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Budget 2014 had greatest impact on low-income groups

A new look at budgets from 2009 to 2014 by the ESRI shows that the lowest impact of next year’s budget was on some middle income groups.

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A NEW ANALYSIS of Irish budgets from 2009 – 2014 showed that the greatest impact Budget 2014 had was on low-income groups.

The paper, from the Economic and Social Research Institute, looks at the distributional impact of tax, welfare and public service pay policies in Irish budgets from 2009 – 2014.

It analyses the available evidence on the impact of Budget 2014, and of the series of budgets from October 2008 up to and including October 2013.

Results

The results show that Budget 2014 had its greatest impact, which was a reduction of 2 per cent, on low income groups.

Meanwhile, the lowest impact was on some middle income groups (a loss of 1 to 1.25 per cent) while the top income group lost slightly less than 1.75 per cent.

It noted that the results for 2014 are quite different to those of the full period from 2009 to 2014, as over that period, all income groups experienced losses.

Income loss was in a narrow range of between 11 and 12 per cent for most income groups.

The greatest losses were for those in the highest 10 per cent of household income, as this group saw losses of about 15.5 per cent. These losses were mainly from tax increases and reductions in public service pay.

But at the other end of the income scale, policy-induced losses were somewhat higher than average (about 12.5 per cent) for those with the lowest incomes.

The ESRI said that these results “do not conform with either a progressive pattern (losses increasing with income) or regressive pattern (losses declining with income)”.

Over a substantial range the pattern is broadly proportional – similar percentage losses for each income group. But this does not extend to whole income distribution. Contrary to some perceptions of a sharper squeeze on middle income groups, the greatest policy-induced losses have been at the top of the income distribution, and the next greatest losses at the bottom.

To read the full document, click here.

Read: Concern over Budget 2014 weakened consumer sentiment last month>

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