Hi guys, you mentioned in this episode and previous episodes not understanding why one would object to solar farms. In this episode it was in the context of statements that Liz Truss made. I am not for a second defending her and not sure what her point is but for your education on why one would object to solar farms is an opinion on land usage, that they should be put on poor quality land and not good quality food producing land, it is not against renewable energy (at least not the logical people). Other people complain about the appearance of them but they need to get over it for the greater good. My opinion is that good quality land should produce food, society should first cover every South facing roof with solar panels, residential, industrial, public and private buildings, then if economics and energy policy says we need more solar it should be installed on poor quality land. This country has plenty of that. A side note is that my opinion that poor land that is not needed for solar and wind should be left return to nature to allow biodiversity recover as it is often producing very little food at the moment , but we need as a society with a growing world population our good quality land producing food. Eamonn Ryan would say that sheep can graze around solar panels but he is fooling himself if he does not admit that the food producing ability of that land will not be dramatically reduced as a solar farm (also sheep are ruminants which he hates most of the time)
Thanks Adrian. Yes, land has competing potential usage. On these islands there is far more land devoted to golf than solar or wind. My instincts are to say that farmers know the best use of land - if they want solar or wind then planners or NIMBY’s should not stand in their way. Future generations will look on our aesthetic hatred of solar panels in the same way we look back, well, any truly weird belief. Brexit, Trump, etc…
Agreed, we can debate land use and the correct location of the solar and wind but the bottom line is we are way behind where we could and should be. The planning office should not really be deciding our land use policy anyway so it should not be grounds for objections.
Jim - As someone who enjoys tax, I think you'll enjoy the visualisation of income Tax that this website gives. The Taxberg and real tax rate that it demonstrates is very helpful in demonstrating the real cost of paying someone a certain salary. As you've noted in your analysis Ireland shows low tax at low income levels and progresses up the table at higher incomes. I've pulled out some comparison to show what these costs add up to in different countries. From my reading of this data there would seem to be some scope for employer PRSI increases notwithstanding the extra costs of doing business in Ireland (energy, insurance, property). Although this would have to be weighed against less job creation as a result.
On the other hand, as the saying goes, the current government has already added a 6% cost to employment for employers not already offering pensions via the new auto-enrolment pension plan which is critiqued in the currency article below.
For example - at a €50k salary - Ireland has a real tax rate of 33% (this includes employer PRSI) with a total cost to the employer of €55,525.
In Portugal - a €50k salary - has a real tax rate of 54.2% with a total cost to the employer of €61,875.
While in Spain - a €50k salary costs €64,604 with a real tax rate of 44.9%.
If we were to follow a Scandinavian countries model - Sweden for example we'd need to increase our real tax rates on this level of income to 61%.
At higher levels, say €300k the real tax rate in Ireland is 52.6% (cost=€333,150) and in Portugal it is 66.1%. (€371,500). Spain has a lower real tax rate of 46.5% (cost = €314,604) while Sweden has a real tax rate of 62.3% at this salary which both show limited progression in real tax rates as salaries increase unlike Ireland and Portugal.
If the top 1% pay a whopping €295k in tax each already then they are earning (on average!) a hell of a lot. I say (on average) because this of course is the mean rather than the median, so you can have a handful of individuals who really skew that distribution by earning enormous amounts. Taking the mean at face value, you’d have to assume those people a shit hot. Really sought after and can demand extraordinarily high wages. I would have to believe they are very resourceful. So they can move quite easily outside of the Irish tax residency if they so choose.
Of course, SF’s proposals are not to just target people at the mean level of wealth as your figures suggest. It’s to target those earning little over €140k, who already pay a whopping 59k income tax already. There must be a lot of them in Ireland!
Many of those earning those type of wages at the lower end of the scale will be self-employed. They can of course choose to pay themselves a salary or not. They choose to the money in the company (paying corporation tax on profits) or adding a lump sum to their pension.
The lesson; putting up taxes doesn’t necessarily bring in more tax revenue.
Anybody who suddenly finds themselves earning €140k a year in Dublin will be comfortable but they won’t be rich - mainly because of how heavy they’re already taxed. Yet SF seem keen to portray these people as millionaires.
