From OECD
This week in 2 classes (EC4004 and EC4333), I talked about Lorenz curves, Gini distributions, and income inequality.
The recent OECD report shows the inequality in who's contributing to income tax receipts.
The chart shows Ireland is a very unequal country when it comes to paying tax-- the rich pay most.
(HT Ronan for the update)
This is not unexpected given the past decades electoral strategy of removing the lower paid from the (income) tax net.
However there is also the matter of indirect taxes. Do you have figures on what the situation looks like when consumption taxes are factored in. While it would be tempting just to apply something like the standard VAT rate to the disposable incomes of the various income group that would not be very accurate; Lower income households tend to spend a higher percentage on highly taxed tobacco & alchohol. That said higher earners may be hit by higher taxes on cars for instance. Also some earners may earn quite a bit from capital gains which is only taxed less than labour.
Basically what I'm saying is that looking at who pay what in _income_ taxes only gives a partial view. You need to factor in all tax categories.
BTW you are not alone in this omission - I've been reading econo blogs for a while now and I haven't seen the fuller analysis on any left wing sites either!
Lastly is there something wrong with the Ireland 2005 line it's a suspicously straight line!
Hi, thanks for the reply,
Consumption taxes are very hard to fit to series like this, simply because of the way they are collected in Ireland--I'd love to see the two series collated, but I reckon that's a PhD all in itself. Anybody reading this that wants to take a crack at it, drop me a mail.
The functional difference between the two depends on wealth effects and the marginal propensity to consume of the different income classes in my opinion, and the only way we'll see a true measure of these is by randomly looking at the expenditure of a sample of households from each class before and after the budget, especially if VAT comes down.
Cheers for the smart comment!