Top 1% of earners share 10 per cent of all income in Ireland

The income share of the top 1 per cent in Ireland – those with incomes of more than €200,000 – has almost doubled since the 1980s, new research suggests.

A report by Tasc, an economic think-tank, says income share has shifted significantly over recent decades, with the bottom 90 per cent of the population losing a significant share of the national income.

While average gross incomes for the wider population have doubled over the past three decades, average incomes for the top 10 per cent more than tripled, while the top 1 per cent increased almost fivefold.

The Tasc report, Cherishing All Equally: Economic Inequality in Ireland, draws on Revenue tax returns and other data sources to build what it says is the most complete picture of inequality in this country.

Based on latest available figures, the report estimates the top 1 per cent of income earners in 2009 represented more than 35,000 people. They included about 10,000 dual-income couples, about 6,000 single-earner married couples and about 2,500 single earners.

Latest figures suggest the top 1 per cent earned more than 10 per cent of all income in 2010, down from a high of 12.5 per cent prior to the crash.

This figure is lower than the UK and US, but higher than most of our European neighbours.

The Tasc report also shows that two-thirds of tax cases had gross household incomes of less than €35,000. Conversely, about 200,000 of the tax cases reported to Revenue – the top 10 per cent – had incomes of more than €75,000. Two-thirds of these cases were dual-income couples.

‘Squeezed middle’

These findings are likely to pose fresh questions over what section of the population should be defined as the “squeezed middle”.

Minister for Finance Michael Noonan, for example, recently defined the squeezed middle as those on incomes of between €40,000-€70,000 and has pledged to cut taxes for this group.

But Revenue data quoted in the Tasc report indicates these represent the top 25 per cent of earners.

In its analysis of the figures, the report says pledges to continue to cut taxes will inexorably lead to a lack of investment in public services, undermining the usefulness of these services for the people who need them most.

“Tax cutting should not be confused with tax equity or with delivering a better society, whatever the perceived electoral value of cutting tax,” the report states.

“This policy has reduced Ireland’s overall taxes to less than 30 per cent of GDP, one of the lowest in the EU, and has delivered weak public social services, most visible in the lack of childcare and preschool education, as well as weaknesses in the health system.”

The report says total social security contributions in Ireland, now at 4.4 per cent of GDP, are the second lowest in the EU, where the average is 11 per cent.

However, the cost of childcare in Ireland is estimated to be the second highest in the EU, devouring 27 per cent of family net income. This compares to an EU average of 11 per cent.

The cost of living in Ireland is also estimated to be 20 per cent higher than the rest of the EU, even when adjusted for purchasing power.

The research by Tasc says economic inequality can be reduced only if policies join the dots between taxes, public services, family and the cost of living, not just focus on cash incomes.

“Decisions made now will determine the kind of society that will develop over the coming decades,” the report states.

“It is vital that a commitment to reducing economic inequality underpins today’s economic policy decisions so that we deal with the root causes and bring about a truly flourishing society.”