Those people are the geese laying the golden eggs in Ireland’s economy. Lose them at our peril. In fact, we’d be better served trying to attract more of them in. The government taking a smaller piece of a much bigger pie.
The best way to show the SF income tax policies for what they are is the gross versus net Gini coefficient compared to other countries. I think the impact Ireland’s tax system makes on the Gini coefficient is the highest in the OECD already. It would be good to then show what the SF policies would do, and how much we would be a complete outlier we would become. It’s madness but I’m sure the populists would find a way to not believe what they see in that graph.
I wonder how much of the rent inflation is driven through cross subsidisation of new rentals subsiding the lost income stream from rent caps on existing rentals?
Should investment for the “green transition” also include spending for the “potential” (what I think is depressingly inevitable) loss in the global battle to fight climate change?
A challenge for your next podcast: if there was an inflation reduction act in ireland (budget unspecified) what would you like to see? Much harder to do in a small economy like ireland admittedly.
Thanks Sean. I think you’ve hit the nail on the head - in the sense that SF’s tax policies are a hammer looking for a nail. They don’t answer the question ‘why?’ What, exactly, are they trying to achieve other than mere ‘nasty signalling’ - the opposite of virtue signalling, something the UK’s Tories are very good at. Which is curious company for SF to keep. Slapping extra taxes on ‘high’ earners can only be about signalling. It won’t raise any serious money. Those signals will, I think be powerful. And be well understood by those who are being signalled.
I’m still thinking about Ireland’s inflation reduction act!
Hi Chris, enjoy the podcast but wondered if you ever provide it in written form, which I prefer. Hope all well and great that you and Jim continue to inform so wisely. Kind regards and from a voice from the past.
Hi Pat, so nice to hear from you after all this time. A real blast from the past! I too prefer the written form and have yet to fully embrace this podcast thing. Despite the podcast! My collaboration with Eamon Dunphy persuaded me if it’s worth - he is more in touch with the zeitgeist than I am. We do write, and I get a much bigger kick out of writing than speaking, but we get lots of requests to turn our written pieces into podcasts. It’s the way of the modern world. Nobody reads anything any more. We get far more listeners than readers
Thanks Chris, good to hear from you and great to note the success of The Other Hand. Spending so much time in the office on my own trying to analyse numbers or read verbose legal docs has made me prefer peace to anything else, while my wife and children prefer the oral route, but listening and advising... Wishing you continued success and longevity.
Thanks, I’ll leave Jim to deal with your points about rents data.
On tax, as you say, back of the envelope. There is reasonable data, from the revenue, about how many people earn little or lots. It’s a while since I looked at it. It may or may not correspond to your calculations. But I don’t think it matters much - what matters is how unequal Ireland is. And in a post-tax, post social welfare way, Ireland is one of the most equal societies on earth. That’s data.
It’s easy to say, and you are more than entitled to say, you are not concerned about high earners paying an extra 3%. But that’s a crap way to make economic policy. We may not like high earners, we may resent them, we may think they can afford to pay a bit more. But that’s a crap way to make economic policy.
Policy should be principles based, with strategic objectives. Taxes always distort, always have intended and unintended consequences. What, exactly, are you trying to achieve by sticking an extra 3% on high earners? Be honest with your answer. If it is to make you feel better about yourself, fine. But that’s a crap way to make economic policy.
I don’t know what problem is being solved by sticking an extra 3% on high earners. So I don’t know what the objective is. It isn’t to raise money. The amounts are trifling in terms of overall budgetary arithmetic.
What’s being signalled here? We don’t like high earners? Why 3%? Why not 30% 3% this year followed by 3% next year? And the year after? What do you think the right rate of tax on high earners should be? If the answer is always ‘more’ then kiss goodbye to a lot of the Irish economy that pays the wages of people not quite so high up the income scale.
It’s the broader message that bothers me. The signalling. ‘We don’t like aspiration and our superficial socialism tells us that capitalists should go home’. They probably will.
If "all" taxpayers, those paying over €275k = 4% of total
If actual taxpayers, those paying over €275k = 6% of total
Either way average income, net of pension, ≈ €600k.
