Numbers game

It’s been bothering me for a while, but until tonight I never bothered to do any research on it.

Here’s Brian Lenihan’s version of it, as paraphrased by The Journal earlier today:

The Finance Minister said Ireland’s taxation system was no longer “fit for purpose”, saying that the upper 8% of taxpayers accounted for 60% of all income tax payments, while 80% of taxpayers contributed just 17% of the total tax take.

But, I idly wondered, how much of all income do those top earner account for.

I did a quick google for “income distribution Ireland”, and found a FinFacts report. It contains this table:

Distribution of PAYE income earners on tax records, including tax exempt individuals, by ranges of income

Range
of Gross Inc €

2000/01

2001

2002

2003

2004
€1
– €10,000
429,680 489,670 346,900 332,390 317,430
€10,001
– €20,000
406,470 493,650 384,440 367,670 351,600
€20,001
– €30,000
293,150 280,920 323,890 331,360 332,590
€30,001
– €40,000
168,440 147,740 206,760 218,290 226,310
€40,001
– €50,000
102,870 73,870 132,080 144,490 154,000
€50,001
– €60,000
55,150 38,240 79,530 90,280 98,990
€60,001
– €70,000
32,290 21,190 47,550 55,240 62,220
€70,001
– €80,000
21,320 11,650 29,560 34,630 39,070
€80,001
– €100,000
20,330 10,820 30,990 37,100 42,670
€100,001
– €125,000
10,070 5,710 14,430 17,830 21,170
€125,001
– €150,000
5,910 2,950 6,400 7,630 8,810
€150,001
– €200,000
4,590 2,590 5,560 6,510 7,490
Over
€200,000
5,740 2,890 5,710 6,470 7,260

The figures are a bit dated, and not very fine-grained, but let’s see what we can do with them.

First, let’s assume that average income in each band is at the midway point. So if your income is between €10,000-20,000, we’ll say the average earner in that band makes €15,000. Do the same in each band, and cap the top layer at €200,000 (We know this is a conservative estimate, given the publicity over semi-state chiefs who earn €250,000+).

Looking at the figures for 2004, we find that 19% of all earners earn between €1-10,000. There are 317430 of them, so assuming an average income of €5,000, that means they account for €1,587,150,000 of earnings. The table below shows the income earned in each band based on the same calculation, the percentage of total income accounted for by each cohort, and the percentage of the population accounted for by the cohort.

It’s not perfect. It only includes PAYE workers for one thing. The self-employed and professions are excluded. And it doesn’t take into account the super rich. And there are 200 people in Ireland who earn over 500,000 a year, according to IrishEconomy.

So it’s not perfect, but it’s a start.

Now let’s remind ourselves what Brian Lenihan said today:

The Finance Minister said Ireland’s taxation system was no longer “fit for purpose”, saying that the upper 8% of taxpayers accounted for 60% of all income tax payments, while 80% of taxpayers contributed just 17% of the total tax take.

Well, it’s not possible to fine tune down to 8% of all taxpayers, but according to our figures, the top 7.57% of earners (those earning over 75,000 approx) account for 24.94% of income.

That sound like they’re paying way over the odds, doesn’t it?

But bear this statistic in mind.

Before the budget changes today, when Brian Cowen took at 14,000 pay cut and with the minimum wage at 8,.65, Cowen earned 13times the minimum wage.
Next year, with the paycut and a lower minimum wage, the taoiseach will earn 14 times the minimum wage. [Source: TASC]

Now who do you think who will hurt more from a 1% increase in income tax, the taoiseach or a taxpayer on the minimum wage?

[Final note: Like I said, those numbers are far from perfect. If anyone out there has better data, please feel free to try the same analysis.]

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