I too get very annoyed that I pay considerably more tax than comparable countries like the UK whilst seemingly getting very little in return. I have to purchase private health insurance for example, as I watch a ridiculously costly children’s hospital getting built. But am I just a whinge complaining about my first world problem?
I think the laffer curve is incredibly difficult to measure. I’m not sure how Chris definitively priced its non-existence. Are we not seeing something similar to the laffer curve with the great resignation? We made extra work so penal and doing diddly squat so attractive that nobody wants to work anymore? Is it not a variation of the laffer curve that makes communist countries like Cuba so unproductive? Perhaps Chris’ point is a percentage point here and there doesn’t make a huge difference, but I would have thought the laffer curve is evident at the extremes.
Thanks Sean. I was careful, I think, to acknowledge the reality of the Laffer curve. Every tax is subject to it. There is a maximum point, to the right of which, tax revenue falls as tax rates increase. And vice versa. The trick is establishing where you actually are on the curve. Not easy, as you say. The way to think about this is in terms of simple,economics. Supply elasticities of capital and labour. So you do fancy overlapping generations models, extended for endogenous capital formation, with all sorts of heels and whistles. Or variants with greater or lesser complexity. You can then back out, for example, the elasticity of supply of labour, for a given tax change, that would be necessary for tax revenues to rise after a tax cut. Because, when you think about it, that’s the only way tax revenues can go up when tax rates fall: hours worked and/or numbers in work must go up by enough to more than compensate for the fall in the tax rate. In other words, the tax base must increase in size sufficient to offset the fall in the tax rate. Every time you do an exercise like this you come up with supply elasticities that are so high they look ridiculous. You might get more hours worked or more people in the workforce if you cut taxes, but any plausible parameterisation/quantification of that doesn’t get you anywhere near enough supply response. If you and Jim think about your own positions, I’d guess you both moan about 52% taxes but both work very hard. Your labour supply elasticities are very low.
I think the great resignation was more about bullshit jobs, the horror of modern corporate life, than taxes.
Disingenuous i reject totally. I have argued for years that the threshold at which one starts to pay the top rate of tax should be lifted to at least 50,000. I feel even stronger about that today. I think the positive attribute of the USC is that it broadens the tax base and as such should not be abolished. I suggested back in 2009 that the corporation tax rate should be lifted by 5%, at least on a temporary basis, but i got pilloried from all sections, particularly the IDA. I would have no problem with a 15% corporation tax rate for all companies, not just those with turnover in excess of 750 k. FF, FG, Labour and SF not interested in such a suggestion. Not sure where you come up with the description of disingenuous. Will discuss in next pod. Thanks for thoughtful comments.
Apologies, disingenuous isn’t fair. I didn’t mean to offend. I’ll hold my hands up and admit I’m only familiar with your work on this podcast and The Stand. I do feel the warning you give to future governments is not to fiddle with the tax system too much.
USC broadens the tax bases simply because of the inadequacies of income tax. Could more income tax bands be added and the sources of income that are taxed by USC be taxed by income tax?
It’s interesting to hear you were ridiculed for the corp tax increase suggestion. I really don’t understand why most Irish people seem ok with the corp tax rate and don’t see it as an opportunity to increase which could help lower the burden on income tax payers.
Future governments need to be more ambitious about tax policy. It has been stagnant for several governments now. The fact that people reach a point where they don’t think it’s worth their while to earn more simply because the tax is too high is madness.