Why might tax increase be acceptable/necessary?
1. Debt/GNI* running at over 100% or nearly €50k per capita.
Unlike other highly indebted countries. Italy, Japan etc. most of Irish debt is foreign owned.
So interest payments leaving Irish economic area.
Interest rates are stable at present. But who knows?
2. Tax receipts.
Ireland likely to run budget surplus of over €10B this year. So what's the problem?
C.T. this year likely to be >€20B. Most of it paid by US MNCs.
a) With the advent of the new US tax structure proposed, call it the "Newest IRA"? US companies will have to pay at least 15%. Most of them don't pay this at present.
One solution might be to repatriate taxable profit to increase overall percentage.
Two main sources of Irish/|US C.T. are Services and Pharma.
God bless Apple. Mostly bookkeeping exercise in IE, so easily transferred?
One consequence of Newest IRA is the proposed control/reduction in Pharma pricing.
Price differential and profits between Irish pharma exports to USA and ROW is substantial.
(Little likelihood of production being relocated to US in near term as FDA approval on new plants takes years).
b) Proposed new OECD tax proposals are suggested to reduce Irish C.T. by €2B-€3B p.a.
(I would suggest more, especially if Apple profits have to be disaggregated by country).
c) If recession, I.T. and VAT might collapse.
I agree Irish GINI coefficient is laudable. One could argue that there might be substantial scamming of the Irish welfare system but that is a far better outcome to the UK system of paying miserly benefits. So I will happily? live with that.
It may arise that all taxes might have to increase and/or benefits/pensions decrease.
In conclusion, I only took the increase in top earners' I.T. from the examples you quoted.
Of the others:
Increase in CAT effects my grandson, so forget it.
Increase in CAT threshold effects my grandson, so forget it.
Increase in CGT effects me, so forget it.
Increase in top earners tax does not effect me, so don't care.
A €600k salary pays €298k in tax according to the income tax calculator I googled. So that’s €23k more tax than you think they ought to pay already, which is more than the 3% of their income you think it’s appropriate to hike their income tax by.
On this revelation I suppose you’re now now happy to leave their income tax alone given that they’re already paying more than you’d like their tax to increase by? :-)
You are making my point for me. When someone says 'I'm going to put your taxes up because it makes me feel good', with no other rationale, the amount by which you put other people's taxes up is unbounded. It's always 'more'.
You know who should pay more tax? Rich people. Who are they? People richer than me.
Heavens forbid I would part with my own hard earned cash for the services I want the government to provide. “No way we won’t pay” is the chant I believe.
Got in my 4Km walk while listening 👍 good to hear the upbeat news from USA
Loved the banter on Year on Year v Month on Month inflation figures - perhaps a simple explainer article on the Substack would aid our politicians 😂
Thanks Deirdre. Maybe we should tailor our podcasts to walking - the 4K or 10k pod?
I average 11 mins a km - so unless you want to talk for an ultra long time- I’d stick to the 4km🤣
As you can probably guess, we could talk long enough for you to do a marathon :)
😂🤣😉 oh yes!! You’ve got never-ending subject matter!!
Hi guys, you mentioned in this episode and previous episodes not understanding why one would object to solar farms. In this episode it was in the context of statements that Liz Truss made. I am not for a second defending her and not sure what her point is but for your education on why one would object to solar farms is an opinion on land usage, that they should be put on poor quality land and not good quality food producing land, it is not against renewable energy (at least not the logical people). Other people complain about the appearance of them but they need to get over it for the greater good. My opinion is that good quality land should produce food, society should first cover every South facing roof with solar panels, residential, industrial, public and private buildings, then if economics and energy policy says we need more solar it should be installed on poor quality land. This country has plenty of that. A side note is that my opinion that poor land that is not needed for solar and wind should be left return to nature to allow biodiversity recover as it is often producing very little food at the moment , but we need as a society with a growing world population our good quality land producing food. Eamonn Ryan would say that sheep can graze around solar panels but he is fooling himself if he does not admit that the food producing ability of that land will not be dramatically reduced as a solar farm (also sheep are ruminants which he hates most of the time)
Love the podcast, keep up the good work.
