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Wednesday 29 November 2023 Dublin: 2°C
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budget roundup

Hopes rise that Budget 2023 will introduce new 30% tax band to help squeezed middle

Minister Heather Humphreys threw her support behind recent comments by Tánaiste Leo Varadkar where he proposed a new middle rate tax band.

A NEW MIDDLE rate tax band should be looked at to help with the rising cost of living, Social Protection Minister Heather Humphreys has indicated.

Pressure is mounting on the Government to do more to ease the rising cost of living, particularly as petrol and diesel costs jumped above the €2 a litre mark

Speaking in Dundalk yesterday, the minister said the Government did not have a “magic money tree” to help with the soaring costs of fuel.

Despite calls from the opposition for a mini Budget this summer, the minister indicated that the budgetary process is where the Government would make changes to deal with the crisis. 

Humphreys threw her support behind comments made by her party leader and Tánaiste Leo Varadkar recently, where he said a new middle rate tax band could help cushion the blow of inflation on the squeezed middle.

Varadkar suggested that a third 30% rate of income tax could help middle-income earners and has asked the Finance Minister Paschal Donohoe examine whether it could be introduced.

He said there might be a case for having a middle rate of 30% for people on middle incomes so the higher rate of 40% would only kick in for higher earnings. 

Speaking about what more the Government could do to ease the impact of inflation on people, Humphreys said “a lot of these things have to be taken into consideration” ahead of Budget Day in October.

“We know that we often talk about the squeezed middle and it’s how we can perhaps improve their income tax situation, because suddenly you’re on 20% and then you jumped to 40%. So again, there is space there,” she said, indicating that a middle income band should be looked at as part of the collective solution to dealing with the cost of living crisis.

Budget 2023

Budgetary kite flying generally kicks off later in the summer months, however, due to inflation on the rise, discussions are already underway as to what further actions the Government can take to take the load off people. 

Earlier in the year, the Government announced a support package of €2.5 billion, which included a cut in the excise on diesel and on petrol, a reduction in VAT on gas and electricity, and reducing public transport fares by 20%.

However, opposition parties are quick to point out that much of the measures have been gobbled up already with the rising inflation, and have been calling for more radical action. 

One way of attempting to put more money in people’s pockets is through increasing State supports and reducing the cost of services, which is understood to be the main focus for Budget 2023 this October. 

As reported by The Journal in April, one of the main focuses for the Government is childcare, with plans to increase childcare subsidies significantly in order to reduce the cost of childcare for parents. 

On average, parents are paying nearly €800 per month per child for childcare.

The Annual Early Years Sector Profile Report for 2020/21 found recently that the average weekly fee nationally per child for full day childcare is €186.84.

With core funding promised for the sector as well as pay agreements, the aim is to cap childcare fees.

Public transport

The Taoiseach has also signalled that further fare reductions for public transport may be be on the cards, particularly for younger people.

It is understood discussions are underway as to whether to extend the 20% reduction out to next year or further extend the percentage reduction. 

Budget 2023 will also include a pension and welfare package, with the Government also aiming to reduce college fees, hospital charges and medicine talks. 

While Budget Day is five months out, sources state the Government is very aware it must hit the mark and make a difference in people’s’ pockets, given the current pressures on people across the country. 

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