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Here's how much money the government would raise if income tax went up

Fine Gael and Labour have repeatedly said that income tax won’t be increased in the Budget – but they’ve still crunched the numbers on just how much it could raise.

Mo' money, mo' problems
Mo' money, mo' problems
Image: JAN KOLLER/Czech News Agency/Press Association Images

IT’S (PROBABLY) NOT going to happen.

Fine Gael and Labour have repeatedly said that they will not increase income tax while they are in government. They’ve said it again and again and again. Just to make sure the message gets across, the programme for government explicitly states that the government will maintain the current rates of income tax, as well as bands and credits, for as long as it is in power.

That doesn’t mean that they haven’t crunched the numbers though.

Michael Noonan this week told the Dáil how much money could be raised with a 2 per cent increase on the top and standard rate of income tax. After checking with the Revenue Commissioners, these are the figures they came up with:

  • A 2 per cent increase on the top rate of tax (41 per cent) would bring in an estimated €923 million in 2013.
  • Meanwhile a 2 per cent increase on the standard rate (20 per cent) would bring in an estimated €385 million.

Noonan told the Dáil that the figures are estimated from the Revenue tax-forecasting model “using actual data for the year 2010 adjusted as necessary for income and employment trends in the interim,” adding: “They are, therefore, provisional and likely to be revised”.

A number of groups have called on the government to focus on increasing taxes to bring in money, rather than just focusing on cutting spending.

So that’s that – but what about a higher rate of income tax of 48 per cent on all pay over €100,000?

In response to a question from one Labour TD, Michael Noonan said that the estimated yield would be around €365 million in one year.

“However,” he noted, “given the current band structures, major issues would need to be resolved as to how in practice such a new rate could be integrated into the current system and how this would affect the relative position of different types of income earners”.

Michael Conaghan TD, who asked Noonan the question about a higher rate, said that bringing in a higher rate would be a fairer way to ensure people who can afford to pay, do.

He told TheJournal.ie:

This is 10 per cent of the entire necessary budget adjustment and would help ease the pressure in other areas such as Education, Health and Social Protection.

Read: Taxes on texts and junk food proposed by Social Justice Ireland >

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