Time to make tax system fairer
Sir, – Taoiseach Leo Varadkar has said that with the lowest earners having been taken out of the tax net completely, the Government will now focus on reducing taxes for middle-income earners: “It’s not fair that people on middle incomes pay income tax at the highest rate . . . That’s not fair, and we’re going to change it” (“Varadkar promises tax cuts for next three budgets”, News, November 11th). Very few would disagree with this view.
However, there is a far more equitable way to achieve this outcome than by small increases in the current tax bands. Irish top tax rates are not abnormally high by international standards; it is taxing workers earning less than the average wage at the highest rate that is both unfair and unusual, and this is a direct outcome of having only two tax rates.
For example, the French tax system, which the Taoiseach has recently praised, has four tax bands, with the highest at 45 per cent , ie 5 per cent more than the Irish top rate.
The simplest and most equitable way to achieve the Taoiseach’s aim of removing middle-income earners from the higher tax rate is to create a new higher rate levied on higher incomes.
The reason we have this tax system here is to shield high earners from paying higher rates of tax.
As long as workers below the average wage pay the same rate of tax as millionaires, it becomes impossible to raise the top rate for any income group – indeed the current Government opinion is to reduce it.
While raising the threshold for the top rate does not benefit high earners any more than those just above that income, sharing that top rate between those below the average wage and the very rich makes it impossible to raise taxes on those on very high incomes. – Yours, etc,