How to design a wealth tax.

Wealth taxes are very popular in general, but not in particular because it usually means that asset ownership gives rise to taxation. One example of this would be property tax.

If ‘wealth’ is going to be taxed it has to be defined, the classical example is to use the accounting equation in which ‘assets minus liabilities equals capital’. The issue after that is where debt is involved because if you owned a home worth €300,000 and had debts on it of €200,000 then your ‘wealth’ is €100,000.

People could potentially try to game the system, it’s not as simple as getting indebted, if you had €300,000 in cash and then bought a property and remortgaged it to the hilt you’d still have to have €300,000 cash somewhere, so the issue becomes one of reporting and valuation.

This puts a weight upon the individual to make declarations and returns which people don’t like doing so a simplified process would be a good thing, where a person can provider a simple number of ‘assets minus liabilities equals wealth’ and file it online.

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Do the rich pay their way?

The information below is projected from 2009 historical data to the 2012 position – they are approximate figures only (Revenues calculations not mine as we don’t have access to the most current data) and Universal Social Charge (USC) is not included in these figures. If USC was included, the likely result would be to increase further the proportion of tax and USC paid by the highest earners because their rates are higher as would be the quantum of tax received. Individuals are sorted by reference to their gross income from all sources upon which income tax is levied.

Of individuals liable to income tax:

the top earning  1 per cent of total  numbers account for 21 per cent of total tax the top earning 10 per cent of total numbers account for 60 per cent of total tax the top earning 50 per cent of total numbers account for 97 per cent of total tax

Another way to look at this is that the top 1% pay just over 20% of tax collected, the next 9% pay the next 40% …

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