Thanks Adrian. Yes, land has competing potential usage. On these islands there is far more land devoted to golf than solar or wind. My instincts are to say that farmers know the best use of land - if they want solar or wind then planners or NIMBY’s should not stand in their way. Future generations will look on our aesthetic hatred of solar panels in the same way we look back, well, any truly weird belief. Brexit, Trump, etc…
Agreed, we can debate land use and the correct location of the solar and wind but the bottom line is we are way behind where we could and should be. The planning office should not really be deciding our land use policy anyway so it should not be grounds for objections.
Jim - As someone who enjoys tax, I think you'll enjoy the visualisation of income Tax that this website gives. The Taxberg and real tax rate that it demonstrates is very helpful in demonstrating the real cost of paying someone a certain salary. As you've noted in your analysis Ireland shows low tax at low income levels and progresses up the table at higher incomes. I've pulled out some comparison to show what these costs add up to in different countries. From my reading of this data there would seem to be some scope for employer PRSI increases notwithstanding the extra costs of doing business in Ireland (energy, insurance, property). Although this would have to be weighed against less job creation as a result.
On the other hand, as the saying goes, the current government has already added a 6% cost to employment for employers not already offering pensions via the new auto-enrolment pension plan which is critiqued in the currency article below.
https://thecurrency.news/articles/85681/with-the-new-auto-enrolment-pension-plan-the-burden-for-the-nations-retirement-is-on-employers-who-cares-if-they-can-afford-it/
For example - at a €50k salary - Ireland has a real tax rate of 33% (this includes employer PRSI) with a total cost to the employer of €55,525.
In Portugal - a €50k salary - has a real tax rate of 54.2% with a total cost to the employer of €61,875.
While in Spain - a €50k salary costs €64,604 with a real tax rate of 44.9%.
If we were to follow a Scandinavian countries model - Sweden for example we'd need to increase our real tax rates on this level of income to 61%.
At higher levels, say €300k the real tax rate in Ireland is 52.6% (cost=€333,150) and in Portugal it is 66.1%. (€371,500). Spain has a lower real tax rate of 46.5% (cost = €314,604) while Sweden has a real tax rate of 62.3% at this salary which both show limited progression in real tax rates as salaries increase unlike Ireland and Portugal.
Reference Links at €50k
https://ie.talent.com/tax-calculator?salary=50000&from=year®ion=Ireland
https://pt.talent.com/tax-calculator?salary=50000&from=year®ion=Portugal
https://es.talent.com/tax-calculator?salary=50000&from=year®ion=Andaluc%C3%ADa
https://se.talent.com/tax-calculator?salary=523255.00&from=year®ion=Stockholm
Reference Links at €300k equivalent
https://ie.talent.com/tax-calculator?salary=300000&from=year®ion=Ireland
https://pt.talent.com/tax-calculator?salary=300000&from=year®ion=Portugal
https://es.talent.com/tax-calculator?salary=300000&from=year®ion=Andaluc%C3%ADa
https://se.talent.com/tax-calculator?salary=3139534.71&from=year®ion=Stockholm
As usual, very interesting. You now just waiting for the but:
1. Rent. According to CSO ,"actual rent paid" up 12.9% in July. No mention of new rentals.
Majority of properties in "Rent Pressure Zones"?
Rent increase limited to 2% in RPZs?
How can rents be much greater than 2%?
https://www.cso.ie/en/releasesandpublications/er/cpi/consumerpriceindexjuly2022/
2. Income Tax.
Very back of envelope rounded figures:
According to figures quoted in podcast:
I.T, including USC. €26.7B
Top 1% paid 22%. €5.9B
2 million tax payers. So 20,000 in top 1%
So top 1% paid mean or average of €295,000
Tax rate of approx 50%, allowing for allowances.
So average income of top 1% is €600,000, ignoring added pension contributions. (Extra €100k?)
(Irish bankers would not make it into top 1%)
Frankly I would not be too concerned about them having to pay an extra 3% (€18,000).
Although 3% tax increase means 6% decrease in net pay. A bit unreasonable?
