Labour's magic €500m – Now you see it, now you don’t
When Eamon Gilmore or any other Labour spokesperson claims that Budget 2013 “squares up to the wealthy in our society” and includes a “€500 million wealth tax package” they are being less than honest. By Eoin Ó Broin.
Eamon Gilmore claims that Budget 2013 is fair. He told RTÉ that, “This Budget… will produce over €500m in additional taxes on wealth… It’s the largest package of tax measures on wealth in this country that I have seen in my 23 years in the Dáil.”
During the Dáil debate on the Financial Resolutions on budget night Gilmore claimed that these measures “would raise €646 million in a full year”.
Unfortunately the Labour leader has produced no figures to support his claim.
Will individuals or households earning over €100,000 per year pay €500 million to €646 million in extra taxes as Gilmore claims? The answer for 2013 is a straight no. The answer for 2014 is far from clear.
Of course taxing wealth and taxing the wealthy are not the same thing. To know how fair the tax proposals in the budget really are we need to know how much will be paid by the wealthy.
Very few of the tax proposals in Budget 2013 specifically target high earners or those with significant levels of wealth
The 3% USC increase on pension incomes and the ending of top splicing relief will clearly impact on those whose wealth is above average, including some very wealthy people.
The changes to capital gains, capital acquisitions and deposit retention taxes again would impact a range of income groups, though one can reasonably assume the bulk of additional revenue under these headings will come from those whose wealth is above average, again including some very wealthy people.
But let’s give Eamon Gilmore the benefit of the doubt and say that all of the projected income under these measures will come from the wealthy. For good measure let’s also throw in the €1 million to be raised from the benefits in kind on preferential loans.
In 2013 these measures are projected to bring in an additional €156 million and in 2014 a total of €179 million (see Table 1).
Table 1
Measure
2013
2014
3% USC
€25m
€38m
Top Splicing
€0
€10m
CGT
€50m
€51m
CAT
€30m
€15m
DIRT
€50m
€64m
BIK loans
€1m
€1m
Total
€156m
€179m
Now let’s turn to the changes to PRSI and the property tax. There are no figures in the budget detailing the volume of these additional tax revenues that will come from the wealthy. But with a few reasonable assumptions we can get a good ballpark figure.
The removal of the weekly PRSI allowance and doubling of the self-employed contribution impacts all contributors equally. There are 1.7 million people in employment. 113,500 of these earn over €100,000 per year. So very roughly 6% of those affected by the changes to PRSI are high earners.
The total projected yield from the two changes to PRSI from this wealthy group of earners in 2013 is roughly €16.7 million and €18 million in 2014.
Throw in the removal of the exemptions on non-earned income and the total yield for 2013 would be €24.7 million in 2013 and €50 million in 2014.
Then you have the property tax. This applies to 1.9 million homes. According to the latest EUSILC date approximately 10% of these households would be on incomes over €100,000.
We don’t have an average house price for these householders but let’s make a working assumption that its €500,000.
This would mean that 190,000 homeowners would be liable for €525 property tax each with a full year yield of €100 million.
Table 2
Measure
Adjusted 2013
Adjusted 2014
PRSI allowance
€16m
€17m
PRSI self employed
€780k
€1m
PRSI exemption
€8m
€32m
Property Tax
€50m
€100m
When we add all of these figures together (Table 1 & Table 2) we get a total tax yield of €230.7 million for 2013 and €329 million for 2014
Finally we have the changes to pension tax relief. This will not start until 2014 so the yield for 2013 is zero. The projected yield for 2014 is €250 million but this is subject to consultation with the pensions industry and presumably no further detail is likely until Budget 2014.
So, on the basis of the calculations above, some of which are admittedly very rough, the total additional tax burden from Budget 2013 on the wealthy will be €230.7 million in 2013, less than half claimed by Eamon Gilmore.
Given that the total projected additional tax yield for 2013 as detailed in Budget 2013 is €1.186 billion, only 19% of this specifically targets the wealthiest in Irish society, not the 42% or 54% claimed by the Labour leader.
In 2014 the extra tax burden on the wealthy arising from Budget 2013 will range from somewhere between €329 million and €579 million. However the higher end of this range must be treated with real caution until further details are provided by the Government next year.
So when Eamon Gilmore or any other Labour spokesperson claims that Budget 2013 “squares up to the wealthy in our society” and includes a “€500 million wealth tax package” they are being less than honest. For 2013, the only year we can be sure of the figures, the actual amount is less than half that figure.
Eoin Ó Broin is a political activist, writer and member of Sinn Féin.
Image top: The Labour Party.