The Creepy Millionaires’ Budget
The ‘creepy’ is in the detail which the Government didn’t reveal.
Social welfare rates will fall by 4 percent (except for pensioners). Regarding low-average earners this is what the budget tables tell us.
All low-average income earners - self-employed and PAYE (both private and public sector) will suffer considerable falls in income.
This is where it starts getting creepy. Those who receive income via rents, dividends, interest and self-employment (non-wage income, or Schedule D taxpayers) are, unsurprisingly, the wealthiest in society. When we hit the stratosphere of high earnings - over €150,000 per anum - those who receive income via non-wages make up nearly 75 percent of all income received above that level; the remaining 25 percent comes from high-earning PAYE taxpayers (e.g. managers, executives, higher professionals, etc.).
What happens to these high-income, non-wage earners? According to the budget tables.
They get off pretty lightly - seeing their net income fall by approximately 1 percent. Contrast that with low-average income earners, including social welfare income. It’s substantially less.
But this is where it gets really creepy.
The budget tables stop their comparisons at €175,000. With the help of the Deloitte tax calculator, we can go higher. This is what Deloitte tells us for non-wage incomes that leave the stratosphere and circle far above the planet the rest of us live on.
That’s right - those are not negative figures. Budget 2011 provides considerable tax breaks for those on very high non-wage incomes. If you happen to be a millionaire you are nearly 6 percent better off with Fianna Fail’s budget. How does this occur?
This is how Deloitte breaks down the millionaire’s budget. They will pay €11,936 more on income tax and PRSI. However, under the Universal Social Charge, they pay €34,931 less than under the Health and Income levies which the Charge. That really puts the ‘Social’ in Universal Social Charge.
And at the risk of totally creeping you out, the ESRI estimates that there will be no wage-growth next year. However, non-wage income (rents, dividends, interest, and self-employment) will grow by 29 percent. So those very high non-wage earners can look forward to not only an increase in their incomes, but tax breaks on top of that.
Truly, a millionaire’s budget.
Discussion
We welcome and encourage lively discussion from the public about articles on Irish Left Review. You can leave a comment using the form at the bottom of the page. Please read through the existing comments before posting your own.
This article is also being discussed on the following websites:
Leave a Comment
Sins of the Father
Subscribe by Email
Best of the Web
EU Should Admit Greece is Bankrupt | Christian Rickens
The unvarnished truth - the second Greek Bailout should not have happened.
The mistake isn’t the size, but the construction of the bailout package. It isn’t geared to the requirements of the people of Greece but to the needs of the international financial markets, meaning the banks.
How else can one explain the fact that around a quarter of the package won’t even arrive in Athens but will flow directly to the country’s international creditors? The holders of Greek government bonds are to get some €30 billion as an incentive to convert their old paper into new bonds. The aim is to keep alive the illusion that Greece isn’t bankrupt — after all, the creditors are voluntarily forgiving part of the debt. The financial sector is cleverly manipulating the fear that a Greek bankruptcy would trigger a fatal chain reaction.
That leaves €100 billion. But that too isn’t geared to what Greece needs in order to get back on its feet. It’s linked to an estimate of how much debt the Greek economy can bear without collapsing. International technocrats agree that with debts amounting to 120 percent of gross domestic product, the country can just about go on servicing its debt. That’s the level at which the cow can go on supplying milk without dying of exhaustion. So 120 percent became the goal.
Collaboration, with our European partners | Cunning Hired Knaves
The European project was supposed to be a bulwark against the dangers of fascist ambition, but now it is the instrument used to dismantle European democracy in the interest of the risk adverse looking for a steady income stream from the provision of the social net by those who cite the words and actions of old fascists while doing so.
The post Collaboration, with our European partners by Richard of Cunning Hired Knaves summed up in one sentence. For much better sentences and many more urgent points read the post.
On Sunday there were massive demonstrations throughout the Spanish state, with half a million people on the streets of Madrid and 450,000 in Barcelona, protesting against the labour ‘reform’ planned by the Partido Popular, the right-wing party that most closely represents the interests of the power elites that conserved their position when the transition from dictatorship to democracy was undertaken.
