Monday, 12 October 2009

Green tax proposals

The Green party are using their NAMA brought political leverage to play in Ireland by extracting some concessions out of the senior coalition partners. Natural, being Green, these are of a particularly Red hue.

One change was lifting the ceiling on PRSI, which was in fact raised not long ago. Since I ran some analysis of Irish marginal and average effective tax rate recently, I thought I would update the charts. I have had to assume that lifting the PRSI ceiling will not come with a revision of the "health levy" that applies to high incomes. Otherwise it wouldn't make much sense to do it in the first place. By removing the ceiling on PRSI, you would increase the marginal rate of tax by 4% on all income over €75,000 approximately. The implications are illustrated in the chart below.

Ireland already has very high marginal rates of tax applying very low down the income scale. This will reinforce that general approach. A 54% marginal rate of tax would apply before you hit twice the median earnings. and 56% would be incurred further up the income scale. This is an implicit statement from the Greens (and to be fair most of the Irish political industry) about who they believe have the primary rights over the market value of your time and expertise.

It isn't you. It's them.

The average rates that would take effect are illustrated below. Ireland's tax structure is already punitively progressive in my opinion. This is another notch on the ratchet of a couple of percent. Given that the massive open pit mine that is Ireland's public finances, I anticipate that we will be seeing more of this type of shift; a couple of percent here, a couple of percent there.

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