Hi Eanna,
If the top 1% pay a whopping €295k in tax each already then they are earning (on average!) a hell of a lot. I say (on average) because this of course is the mean rather than the median, so you can have a handful of individuals who really skew that distribution by earning enormous amounts. Taking the mean at face value, you’d have to assume those people a shit hot. Really sought after and can demand extraordinarily high wages. I would have to believe they are very resourceful. So they can move quite easily outside of the Irish tax residency if they so choose.
Of course, SF’s proposals are not to just target people at the mean level of wealth as your figures suggest. It’s to target those earning little over €140k, who already pay a whopping 59k income tax already. There must be a lot of them in Ireland!
Many of those earning those type of wages at the lower end of the scale will be self-employed. They can of course choose to pay themselves a salary or not. They choose to the money in the company (paying corporation tax on profits) or adding a lump sum to their pension.
The lesson; putting up taxes doesn’t necessarily bring in more tax revenue.
Anybody who suddenly finds themselves earning €140k a year in Dublin will be comfortable but they won’t be rich - mainly because of how heavy they’re already taxed. Yet SF seem keen to portray these people as millionaires.
Those people are the geese laying the golden eggs in Ireland’s economy. Lose them at our peril. In fact, we’d be better served trying to attract more of them in. The government taking a smaller piece of a much bigger pie.
Hi lads. Spot on as usual.
The best way to show the SF income tax policies for what they are is the gross versus net Gini coefficient compared to other countries. I think the impact Ireland’s tax system makes on the Gini coefficient is the highest in the OECD already. It would be good to then show what the SF policies would do, and how much we would be a complete outlier we would become. It’s madness but I’m sure the populists would find a way to not believe what they see in that graph.
I wonder how much of the rent inflation is driven through cross subsidisation of new rentals subsiding the lost income stream from rent caps on existing rentals?
Should investment for the “green transition” also include spending for the “potential” (what I think is depressingly inevitable) loss in the global battle to fight climate change?
A challenge for your next podcast: if there was an inflation reduction act in ireland (budget unspecified) what would you like to see? Much harder to do in a small economy like ireland admittedly.
Thanks Sean. I think you’ve hit the nail on the head - in the sense that SF’s tax policies are a hammer looking for a nail. They don’t answer the question ‘why?’ What, exactly, are they trying to achieve other than mere ‘nasty signalling’ - the opposite of virtue signalling, something the UK’s Tories are very good at. Which is curious company for SF to keep. Slapping extra taxes on ‘high’ earners can only be about signalling. It won’t raise any serious money. Those signals will, I think be powerful. And be well understood by those who are being signalled.
I’m still thinking about Ireland’s inflation reduction act!
Hi Chris, enjoy the podcast but wondered if you ever provide it in written form, which I prefer. Hope all well and great that you and Jim continue to inform so wisely. Kind regards and from a voice from the past.
Pat Gleeson. ex BIAM, now Pharmafilter.
Hi Pat, so nice to hear from you after all this time. A real blast from the past! I too prefer the written form and have yet to fully embrace this podcast thing. Despite the podcast! My collaboration with Eamon Dunphy persuaded me if it’s worth - he is more in touch with the zeitgeist than I am. We do write, and I get a much bigger kick out of writing than speaking, but we get lots of requests to turn our written pieces into podcasts. It’s the way of the modern world. Nobody reads anything any more. We get far more listeners than readers
Thanks Chris, good to hear from you and great to note the success of The Other Hand. Spending so much time in the office on my own trying to analyse numbers or read verbose legal docs has made me prefer peace to anything else, while my wife and children prefer the oral route, but listening and advising... Wishing you continued success and longevity.
Thanks, I’ll leave Jim to deal with your points about rents data.
On tax, as you say, back of the envelope. There is reasonable data, from the revenue, about how many people earn little or lots. It’s a while since I looked at it. It may or may not correspond to your calculations. But I don’t think it matters much - what matters is how unequal Ireland is. And in a post-tax, post social welfare way, Ireland is one of the most equal societies on earth. That’s data.