S.P.A.R.K. protest at cuts to lone parents, Dublin 18th February 2012
Many families were cut in the last budget but lone parent families were particularly hit by the Fine Gael/Labour Party government.
The key elements are that single parents can’t take advantage of training such as Community Employment (CE) Schemes and when the youngest child turns 7 years old, the parent is declassed as a lone parent but treated as an ordinary worker even though there are few affordable creche places. There is a bill coming up in March which will copper fasten some of the worst elements of government plans.
There is particular anger directed at the Labour Party because they are associated with women’s rights and a more progressive society.
Please share the link to this video
Exiting the euro | Michael Roberts
Michael Roberts argues that those in Greece who cite the example of Argentina when suggesting that Greece should leave the Euro are not necessarily looking at the whole picture. The situations are not the same, Roberts points out, citing Argentina’s former central bank governor at the time, Mario Blejer and his recent piece in the Financial Times. He also points to research based on the the experience of five recent devaluations of economies in crisis (including that of Argentina) which “shows that they lead to a 10-20% fall in real GDP and take five to ten years to recover to previous real GDP levels. But that is not to say that there is no alternative to “lowering wages, privatising the state sector, reducing taxes for the corporate sector (especially big business) and ‘deregulating’ labour markets i.e. the super-exploitation of the Greek people to raise profitability.”
But the left could also find an alternative policy to exiting the euro where Greece negotiates a full default on its debt to private and foreign bondholders; takes over the banks; and uses the savings from bond and interest repayments (€17-20bn a year) to start state directed investment in jobs, technology and funding small businesses, while staying in the euro to protect the savings of the people from destruction, keeping down inflation and avoiding a rise in foreign debt. The question of exiting the euro then becomes an issue for the Euro leaders to impose (and to be resisted by a campaign within Europe), not as the main policy plank of the left.
Corporate tax avoidance: where are the worst offenders?
This table comes via the Tax Justice Network (and Richard Murphy). It’s from a table produced by U.S. researcher Kimberly Clausing and as TJN notes “demonstrates which countries are working hardest to wage economic warfare on the United States (and, by extension, on other countries,) via the global tax system”.
Solidarity campaign to support the people of Greece
Mikis Theodorakis, famous Greek composer of Zorba’s Dance, and Manolis Glezos, veteran resistance fighter against the Nazi occupation, have issued a call for a European Front to defend the people of Greece and all those facing austerity. We have decided to support this call and work with trade unions, campaigns and parties across Europe to establish a European Solidarity Campaign to defend the people of Greece. We will organise solidarity and raise practical support for the people of Greece; they cannot be made to pay for a crisis for which they are not responsible.
Chris Dillow | Capitalism against freedom
[...]
During the Cold War, opponents of communism routinely, and not entirely wrongly, claimed to be champions of liberty. Freedom for capitalists and freedom of speech and thought go together, it was claimed. “Freedom is indivisible” wrote Bruce Winton Knight in 1952. “Economic freedom is…an indispensable means toward the achievement of political freedom“ wrote Milton Friedman in Capitalism and Freedom. And back in 1944 Friedrich Hayek complained that “We have progressively abandoned that freedom in economic affairs without which personal and political freedom has never existed in the past.”
Today, though, this seems wrong. Many threats to freedom come from capitalists. The story is no longer capitalism and freedom, but capitalism against freedom.
Ian Stewart | The mathematical equation that caused the banks to crash
In The Observer, Sunday 12 February 2012
Anyone who has followed the crisis will understand that the real economy of businesses and commodities is being upstaged by complicated financial instruments known as derivatives. These are not money or goods. They are investments in investments, bets about bets. Derivatives created a booming global economy, but they also led to turbulent markets, the credit crunch, the near collapse of the banking system and the economic slump. And it was the Black-Scholes equation that opened up the world of derivatives.