Thank you. No i really appreciate all feedback. In the next pod, due tomorrow i think, we address a lot of the tax issues you raised and more. I agree on the USC point, and i also believe a mid income tax rate would be a good idea. See what you think of our discussion tomorrow. Thanks
Thanks for another super podcast. Regarding your points on the personal tax disincentive, I feel exactly the same as Jim and I regularly question should I do additional work. Frequently the answer is no as the marginal benefit remaining after tax for the additional work is just not worth it. Sadly, the Irish electorate, which already has the most redistributive tax and welfare system in the EU, intends to seriously risk the hugely successful Irish economic model by electing a fully leftist government which intends to tax higher earners and investors significantly more. A socialist government led by Sinn Féin with the probable involvement of the Social Democrats, Labour and People Before Profit is unlikely to change tack from their recent budget submissions which plan for more income taxes and wealth taxes imposed on those who already pay the most. Further, none of these parties appears to have an economic plan or or economic development policy of their own. They do however have plenty of spending commitments. On taxation, their assumption is that they can apply more taxes on investors, entrepreneurs, high earners, FDI companies and Irish businesses and that economic growth will continue unabated. I firmly believe that over one term of a leftist government a significant cohort of investors and higher tax payers will say no to more taxation and depart to other jurisdictions where their contribution is appreciated. Obviously in that scenario Irish taxation yields in Ireland will fall, private investment will suffer and public spending will come under huge pressure.
I’ve a question for Jim if he could answer it on the next pod if possible?
Jim keeps telling us how strong the Irish tax take is and how well oiled of a machine it is. He has often warned of the dangers of a new government coming in and implementing or tinkering with the tax policy which may undermine the current basic economic model. My question lies with universal social charge (USC). Would he agree with a new government coming in and abolishing USC? Could this be possible without having a detrimental effect on the tax intake? We are constantly told that tax intake is booming and that Corp tax is at all time highs. Could the tax burden not be eased on the average tax payer? Or, if it was deemed to be detrimental could Corp tax not be increased by 1 or 2% more to cover the loss of USC. A small increase of Corp tax would still make us one of the lowest Corp taxes in Europe.
We were told at the time that USC was “temporary”. Now with tax intake at all time highs it would seem possible to abolish it. If not now then when? We’ll never be in a better situation (tax intake wise) than we have been over the last 2 years.
It seems to me that something needs to be done about the tax burden on the average tax payer. Jim even said it himself in a previous episode that he sometimes won’t bother doing extra work as it wouldn’t be worth his time after he pays the extra tax. I feel his warnings to potential new governments about implementing new tax policies are a bit disingenuous at times. There’s no point having tax intake at all time highs when the average tax payer doesn’t feel richer.
Great discussion again.
I too get very annoyed that I pay considerably more tax than comparable countries like the UK whilst seemingly getting very little in return. I have to purchase private health insurance for example, as I watch a ridiculously costly children’s hospital getting built. But am I just a whinge complaining about my first world problem?
I think the laffer curve is incredibly difficult to measure. I’m not sure how Chris definitively priced its non-existence. Are we not seeing something similar to the laffer curve with the great resignation? We made extra work so penal and doing diddly squat so attractive that nobody wants to work anymore? Is it not a variation of the laffer curve that makes communist countries like Cuba so unproductive? Perhaps Chris’ point is a percentage point here and there doesn’t make a huge difference, but I would have thought the laffer curve is evident at the extremes.
Thanks Sean. I was careful, I think, to acknowledge the reality of the Laffer curve. Every tax is subject to it. There is a maximum point, to the right of which, tax revenue falls as tax rates increase. And vice versa. The trick is establishing where you actually are on the curve. Not easy, as you say. The way to think about this is in terms of simple,economics. Supply elasticities of capital and labour. So you do fancy overlapping generations models, extended for endogenous capital formation, with all sorts of heels and whistles. Or variants with greater or lesser complexity. You can then back out, for example, the elasticity of supply of labour, for a given tax change, that would be necessary for tax revenues to rise after a tax cut. Because, when you think about it, that’s the only way tax revenues can go up when tax rates fall: hours worked and/or numbers in work must go up by enough to more than compensate for the fall in the tax rate. In other words, the tax base must increase in size sufficient to offset the fall in the tax rate. Every time you do an exercise like this you come up with supply elasticities that are so high they look ridiculous. You might get more hours worked or more people in the workforce if you cut taxes, but any plausible parameterisation/quantification of that doesn’t get you anywhere near enough supply response. If you and Jim think about your own positions, I’d guess you both moan about 52% taxes but both work very hard. Your labour supply elasticities are very low.
I think the great resignation was more about bullshit jobs, the horror of modern corporate life, than taxes.
