Tax Burden

Ireland: The Progressive Nation

The Republic of Ireland enjoys the most progressive tax system in the European Union and only recently ceded its position as the world’s most progressive system to Israel.

Achieving this has meant that the point at which workers enter the top bracket of forty per cent is E35,300, which is ten per cent below the national average industrials wage. High fliers such as primary school teachers, policemen and nurses will all find themselves comfortably in the top paying bracket.

Forty per cent income tax is the kicking off point of course not the end. We also have the Universal Service Charge which was introduced in 2011 as part of a spending reduction revenue raising budget in the wake of the economies crash and the bursting of the credit bubble. It is an income-based tax and also highly progressive.

Rate Income Band

• 0.5% Up to €12,012
• 2% From €12,012.01 to €19,372.00
• 4.75% From €19,372.01 to €70,044.00
• 8% From €70,044.01 to €100,000.00
• 8% Any PAYE income over €100,000
• 11% Non-PAYE (Self-employed) income over €100,000

Not Just Income Tax

The Universal Service Charge was introduced at time of extraordinary budgetary exigency and in the expectation that once the economy had recovered it would be phased out. Inheritance tax in the United States was introduced in 1898 to pay of the Spanish American war, income tax in the United Kingdom was an emergency measure introduced by Pitt to finance the Napoleonic War but we are sure it will be different with the USC.

PRSI or pay related social insurance is paid by employees, employers, and the self-employed as a percentage of wages after pension contributions. It is divided into classes A,B,C,D,H,J,K,M and S. Grosso modo as an employee you can expect to pay about four per cent of income as PRSI.

The moral of the tale therefore is if you are a higher earner in Ireland you could be handing over half of what you earn to the State before you get a chance to buy a bar of chocolate ( value added tax 21%). Can it be moral, ethical, to coerce the citizen to pay over half of the products of her labour to the state?

People get upset when words like coerce are used in this context but what else is it expect coercion ?The citizen does not get to choose at what rate to pay tax or which programmes or projects of government to support. There is no hypothecation option available to the conscientious objector who is forced to fund activities profoundly offensive to his or her morality. That really very ordinary people should be in the highest tax band and that the top 1% should pay 20% of all personal taxes is dictated by the requirement for a progressive tax system and active redistribution of wealth.

Who Pays? You or Society

Mrs Thatcher has often been derided for saying “there is no such thing as society” however it useful to see the quote more fully.

There is no such thing as society. There is living tapestry of men and women and people and the beauty of that tapestry and the quality of our lives will depend upon how much each of us is prepared to take responsibility for ourselves and each of us prepared to turn round and help by our own efforts those who are unfortunate.

The point she makes is essentially the point made by Prof Matt O Donnell in his lectures on Anarchy the State and Utopia. When the state uses the tax system to transfer wealth it does not transfer to some abstract entity such as “Society” or “the common Good” but it puts its hand in Mary Murphy’s pocket and gives her money to Jack Jones. Some of the money may go on services which she might also consume but a part is a simple cash transfer from her bank account to his. If the distributing actor were not the Minister of Finance then it would be an act of either theft or extorting money with menaces.

Moral Taxation

Now we are not anarchists here. We believe taxation can be moral and necessary. Mary may well be perfectly happy to hep out Jack at this difficult time for him and act out of the purest altruism but that does not mean we can assume there is no moral limit to the amount of the transfers that occur between her and Jack. If we believe that Mary in fact owns herself, her labour and the fruits of her labour. And we do. Is this what our state believes however ? Or does it believe that in the end there is no true right to ownership merely a privilege conceded by the state for as long and to the extent that it suits the state?

Marx believed that capitalism treated workers not as persons but as commodities to be traded and whom had been alienated from the fruits of their labours. It is ironic to see so much of the left today see workers as nothing but sources of capital for them to distribute to their clients. Their rhetoric of social justice demands that the tax payer is merely a source of utility, a means not end in themselves.

Proposals to lower the tax burden on the middle-income earner by raising the entry point to the highest rate have been critiqued as increasing income inequality. Ireland has one of the more household income unequal economies in the European Union however the extremely progressive nature of our tax system but after tax we come out around the EU average. Particularly helpful in this are the USC and the early entry into the top rate of tax. Unless we are missing something big this positive out come was achieved not by raising lower incomes but lowering the incomes of those farther up the earning ladder. This looks very like the kind of thinking which would rather the poor stayed poor rather than get richer but at a slower rate than the already rich. Because Equality.

Poor but Equal

Still it must be a comfort to the Nurse, Garda or teacher that while they struggle to get a mortgage they are contributing to income equality in Ireland. And they need some comfort. Even if they wanted to smoking is too expensive. In the country with the highest excise on wine in the EU, second highest beer and third highest on spirits Lidl and Aldi had made a cup of cheer affordable but the government is going to sort that out with minimum pricing.

If there were no taxes there would be no buses, roads, or hospitals. If , we are told, we want quality services then we must fund them. The belief that nothing would of could happen without the state providing is a very modern notion. But there maybe a rationale to state provision and or funding of security, health and education. We had trains and canals without the state while the construction of roads has shown what happens when political influence is the driver of development rather than demand. In the heel of the reel though to justify this level of taxation we need to believe that the state is am efficient competent and cost-effective supplier of services and deliverer of projects. Morality demands that if you take these peoples money that you be a good and prudent steward.

The truly rich can have whatever income they want, live where they want when they want and consequently pay the tax they want. Many high income earners can be heard to say that they are happy to pay more in tax to provide more and better services to those who need them. That is a fine and altruistic impulse and happily the revenue service does not have a maximum allowed return, They are free to pay as much as they like over the minimum required. However to morally demand half of the earnings of ordinary folk without at the very least providing functioning and value for money services is just theft.