The equation itself wasn’t the real problem. It was useful, it was precise, and its limitations were clearly stated. It provided an industry-standard method to assess the likely value of a financial derivative. So derivatives could be traded before they matured. The formula was fine if you used it sensibly and abandoned it when market conditions weren’t appropriate. The trouble was its potential for abuse. It allowed derivatives to become commodities that could be traded in their own right. The financial sector called it the Midas Formula and saw it as a recipe for making everything turn to gold. But the markets forgot how the story of King Midas ended.
Greece: a Sisyphean task | Michael Roberts
In a Eurozone that is unwilling to share its surplus with weaker, hardest hit economies there is no other option for those economies but default. Despite the agreement of Greek politicians to shorten their political life and accept the deal all that they have done is simply postpone this eventuality once again. However, even that postponement might be shortened by the Greek elections in April where the smaller leftist parties outside the coalition currently have 40% of the vote. Or so says Michael Roberts:
Whatever the Greek coalition leaders agree to and try to implement, such is the weakness of Greek capitalism, it will not be able to meet its fiscal targets or get its debt down to reasonable levels. Before the end of the year, the Troika will have to report that Greece is not delivering. Then the EU leaders will have to decide whether they ‘let Greece go’ or not. The EU leaders have agreed to more money for Greece (or more accurately its bondholders and banks) in return for draconian cuts in living standards in order to provide more time to try and ‘ring-fence’ other vulnerable Eurozone states like Portugal and Ireland (where they are preparing extra funding). So when Greece goes down, it will not affect the rest (or so the EU leaders hope). Of course, the Greek people may force the issue earlier if they vote in an anti-Troika government in April.
As Greece stares into the abyss, Europe must choose | Maria Margaronis
Do we really want to live in an economic union that must destroy the future of millions in order to just tick along? Maria Margaronis points out that the situation in Greece today says little about Greece and everything about the EU.
The trouble with historical metaphors is that they can obscure the present: what’s really at stake here is not Greece’s identity but Europe’s. All eyes are fixed on Athens, but the way out of the crisis requires a choice about what kind of Europe we want. The one we have now, with its deep structural inequalities and its rigid adherence to a failed economic ideology, protects neither democracy nor human rights. Stiff-necked and punitive, it prefers to eat its children.
Comment by: Corkoniense
Dec 8th 2010 at 16:12
Holy Jebus! Do you think Lenihan and DofF finance officials realised this when they brought in these tax changes? How do they think this is going to revive the economy? Can they really ascribe monetarist ideology to this policy? Or are they really hell bent on looting the country before the inevitable default?
Comment by: Con Carroll
Dec 8th 2010 at 18:12
people should be asking serious questions to independent, deputy Joe Behan. ex ff. for his support. we also have to ask serious questions about Michael Lowry, Denis o Brien. moriarity tribunal. this is not a recession this is class war. ministers 10,000 euro cut while peoople are expected to shut up. and accept, cuts in their wages. good to see people on the streets in peaceful protests.
Comment by: William Wall
Dec 8th 2010 at 18:12
Don’t bother asking Michael Lowry anything. He learned how to not answer questions when he was trying to hide Ben Dunn’s bribes (sorry ‘gifts’) from the Moriarty Tribunal. What do you expect from an asshole except….
Comment by: Mark C
Dec 8th 2010 at 20:12
Thanks for posting this Michael. It’s very useful information, and only confirms, yet again, the agenda of “our” government.
Comment by: Aidan R
Dec 8th 2010 at 21:12
Great post Mick.
But, quick question; how are you arriving at the final figure of €34,941? Is this purely a result of the changes in the ’social’ levy or the outcome of a specific tax break that enables an increase in net income (or if not earned - net worth?). I am arriving at quite a different figure but probably because I am missing a lot of these tax breaks?
Either way, one thing is for sure. This is class war being waged by the state.
Aidan
Comment by: Michael Taft
Dec 8th 2010 at 22:12
Aidan - I’ve taken the difference between what high-income groups paid on the health/income levies and what they are paying under the Universal Social Charge. That’s all the €34,941 figure refers to. On income tax/PRSI, they are paying €11,936. I’ve only taken these from the Deloitte Tax Calculator. And that is for non-employees (that is, Schedule D taxpayers). I understand that other calculators are coming up with slightly different results but that may be because they are not factoring in the PRSI changes on Pension contributions (which the Government assessed at 6% of income).
