James Fitzsimons: Average family pays 40% more tax than it did four years ago
The crushing burden of keeping the State afloat has fallen on low and middle earners
When tax on income is too high, the black economy prospers and high earners are frightened away. An average rate of tax of 35 per cent is acceptable, if essential services are freely available. When the Government takes more than 50 per cent, that's the breaking point for taxpayers. If high earners cannot control their tax bills, they may migrate to where the tax regime is more favourable. For those who cannot avoid tax by legitimate means, the black economy is their only hope.
The system is out of control. So the Government has descended on low- and middle-income groups to fix the problem. Nearly 90 per cent of government spending goes on welfare, health and education. This year, tax revenue will be about €36bn. Social protection will gobble up €22bn. When combined with the cost of health and education, we are spending much more than we are taking in.
There are between 300,000 and 400,000 fewer taxpayers today than there were four years ago. That's a drop of 16 per cent to 20 per cent. But with fewer taxpayers, we are paying more income tax than we ever did and all other taxes are higher too. In 2008, income tax alone yielded €13.2bn. In the 11 months to November 2012, we have already paid nearly €13.9bn.