Disingenuous i reject totally. I have argued for years that the threshold at which one starts to pay the top rate of tax should be lifted to at least 50,000. I feel even stronger about that today. I think the positive attribute of the USC is that it broadens the tax base and as such should not be abolished. I suggested back in 2009 that the corporation tax rate should be lifted by 5%, at least on a temporary basis, but i got pilloried from all sections, particularly the IDA. I would have no problem with a 15% corporation tax rate for all companies, not just those with turnover in excess of 750 k. FF, FG, Labour and SF not interested in such a suggestion. Not sure where you come up with the description of disingenuous. Will discuss in next pod. Thanks for thoughtful comments.
Jim
Apologies, disingenuous isn’t fair. I didn’t mean to offend. I’ll hold my hands up and admit I’m only familiar with your work on this podcast and The Stand. I do feel the warning you give to future governments is not to fiddle with the tax system too much.
USC broadens the tax bases simply because of the inadequacies of income tax. Could more income tax bands be added and the sources of income that are taxed by USC be taxed by income tax?
It’s interesting to hear you were ridiculed for the corp tax increase suggestion. I really don’t understand why most Irish people seem ok with the corp tax rate and don’t see it as an opportunity to increase which could help lower the burden on income tax payers.
Future governments need to be more ambitious about tax policy. It has been stagnant for several governments now. The fact that people reach a point where they don’t think it’s worth their while to earn more simply because the tax is too high is madness.
Thank you. No i really appreciate all feedback. In the next pod, due tomorrow i think, we address a lot of the tax issues you raised and more. I agree on the USC point, and i also believe a mid income tax rate would be a good idea. See what you think of our discussion tomorrow. Thanks
Jim
Thanks for another super podcast. Regarding your points on the personal tax disincentive, I feel exactly the same as Jim and I regularly question should I do additional work. Frequently the answer is no as the marginal benefit remaining after tax for the additional work is just not worth it. Sadly, the Irish electorate, which already has the most redistributive tax and welfare system in the EU, intends to seriously risk the hugely successful Irish economic model by electing a fully leftist government which intends to tax higher earners and investors significantly more. A socialist government led by Sinn Féin with the probable involvement of the Social Democrats, Labour and People Before Profit is unlikely to change tack from their recent budget submissions which plan for more income taxes and wealth taxes imposed on those who already pay the most. Further, none of these parties appears to have an economic plan or or economic development policy of their own. They do however have plenty of spending commitments. On taxation, their assumption is that they can apply more taxes on investors, entrepreneurs, high earners, FDI companies and Irish businesses and that economic growth will continue unabated. I firmly believe that over one term of a leftist government a significant cohort of investors and higher tax payers will say no to more taxation and depart to other jurisdictions where their contribution is appreciated. Obviously in that scenario Irish taxation yields in Ireland will fall, private investment will suffer and public spending will come under huge pressure.
I’ve a question for Jim if he could answer it on the next pod if possible?
Jim keeps telling us how strong the Irish tax take is and how well oiled of a machine it is. He has often warned of the dangers of a new government coming in and implementing or tinkering with the tax policy which may undermine the current basic economic model. My question lies with universal social charge (USC). Would he agree with a new government coming in and abolishing USC? Could this be possible without having a detrimental effect on the tax intake? We are constantly told that tax intake is booming and that Corp tax is at all time highs. Could the tax burden not be eased on the average tax payer? Or, if it was deemed to be detrimental could Corp tax not be increased by 1 or 2% more to cover the loss of USC. A small increase of Corp tax would still make us one of the lowest Corp taxes in Europe.
We were told at the time that USC was “temporary”. Now with tax intake at all time highs it would seem possible to abolish it. If not now then when? We’ll never be in a better situation (tax intake wise) than we have been over the last 2 years.
It seems to me that something needs to be done about the tax burden on the average tax payer. Jim even said it himself in a previous episode that he sometimes won’t bother doing extra work as it wouldn’t be worth his time after he pays the extra tax. I feel his warnings to potential new governments about implementing new tax policies are a bit disingenuous at times. There’s no point having tax intake at all time highs when the average tax payer doesn’t feel richer.