[mootothemax]

Doesn't Ireland have a graduated tax system?

According to Wikipedia, it does:

http://en.wikipedia.org/wiki/Taxation_in_the_Republic_of_Ire...

"The taxation of earnings is progressive"

Which makes the OP's post rather confusing.

Does any country out there not tax progressively?

I just can't imagine it - "Great, you got a pay rise! Now you get to take home less, until your pay rises by another $5,000!"

Edit: On second reading, I think I understand what the OP is talking about: leaving money in the company they operate, which pays out (I guess through dividends?) at a lesser tax rate than if it were paid out directly as wages. I'm pretty sure this is a standard technique in the rest of the world, and not particularly unique to Ireland.

[sbierwagen]

  Does any country out there not tax progressively?

  I just can't imagine it - "Great, you got a pay rise! Now 
  you get to take home less, until your pay rises by 
  another $5,000!"

He's just whining. At no point under the progressive tax system do you get penalized for earning more: the first $35K of your income is still taxed at the lower rate. When you earn dollar number 35,001, that dollar is taxed at 53%, but your average tax rate only goes up a hundredth of a percent.

This misunderstanding of how tax brackets is so widely pervasive that I can only assume it's the work of enemy action: people who want to reduce income taxes, or to move the tax burden to the poor by implementing a flat tax rate.

[yebyen]

He's still paying a significantly higher tax rate on that dollar than if he didn't earn it this year.

If he is not hurting for cash and he could defer it until next year (or year after that) with no penalty at all and (arguably) negligible risk, thus paying the lower personal income tax rate on that dollar, why not do it?

I don't see what part is misunderstood. If you're being paid by your employer, obviously you want to take the raise regardless of higher taxes. If you are your own employer, both entities are paying taxes and each dollar of taxes paid is coming out of your own pocket.

[rmc]

Sure, but 50c is better than €0.

[yc1010]

The money doesn't appear out of thin air. It takes time and stress to earn each euro. Especially if you work for yourself or in a startup, you are probably working for someone else so you do not comprehend the perspective of someone who is trying to make his own way in the world.

The tax system here puts a huge disincentive to work hard and earn a lot, at least there is an option if you have your own company to defer and stretch your wages over longer period BUT that comes with all sorts of risk since IT IS NOT YOUR MONEY but company money and corporation tax.

[yebyen]

That's very short-sighted. If you are incorporated for yourself then:

> each dollar of taxes paid (by either entity) is coming out of your own pocket

You can keep it in pocket A, the corporation, and pay taxes once (on profits only, I guess), or move it to pocket B and pay taxes a second time also, at a much higher rate (and on overall income, again a larger basis than it would be to count up personal profits.) If you can replace some personal expenses with corporate expenses, end-around pocket B completely, now your business has also made less profit, so pays less corporate tax. I am not a tax accountant (or even remotely skilled in taxes) and this is not tax advice, but it makes pretty good sene to me. Certainly some part less than all of what I suggest would be considered illegal tax dodging or corporate malfeasance.

Sounds like a good incentive for CEOs/majority owners of small businesses to live frugally and to refrain from looting their corporate coffers excessively. Sure, a bird in the hand is worth two in the bush, but it also seems very clear to make the case that two whole birds in the bush are worth more than 0.94 birds in the hand.

You are thinking like an employee.

[yebyen]

That's approximately how I read it. Even if it's his company, money he puts in his own pocket needs to have income tax paid on it (I would suppose this means, after any appropriate corporate taxes are paid by the corporation).

If the money does not actually leave the company and go into his pocket, the only taxes that would need to be paid are those (low) corporate taxes.

Of what value is money you can't have in your pocket and spend, of course, is an exercise for the reader, but presumably it could be paid out as personal income over a greater number of years (if the company survives that long) without ever paying $0.53/1.00 in personal income taxes on any portion of that money.

[drcross]

This is what I do. I worked hard for three years, pay myself a wage thats in the minimum pay bracket and will travel until the company money is gone. I'm not give a cent more than I have to to those crooks.