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Flat tax versus progressive tax


ticketyboo

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Joined
Oct 21, 2011
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5,045
Well, this might be interesting to explore.
watched the latter stages of a dire VB programme last night, but my attention was piqued somewhat to the questions about the desirability, or not, of a flat tax system.
It would be interesting to hear the views of contributors across the political spectrum on this issue. A bit of rudimentary research (Google!) suggested that the tax take could be greatly enhanced by a flat tax. Would this make it a better system than the one we have at present, where, when I try to recall politicians views on this, such as Leo Varadkar has lauded our current progressive tax system...but is this true?
Would a flat tax system succeed in eliminating the myriad of tax reliefs that I would venture benefit the wealthier members of our society, and if such individuals do indeed benefit from the employ of smart accountants, then do we truly have a progressive tax system at all...that is, by its true definition, one where higher earners pay a greater proportion of their earnings?
The floor is yours, ladies and gentlemen......
 

Sync

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Aug 27, 2009
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28,845
What % are you proposing? What's the starting point where people begin to be taxed? Flat taxes normally sound great until you do the numbers on the impact on the poor and the mobility of taxpayers at the upper end.
 

Trainwreck

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Joined
Sep 6, 2012
Messages
26,809
Well, this might be interesting to explore.
watched the latter stages of a dire VB programme last night, but my attention was piqued somewhat to the questions about the desirability, or not, of a flat tax system.
It would be interesting to hear the views of contributors across the political spectrum on this issue. A bit of rudimentary research (Google!) suggested that the tax take could be greatly enhanced by a flat tax. Would this make it a better system than the one we have at present, where, when I try to recall politicians views on this, such as Leo Varadkar has lauded our current progressive tax system...but is this true?
Would a flat tax system succeed in eliminating the myriad of tax reliefs that I would venture benefit the wealthier members of our society, and if such individuals do indeed benefit from the employ of smart accountants, then do we truly have a progressive tax system at all...that is, by its true definition, one where higher earners pay a greater proportion of their earnings?
The floor is yours, ladies and gentlemen......
Can we first introduce some clarity.


A "flat tax" can be progressive, so saying "flat" versus "progressive" introduce a false dichotomy.
 

ruserious

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Jan 3, 2011
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29,601
Flat tax means the lifestyle of the poor is worse effected by a flat tax than a progressive tax.
 

ticketyboo

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Oct 21, 2011
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Can we first introduce some clarity.


A "flat tax" can be progressive, so saying "flat" versus "progressive" introduce a false dichotomy.
Fair enough, but that's the terminology that is used in relation to the two, isn't it?
It's like the abortion debate, where the terms are pro-life and pro-choice. It isn't the case that somebody who isn't in the "pro-life" camp is anti-life, but them's the labels people use, for better or worse.
 

ticketyboo

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Oct 21, 2011
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5,045
What % are you proposing? What's the starting point where people begin to be taxed? Flat taxes normally sound great until you do the numbers on the impact on the poor and the mobility of taxpayers at the upper end.
Well, that's one of the things I'd like to see teased out.
What precisely do you mean by the mobility of those at the upper end? Is it their ability to conduct their affairs from another jurisdiction or their ability to write off their tax liabilities by reliefs, allowances, expenses, etc?
I'm here to be educated...that's why I asked the question.
 

Sync

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Well, that's one of the things I'd like to see teased out.
What precisely do you mean by the mobility of those at the upper end? Is it their ability to conduct their affairs from another jurisdiction or their ability to write off their tax liabilities by reliefs, allowances, expenses, etc?
I'm here to be educated...that's why I asked the question.
If you ramp up the tax rate you'll see some of the top earners leaving. If you have a flat rate of say 33%, it's easier for someone on 100k to pay 33k in tax than it is for someone on 15k to pay 5. The person on 100k already pays around 33% in tax, the person on 15 is putting through much much less.

That's why you're hearing Google/Apple bang on about wanting a "Simplified" tax code for countries. It makes it easier to cherry pick where you set up.
 

Trainwreck

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26,809
Fair enough, but that's the terminology that is used in relation to the two, isn't it?
It's like the abortion debate, where the terms are pro-life and pro-choice. It isn't the case that somebody who isn't in the "pro-life" camp is anti-life, but them's the labels people use, for better or worse.
Well, no its no OK. Because you are creating a debate that will, falsely, disintegrate into "poor" versus "rich".

For example:

Flat tax means the lifestyle of the poor is worse effected by a flat tax than a progressive tax.
 

Sync

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Also: Tax reliefs exist for a reason. Single parents, home carers, third level fees, widows credit etc etc. We have those to assist people who need it.

The people who LOVE the idea of a flat tax are guys like Herman Cain i.e Lunatic rich guys.
 

Taxi Driver

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Jan 8, 2011
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4,296
Around 2.8 million people pay income tax (or at least have a return on file) each year. There are 2.1 million tax cases with 700k couples filing jointly.

