Tax cuts signalled by the Government, and proposed by Fianna Fáil, for Budget 2018 would be "profoundly unfair" and would "favour only those with higher incomes", advocacy group Social Justice Ireland has said.
The organisation said it had analysed the effect of increasing the standard rate band by €1,000 to raise the level at which people hit the higher rate of tax, something which is understood to be under consideration by the Government.
The group also looked at the impact of a 0.5 per cent decrease in the 5 per cent USC rate applying to incomes between €18,772 and €70,044, along the lines of the Fianna Fáil proposals.
Third proposal
These were compared with a third proposal which is advocated by Social Justice Ireland: increasing the personal tax credit of €85, with commensurate increases in couple, widowed parents and the single person child carer credit.
“Both increasing the standard rate band and decreasing the 0.5 per cent USC rate skew the benefits towards those on higher incomes. In contrast, increasing the personal tax credit spreads the benefits more evenly across all earners,” said Dr Seán Healy, the organisation’s director.
Changing the entry point to the top tax rate provides gains which were greatest for those on higher incomes, he said.
“A single earner on €25,000 gains nothing from this reform and it is only individuals with incomes of €33,800 plus, and couples with two earners with a gross income above €67,600, who gain. The largest benefits flow to those on the highest incomes.”
Similarly he said, with a reduction in the 5 per cent USC band the benefit is greater the higher an individual’s income. An individual on €25,000 gains €31.14 a year while an individual on €100,000 gains more than eight times as much – €256.36 a year.
An €85 increase in the personal tax credit provides the same gain to all taxpayers earning sufficient to pay more than €85 in income taxes. However, below €16,500 for single earners, or €24,900 for couples with one earner, or €33,000 for couples with two earners, there are no gains as up to these points tax credits absorb all income tax liabilities, the organisation said.
