Tuesday, March 01, 2011

Progressive Income Tax and You

I love hard data.

Here is a little website where you can input your current net salary (per month), and see how much less/more you would be paying under the progressive income tax proposals of SDE and the Center Party.

What I would also love to see is the impact of this on the budget, but unfortunately there is probably no way to get a breakdown of taxes paid by each resident (even if it's just a list of numbers, with no personally identifiable information). I'm sure the Tax Board has that info, and I would love it if they made the calculations and published the results, but I doubt they will. So I tried a very, very approximate method to get something vaguely resembling useful numbers.

The most relevant numbers I can find in the Statistics Database are the total amount of personal income tax paid into the state budget (191 728 390 Euro) and municipal budgets (584 706 720 Euro) in 2010. This table shows the average number of persons engaged in each industry, adjusted for fulltime work, and this one shows the average net and brute salary for the same industries (both tables show data for Q3 2010).

If there are any statisticians in the audience, please tell me if I've got the logic heavily wrong somehow. I took the number of employees in each industry, and the net wage for that industry; then used the net wage with the link above to calculate the impact.

Click the image to see the full-size version.

So for the wages listed above, alone, it seems that the Social Democrats' progressive income tax plan will result in an increase of budget revenues of around 3 million euro per year; whereas the Center Party's plan, which actually cuts the tax rate for the lower income bands, will result in a loss off around 638 thousand euro per year in budget revenue.

Of course, these numbers do not include income tax generated from corporate dividends and investment income, but those numbers are far harder to find. But they would not make a significant impact on the magnitude of the budget impact. Remember that the total revenue from personal income tax in 2010, for the state and local budgets, was 191 728 390 + 584 706 720 = 776 435 110 euro. Whereas the people in the table, together, would have paid 701 085 072 Euro in flat income tax, adjusting for the untaxable minimum.

Again, all these numbers are very approximate. As always, if you can point me to the right data, I'll appreciate it.

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