But whatever about a few euros here or there, you’re right. This is class war (though it will never be called that until the victims start fighting back).
Comment by: Rory
Dec 9th 2010 at 10:12
Could you explain more of how you got those figures? Could you tell us what figures you put into the tax calculator ( http://www.deloitte.ie/tc/ ) so that we can reproduce these results?
Comment by: Michael Taft
Dec 9th 2010 at 10:12
Rory - when you get to the Deloitte Tax calculator under Status press Single, then press No under ‘Are You an Employee’ (this will make the calculation based on Schedule D). Then type in 1,000,000 (or any other figure) under ‘Your Income’ and then type in what ever 6% of Your Income comes to under ‘Have You Made A Qualifying Pension’. For €1,000,000 this would be 60,000. This keeps it consistent with the Department of Finance calculations in their Annexes.
Comment by: William Wall
Dec 9th 2010 at 11:12
I see that The Greys (sorry, The ‘Greens’) continue to keep FF in power. They continually struggle with their consciences and win. They need a bit of fig-leaf legislation to hide the naked arse-licking they’ve had to do. To get that fig-leaf they’re going to give FF a ‘long lead time’ which will almost certainly see them make offers that will help them gain in the election.
Comment by: kieran
Dec 9th 2010 at 12:12
Interesting analysis, and don’t disagree with the analysis that the very rich got away lightly in this bduget.
However, you miss a fundamental poingt how many taxpayers are on salaries of €1m? I’m sure that is available, but I’d say we’re talking about no more than a hundred (guess). To quote Moore McDowell, the tax base is shaped like a ship’s decanter, with those few rich at the narrow neck and the majority at the base. We can tax the bejaysus out of the rich but it ain’t going to solve the problems we’re in.
It is easy to put up headlines like this - what is harder is to put together a cogent analysis of a realistic solution - even a 100% tax rate on incomes greater than say €250k might give us grim satisfaction but won’t even come close to solving the problem we’re in…assumuing those on that kind of money would stay and pay such rates.
Comment by: William Wall
Dec 9th 2010 at 12:12
Isn’t Moore McDowell very knowledgeable for a founding member of the Open Republic Institute and chief cryer-in for neoliberalism in Ireland. A ship’s decanter specifically! Well, he’s more than one kind of expert it seems. But you miss the point, Kieran. Taxing the super-rich may not fix the economy, but not taxing them is what we’re talking about. Not taxing the super-rich is a political decision by a right-wing government.
But, have a laugh for yourself and read this report:
http://www.finfacts.com/irelandbusinessnews/publish/printer_1000article_1010706.shtml
In it you’ll see that Bank of Ireland Private Banking estimated in 2007 that:
“the number of millionaires in Ireland has increased from 30,000 to 33,000 in the 12 months, an increase of 10%. Bank of Ireland Private Banking’s definition of a millionaire is the sum of total assets excluding principal private residence. Of those, it estimates that there are approximately 330 individuals with a net worth in excess of €30 million, a further 3,000 with a net worth of between €5 million and €30 million, with the remaining having a net worth of between €1 million -€5 million.”
The report really is worth it. It’s one of the funniest things I’ve read in years.
Of course, most of these chaps were *only* millionaires. And a few of them probably aren’t millionaires any more as a result of having put money into Bank of Ireland etc. And, as regards income, you’d need to work out what someone with assets in excess of €30 million would be making. But it’s a very wide-necked decanter. More of a barrel maybe…
Comment by: patrick
Dec 9th 2010 at 14:12
But how many of those millionaires are earning salaries of a million a year? The above 33,000 have assets of over a million….not salaries.
I agree though, there is no excuse for taxing them any less than the rest of us!!
Comment by: William Wall
Dec 9th 2010 at 15:12
@ Patrick I quote my last sentence “And, as regards income, you’d need to work out what someone with assets in excess of €30 million would be making. But it’s a very wide-necked decanter. More of a barrel maybe…”
But the point I’m making is that not taxing them is a political decision - a typically right-wing political decision. As is deciding to increase tax on the unemployed, the disabled etc.
