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:

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.]

By Gerard Cunningham

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