The total amount of gross income reported is around €80 billion from which earners pay around €15 billion in Income Tax plus USC and about €2 billion in employee PRSI. PRSI is already flat so we can assume that any proposal will refer to Income Tax and USC which are hugely progressive as currently constituted.

The €15 billion currently collected reflects close to 20% of gross income.

One way to make it revenue neutral would be to introduce a flat tax at 25% of gross income with an individual tax credit of around €2,500.

The 25% tax would generate €20 billion and the 2.8 million tax credits of €2.5k each would cost around €5 billion (assuming some people wouldn't use the full tax credit). That would leave €15 billion to be collected.

The proposal wouldn't have to be revenue neutral but this is one that is: A 25% tax on all income with a €2,500 tax credit.

No tax would be paid on any income up to €10,000.
The effective tax rate on €20,000 would be 12.5%.
The effective tax rate on €40,000 would be 18.75%.
The effective tax rate on €100,000 would be 22.5%
and it would get closer and closer to 25% at higher incomes.

Abolition of existing reliefs (pension contributions, health insurance premiums etc.) would raise the amount collected but maybe that's a different discussion.

A 25% tax on income with a €2,500 tax credit?
 

Dan_Murphy

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Feb 22, 2010
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3,811
If you ramp up the tax rate you'll see some of the top earners leaving. If you have a flat rate of say 33%, it's easier for someone on 100k to pay 33k in tax than it is for someone on 15k to pay 5. The person on 100k already pays around 33% in tax, the person on 15 is putting through much much less.

That's why you're hearing Google/Apple bang on about wanting a "Simplified" tax code for countries. It makes it easier to cherry pick where you set up.
Would something like Milton Friedmans Negative Income Tax be worth considering then?

If we said instead that the tax should be 33% of income after 10k, for example, then the person on 100k pays 29.7% of his income as taxes while the person on 15k would pay only 11%, while someone on only 5k would receive a benefit from the government of €1,650.

I'm not sure we could make radical changes of tax laws without also looking at social welfare spending, but I've always figured there might be merit to this system. I haven't looked too deeply into it though.
 

ruserious

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Jan 3, 2011
Messages
29,601
Around 2.8 million people pay income tax (or at least have a return on file) each year. There are 2.1 million tax cases with 700k couples filing jointly.

The total amount of gross income reported is around €80 billion from which earners pay around €15 billion in Income Tax plus USC and about €2 billion in employee PRSI. PRSI is already flat so we can assume that any proposal will refer to Income Tax and USC which are hugely progressive as currently constituted.

The €15 billion currently collected reflects close to 20% of gross income.

One way to make it revenue neutral would be to introduce a flat tax at 25% of gross income with an individual tax credit of around €2,500.

The 25% tax would generate €20 billion and the 2.8 million tax credits of €2.5k each would cost around €5 billion (assuming some people wouldn't use the full tax credit). That would leave €15 billion to be collected.

The proposal wouldn't have to be revenue neutral but this is one that is: A 25% tax on all income with a €2,500 tax credit.

No tax would be paid on any income up to €10,000.
The effective tax rate on €20,000 would be 12.5%.
The effective tax rate on €40,000 would be 18.75%.
The effective tax rate on €100,000 would be 22.5%
and it would get closer and closer to 25% at higher incomes.

Abolition of existing reliefs (pension contributions, health insurance premiums etc.) would raise the amount collected but maybe that's a different discussion.

A 25% tax on income with a €2,500 tax credit?

I like the idea of that but higher tax % than you have stated.
 

bormotello

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Aug 8, 2008
Messages
12,174
Its hard to see how it would increase tax take. It has been successful in places where previously people avoided income tax - it might be a good idea in Greece, for example.

But in Ireland, it could only lead to a drop in take.
Simple - more people will pay tax(tax take won't depends from rich) and rich will have less ways to minimize their taxes
 

Ribeye

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Joined
Jul 12, 2011
Messages
26,306
im in favor of a flat income tax, reeeeaaaaallll flat, 0%!!!!!

however, i know that's not gonna fly around here, so i'll compromise,

Ribeye Tax Code

- !0% Flat Rate on Income, Corporate Profits and VAT.

ALL other taxes eliminated, all of them. ALL loopholes eliminated, all of them.

Watch the engine light up.
 

SilverSpurs

Well-known member
Joined
Nov 27, 2009
Messages
5,550
Well, this might be interesting to explore.
watched the latter stages of a dire VB programme last night, but my attention was piqued somewhat to the questions about the desirability, or not, of a flat tax system.
It would be interesting to hear the views of contributors across the political spectrum on this issue. A bit of rudimentary research (Google!) suggested that the tax take could be greatly enhanced by a flat tax. Would this make it a better system than the one we have at present, where, when I try to recall politicians views on this, such as Leo Varadkar has lauded our current progressive tax system...but is this true?
Would a flat tax system succeed in eliminating the myriad of tax reliefs that I would venture benefit the wealthier members of our society, and if such individuals do indeed benefit from the employ of smart accountants, then do we truly have a progressive tax system at all...that is, by its true definition, one where higher earners pay a greater proportion of their earnings?
The floor is yours, ladies and gentlemen......
We need a sustainable tax base and sustainable public spending. The sad reality of that is that "the poor" will have to contribute more to that tax base and will be have to draw down less from the public budget. A single income tax rate with a tax free allowance is essential as is VAT on food and childrens clothes. Similarly means assessed benefits are cut to the bone and not paid in cash. Child benefit phased out as it is a charter for irresponsible parenting.
 

