Death and Income tax.

Benjamin Franklin famously opined that "in this life nothing is certain except for death and taxs". In Ireland it seems we may have proved 'ol Benjie wrong on this count, at least when it comes to income tax.

I have written before on this blog about how our state was for years reliant on a myriad of unsustainable consumption based taxs which collapsed during the recession. However another more pressing concern is the state of income tax returns in Ireland and the land of eternal dreams in which many people exist on the matter.

Its important to note before reading this article by Ronan Lyons entitled "a little quiz on Irelands income tax" that income tax does not include PRSI(which is insurance), consumption based taxs(such as VAT) or the income levies introduced by our previous government.

The article contains a quiz in which I got one of the questions right. Its a real eye opener in terms of who pays what in terms of income tax. When compared with the following chart again from Lyons the issue becomes even more stark.

This graphic shows the all in tax rate of Irish average wage workers in comparison to the US, UK and OECD. According to Lyons:
"The graph below shows the average “all-in” personal income tax rate levied on people who earn the average industrial wage, for a range of economies including Ireland, from 2000 on. The figure given is an average tax rate for four stylised households (a single worker with no children, a single worker with two children, a married couple with one earner and no children and a one-earner couple with two children). The figure for each economy includes family cash transfers, paid in respect of dependent children between five and twelve years of age. All figures come from the OECD."

This graph shows that between the period 2000 and 2007 effective income tax rates for the above families on the average industrial wage had dropped to somewhere below zero.
The incoming government face some big issues the bank(and possibly soverign) default which looks likely to come in the next five years, the excessive wages and spending we can no longer afford, fights with unions from consultants and teachers to the public service and political restructuring on a large scale but somewhere in all of this we need to look at a reformed tax system.

In this article Constantin Gurdgeiv makes some interesting suggestions on changes that could benifit our tax system and indeed social welfare such as a 15% flat tax rate and capped (7 year) lifetime welfare benifits not including pensions or disability benifits. As yet I am not sure what I think about either but when people demand "radical" changes to our society and the way we govern ourselves some very radical suggestions to the issues such as these should be considered. It would be far and away preferable to at least put these issues on the table rather than the stock "not on my patch" consensus built disaster we have sleepwalked ourselves into in the last ten years.