Comment by: Peter Bovril
Dec 9th 2010 at 16:12
The budget calculators provided by the likes of Deloitte are arbitrary by nature. They are based on a number of assumptions and do not (nor cannot) include the impact of:
1. Imposition of USC on pension contributions
2. Removal of all property reliefs against which income can be sheltered.
The plain fact is that marginal tax rate for all individuals earning in excess of €32,800 is now 52% for each €1 more of income earned.
I think people should inform yourselves correctly before commenting on matters which they evidently do not understand
Comment by: Michael Taft
Dec 9th 2010 at 16:12
Kieran - I take your point re: how much tax would be gained on how many rich people. However, the immediate (and only) issue the post addressed was the distributional impact of the budget on high income groups. The issue you have raised is, while tangential, is separate. And to be honest, one cannot touch upon all tangential aspects in one post; otherwise, it could run to volumes.
A number of groups have put forward credible policies to increase taxation on high-income groups: Community Platform, TASC, Labour, Sinn Fein. These range from €2 billion to €3 billion. Many sectors among high-income groups are likely to see solid income growth as I mentioned in the post, reinforcing the prospect of atrracting high-yields next year and in subsequent years.
In addition, it is not only income here but income abroad that should be counted (which is why the Community Platform’s proposal re: a citizenship basis for taxation is so useful). As well, a wealth tax is not a tax on income but on property - embedded past income if you will.
There is considerable scope for increasing taxation on high income groups - taxation that goes beyond income generated domestically. It is worth checking these out.
In addition, I would refer you to UNITE’s ‘The Peoples’ Budget’ as an example of an alternative programme grounded in an alternative analysis of income, wealth and, most of all and most importantly, growth.
Comment by: Michael Taft
Dec 9th 2010 at 16:12
Peter - First, I don’t think you mean that such calculators are ‘arbitrary’. Rather, you mean they do not capture all the circustance of the tax system with all the reliefs, allowances and exemptions. You may be correct that the calculator doesn’t pick up the new PRSI/USC charges on the pension contribution. Let’s do it ourselves - 11% on the pension contribution. If you had done that you’d have found that the millionaire would have recieved a 4% increase in net income. I won’t argue the toss between 4% and 5.6% increase - the principle remains.
Or, let’s remove the pension contribution variable. What do we find? The millionaire gets a 5.1% increase, the average industrial earner takes a -3.6% hit. Again, the principle remains.
Second, I would urge you to read, at least, the Summary of budget measures. Those tax shelters still remain. Property tax reliefs won’t be guillotined until 2014, with some reliefs being carried forward to 2021. A clue to the fact that these reliefs will persist lies in the limited yield the Government estimates: €60 million this year and €100 million in a full year.
Third, the marginal tax rate for average industrial earners has risen from 51% to 52%. For millionaires (under Schedule D) it fell - from 55% to 52%. Progressive?
You’re right, Peter: ‘people should inform yourselves correctly before commenting on matters which they evidently do not understand.’
Comment by: Pope Epopt
Dec 9th 2010 at 22:12
Thank you Michael - you have done us all a service by putting figures on our overall impressions. This budget is not only a transfer of resources from the poor to the bonuses of bankers and fund managers but also to our own homegrown gombeen millionaires who lined FF’s coffers over the years.
Class war it most certainly is.
Comment by: baNAMA republic
Dec 10th 2010 at 11:12
Michael, I wonder have you seen the article in the Irish Times published 9th December which says that highter income earners were harderst hit by the budget. This article was written by three employees of the ESRI. Is this ESRI article factual or simply manipulating statistics for the Governments benefit?
Comment by: david pender
Jan 22nd 2011 at 09:01
hi michael, thanks very much for your informed article. had to re read it again as i still find it hard to believe; then lenihan and ff decide not to remove section 23 tax reliefs as they have been lobbied not to do so. does this mean that people with section d tax status or income from property stand to make even more?its unbelievable!