Trainwreck

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Joined
Sep 6, 2012
Messages
26,809
It will never happen, as shown by some of the repsonses here.


To make it revenue neutral, some people will have to pay more and some people will have to pay less.

Our income tax system is now so swingingly progressive that it would reduce the average rate of tax for the highest earners and increase it in the middle - while the lowest could be releaved of more taxes down the scale. (unless you are proposeing a flat tax rate of 60%+)

That creates the conept of winners and losers and a tax cut for someone you eprceiv as wealthier than you is never popular.


There is also the embedded belief that many life choices come with some sort of need and right, as witnessed by some Syncs comments - for exmaple, if I go to university (and benefit from subsidised education) I have a "need" for more tax consessions. Simlarly if I chose to be a "single parent" (an absurdity because there is always two parents) I have a need to be a special case.
 

Spanner Island

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Feb 22, 2011
Messages
24,203
Income tax and VAT with multiple levels of each and a maximum of 50% on income.

No government anywhere should believe it has any right to take more than 50% of anyone's income regardless of how much they make or how rich they are... imo.

Income tax should also be imposed on global earnings as it is in America. All tax avoidance loopholes should be closed with stiff and unambiguous penalties imposed on those who cheat the system...

If you earn money you pay tax and you pay your fair share. Simple as.


Regarding VAT I'd be in favour of multiple VAT bands based on whether goods and services are necessities or luxuries etc... e.g. 1% on necessities like bread and milk etc. right up to 100% on things like Rolex watches or Ferrari cars etc.

All other taxes should be abolished imo, including corporation tax... with the ultimate goal being to minimise the tax burden on everyone as much as possible while extracting as much 'bang for our buck' as possible from those taxes that are collected...

The tax system needs to be stripped down and made very simple...

Will this happen?

Doubt it... cos just like the 'War on Drugs' and 'War on Terror' etc., there are now far too many vested interests whose livelihoods depend on it remaining as complex and full of loopholes as it is now...

And so the scam goes on... tax 'experts' are brought in by useless Governments to 'advise' and help construct the tax mess and then those same 'experts' head off to charge their clients fortunes in order to enable them to avoid the loopholes the 'experts' have helped build into the system...
 

Clanrickard

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Joined
Apr 25, 2008
Messages
33,054
.

No government anywhere should believe it has any right to take more than 50% of anyone's income regardless of how much they make or how rich they are... imo.

Income tax should also be imposed on global earnings as it is in America. All tax avoidance loopholes should be closed with stiff and unambiguous penalties imposed on those who cheat the system...

If you earn money you pay tax and you pay your fair share. Simple as.


Regarding VAT I'd be in favour of multiple VAT bands based on whether goods and services are necessities or luxuries etc... e.g. 1% on necessities like bread and milk etc. right up to 100% on things like Rolex watches or Ferrari cars etc.

All other taxes should be abolished imo, including corporation tax... with the ultimate goal being to minimise the tax burden on everyone as much as possible while extracting the as much 'bang for our buck' as possible from those taxes that are collected...

The tax system needs to be stripped down and made very simple...

Will this happen?

Doubt it... cos just like the 'War on Drugs' and 'War on Terror' etc., there are now far too many vested interests whose livelihoods depend on it remaining complex and full of loopholes...
 

pragmaticapproach

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Joined
Jul 21, 2010
Messages
8,817
Well, this might be interesting to explore.
watched the latter stages of a dire VB programme last night, but my attention was piqued somewhat to the questions about the desirability, or not, of a flat tax system.
It would be interesting to hear the views of contributors across the political spectrum on this issue. A bit of rudimentary research (Google!) suggested that the tax take could be greatly enhanced by a flat tax. Would this make it a better system than the one we have at present, where, when I try to recall politicians views on this, such as Leo Varadkar has lauded our current progressive tax system...but is this true?
Would a flat tax system succeed in eliminating the myriad of tax reliefs that I would venture benefit the wealthier members of our society, and if such individuals do indeed benefit from the employ of smart accountants, then do we truly have a progressive tax system at all...that is, by its true definition, one where higher earners pay a greater proportion of their earnings?
The floor is yours, ladies and gentlemen......
A flat tax with a universal tax credit is the way to go, but of course in order to set the tax at a modest rate, expenditure would have to be significantly reduced, so any tax reform would have to be part of package of a reforms.

What the exact rate of taxation should be and the amount exempted by the tax credit is another matter, but the advantages are, in addition to massive simplification, that it would protect those on lower incomes while at the same time not punish those on higher incomes.
 
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