It’s easy to say, and you are more than entitled to say, you are not concerned about high earners paying an extra 3%. But that’s a crap way to make economic policy. We may not like high earners, we may resent them, we may think they can afford to pay a bit more. But that’s a crap way to make economic policy.
Policy should be principles based, with strategic objectives. Taxes always distort, always have intended and unintended consequences. What, exactly, are you trying to achieve by sticking an extra 3% on high earners? Be honest with your answer. If it is to make you feel better about yourself, fine. But that’s a crap way to make economic policy.
I don’t know what problem is being solved by sticking an extra 3% on high earners. So I don’t know what the objective is. It isn’t to raise money. The amounts are trifling in terms of overall budgetary arithmetic.
What’s being signalled here? We don’t like high earners? Why 3%? Why not 30% 3% this year followed by 3% next year? And the year after? What do you think the right rate of tax on high earners should be? If the answer is always ‘more’ then kiss goodbye to a lot of the Irish economy that pays the wages of people not quite so high up the income scale.
It’s the broader message that bothers me. The signalling. ‘We don’t like aspiration and our superficial socialism tells us that capitalists should go home’. They probably will.
What a pleasant surprise.
Back of the envelope a bit of a cockup. I blame it on babysitting grandson all day!
Some actual figures; https://www.revenue.ie/en/corporate/documents/statistics/income-distributors/individualised-gross-income.pdf
Are taxpayers only those who pay tax or not?
If "all" taxpayers, those paying over €275k = 4% of total
If actual taxpayers, those paying over €275k = 6% of total
Either way average income, net of pension, ≈ €600k.
Why might tax increase be acceptable/necessary?
1. Debt/GNI* running at over 100% or nearly €50k per capita.
Unlike other highly indebted countries. Italy, Japan etc. most of Irish debt is foreign owned.
So interest payments leaving Irish economic area.
Interest rates are stable at present. But who knows?
2. Tax receipts.
Ireland likely to run budget surplus of over €10B this year. So what's the problem?
C.T. this year likely to be >€20B. Most of it paid by US MNCs.
a) With the advent of the new US tax structure proposed, call it the "Newest IRA"? US companies will have to pay at least 15%. Most of them don't pay this at present.
One solution might be to repatriate taxable profit to increase overall percentage.
Two main sources of Irish/|US C.T. are Services and Pharma.
God bless Apple. Mostly bookkeeping exercise in IE, so easily transferred?
One consequence of Newest IRA is the proposed control/reduction in Pharma pricing.
Price differential and profits between Irish pharma exports to USA and ROW is substantial.
(Little likelihood of production being relocated to US in near term as FDA approval on new plants takes years).
b) Proposed new OECD tax proposals are suggested to reduce Irish C.T. by €2B-€3B p.a.
(I would suggest more, especially if Apple profits have to be disaggregated by country).
c) If recession, I.T. and VAT might collapse.
I agree Irish GINI coefficient is laudable. One could argue that there might be substantial scamming of the Irish welfare system but that is a far better outcome to the UK system of paying miserly benefits. So I will happily? live with that.
It may arise that all taxes might have to increase and/or benefits/pensions decrease.
In conclusion, I only took the increase in top earners' I.T. from the examples you quoted.
Of the others:
Increase in CAT effects my grandson, so forget it.
Increase in CAT threshold effects my grandson, so forget it.
Increase in CGT effects me, so forget it.
Increase in top earners tax does not effect me, so don't care.
No one ever accused me of being altruistic.😃
Excellent set of podcasts.
A €600k salary pays €298k in tax according to the income tax calculator I googled. So that’s €23k more tax than you think they ought to pay already, which is more than the 3% of their income you think it’s appropriate to hike their income tax by.
On this revelation I suppose you’re now now happy to leave their income tax alone given that they’re already paying more than you’d like their tax to increase by? :-)
You are making my point for me. When someone says 'I'm going to put your taxes up because it makes me feel good', with no other rationale, the amount by which you put other people's taxes up is unbounded. It's always 'more'.
Indeed.
You know who should pay more tax? Rich people. Who are they? People richer than me.
Heavens forbid I would part with my own hard earned cash for the services I want the government to provide. “No way we won’t pay” is the chant I believe.