in capital located here then you have to pay.

so if that person removes their 5 million and invests it in switzerland, they dont have to pay that tax.

which is exactly what the denis o'briens of this world will do.

lenihan could have been historic and introduced an american style system - where if you hold an american passport, you PAY american taxes. irrespective of where you are in the world.

( the idea being , that american citizenship is worth something.. you cant swan off , stay american and not stump up for the motherland.. )

[ubernerd]

so if that person removes their 5 million and invests it in switzerland, they dont have to pay that tax.

which is exactly what the denis o'briens of this world will do.

lenihan could have been historic and introduced an american style system - where if you hold an american passport, you PAY american taxes. irrespective of where you are in the world.

( the idea being , that american citizenship is worth something.. you cant swan off , stay american and not stump up for the motherland.. )

I can't see Dennis flogging that flash house on Raglan Road in this market.

[Haro]

The flaw in this is that many of the richest in this country pay little or no tax...

Not only that, but a lot of the richer members of society will mostly exchange money with the richer members of society(fancier restaurants, expensive cars bought off other rich people, etc.), so they're not giving as much of a boost to the overall economy as you might expect.

lenihan could have been historic and introduced an american style system - where if you hold an american passport, you PAY american taxes. irrespective of where you are in the world.

I don't understand why they haven't done this.

[ManielMan]

Not only that, but a lot of the richer members of society will mostly exchange money with the richer members of society(fancier restaurants, expensive cars bought off other rich people, etc.), so they're not giving as much of a boost to the overall economy as you might expect.


Why do you feel entitled to complain?
You've said before that you're on long term social welfare.(I apologise if you find that offensive, but you have disclosed this before yourself so its relevant).
You're not paying any income tax, at all.
If its really such a moral sticking point, why not get a job and help us?

If the rich aren't paying tax as you imagine, then its just guys like me and the other PROCers, paying for you.
How much of a boost are you giving to the economy?

How much tax do you think Michael O'Leary pays to the Irish government?

[Beaty]

Sounds American....

S

[Haro]

Why do you feel entitled to complain?
You've said before that you're on long term social welfare.(I apologise if you find that offensive, but you have disclosed this before yourself so its relevant).
You're not paying any income tax, at all.
If its really such a moral sticking point, why not get a job and help us?

Yeah, because they're just handing those out, right? Amazingly I have the ability to think outside my own bubble and give a shit about people in other circumstances, something, from these threads, the average Irish person seems to lack.

[ManielMan]

Yeah, because they're just handing those out, right?

No, they are not handing them out.
But you have said you are long term unemployed.
So why didn't you have a job when we were at full employment less than 2 years ago - the 2nd lowest unemployment in the EU and importing hundreds of thousands of workers

Would you not agree that its somewhat hypocritical to now be protesting about taking a deduction of 1.5%, when many of us have taken a 100% decrease/tax increases and can no longer afford to pay so handsomely for you?


Amazingly I have the ability to think outside my own bubble and give a shit about people in other circumstances, something, from these threads, the average Irish person seems to lack.

I praise your humanistic attitude/emphatic point of view.
But lets get real - nobody is on the bread line.
We have the most lucrative social welfare in the EU, @207 per week, hence the €22.3 billion annual bill.

My main qualm with your posts is your lack of ability to think outside your personal scenario (bubble as you put it).

My GF is unemployed, she is not entitled to a red cent, despite contributing years of tax and prsi, due to means testing.
I'm paying plenty of tax from my income and I'm just a regular, middle class, worker.
Members of my family are employed in the public sector and I don't wish to see anyone in my family take pain.

Yet in spite of that, I understand that austerity is the only option available to this country.
Unfortunately, we all have to take the pain.
Its some pain now or catastrophic pain later.

We've taken about a 55% hit in our income.
I find it galling to think that people who are employed in the public sector & paid 30% in excess of me, from my taxes, and people who are on the dole not helping with the burden on our shoulders but living off our tax payments, can turn around and demand that we pay more.

Do you think that is fair?
Where is your empathy for the regular joe soap?

Reading between the lines of your posts, all I can see is G-R-E-E-D.

[poulgorm]

No, they are not handing them out.
But you have said you are long term unemployed.
So why didn't you have a job when we were at full employment less than 2 years ago - the 2nd lowest unemployment in the EU and importing hundreds of thousands of workers

Would you not agree that its somewhat hypocritical to now be protesting about taking a deduction of 1.5%, when many of us have taken a 100% decrease/tax increases and can no longer afford to pay so handsomely for you?



I praise your humanistic attitude/emphatic point of view.
But lets get real - nobody is on the bread line.
We have the most lucrative social welfare in the EU, @207 per week, hence the €22.3 billion annual bill.

My main qualm with your posts is your lack of ability to think outside your personal scenario (bubble as you put it).

My GF is unemployed, she is not entitled to a red cent, despite contributing years of tax and prsi, due to means testing.
I'm paying plenty of tax from my income and I'm just a regular, middle class, worker.
Members of my family are employed in the public sector and I don't wish to see anyone in my family take pain.

Yet in spite of that, I understand that austerity is the only option available to this country.
Unfortunately, we all have to take the pain.
Its some pain now or catastrophic pain later.

We've taken about a 55% hit in our income.
I find it galling to think that people who are employed in the public sector & paid 30% in excess of me, from my taxes, and people who are on the dole not helping with the burden on our shoulders but living off our tax payments, can turn around and demand that we pay more.

Do you think that is fair?
Where is your empathy for the regular joe soap?

Reading between the lines of your posts, all I can see is G-R-E-E-D.


Good post