More income tax comes from people on low to middle incomes than is indicated by statements based on the Revenue’s ‘tax cases’ figures
A GREATER proportion of income tax comes from middle and lower-earning workers than is indicated by Revenue data and resulting information from the Department of Finance.
Tables showing the distribution of income tax contributions across various income bands are produced by the Revenue Commissioners and regularly quoted by the department.
However, the “income earners” referred to in the data are what the Revenue also calls tax cases. A married couple earning two incomes can be a single tax case and is presented in the data as a single “earner”.
When account is taken of the number of tax cases that are in fact dual-income married couples, the number of earners increases, and earners slip to lower income ranges.
The effect is to produce an overall picture for income earners that is more concentrated in the low to middle income ranges. This in turn means that more income tax comes from people on low to middle incomes than is indicated by statements based on the Revenue’s “tax cases” figures.
A reader who contacted The Irish Times has reconstructed a table given to the Labour Party’s Joan Burton last November by Minister for Finance Brian Lenihan and has broken up the married couples into individual earners. Tables given to Ms Burton referred to “earners” but it was pointed out they included married couples being counted as one tax unit. No data on the number of dual-income couples involved were included with the data.
Brian Flanagan, a certified management consultant with Invest-Tech Ltd, used available 2005 data on the number of dual-income married couples to re-create the table, which is for 2008.
Whereas the figures given to Ms Burton indicate that 50 per cent of all income tax comes from earners with incomes of more than €100,000, the table produced by Mr Flanagan shows the same group paying only 31.4 per cent.
Again, whereas the figures given to Ms Burton show “income earners” who earned between €30,000 and €100,000 paid 47.8 per cent of all income tax, the table produced by Mr Flanagan show those income earners paid 58.6 per cent of all income tax.
In relation to those earning up to €30,000, the figures given to Ms Burton show they paid 2.3 per cent of all income tax; the figures produced by Mr Flanagan show they paid 10 per cent of all income tax.
The income figures are for all income bar that put into pension contributions. They include income subject to Irish taxation earned by persons who are not tax resident here.
Another effect of treating dual-income spouses separately is that the number of people on higher middle incomes drops off more steeply than the impression created by the tax case figures.
Both methods of looking at the distribution of earnings show there is a small number of very high earners whose incomes are enormous relative to the majority of the population. Mr Flanagan’s table shows 9,129 people, or 0.3 per cent of earners, between them earned €6.7 billion, or 6.6 per cent of all income.
