AFTER YEARS OF rises during the austerity years, the news that the government was finally cutting income taxes in this year’s Budget was a welcome announcement for most.
Finance Minister Michael Noonan said “a fair, efficient and competitive income tax system” was essential for the economy and jobs as he launched into the changes.
But exactly how much money will all that tweaking of tax brackets and rate bands actually cost the exchequer, and by extension Irish taxpayers? First, here’s a quick recap of what was new in Budget 2015:
Noonan also lifted the income threshold above which workers were liable for USC to €12,012, a move he said would take 80,000 low-earners out of that system altogether.
All workers pay less tax, especially high earners
For workers, that all boiled down to less tax across the board – although high earners, who pay the most tax, were the biggest winners.
Sifting through the Budget papers, we learned the total effect of the tax changes was expected to cost the government €642 million over a full year – with about two-thirds of that amount benefiting people earning over €33,800.
Since the average Irish earnings stood at €35,830 last year, a lot of workers would fall into that category.
Top rate cut the big cost
But in a recent answer to a parliamentary question from Sinn Féin finance spokesman Pearse Doherty, Noonan revealed if he had left the top tax rate at 41% in place and only lifted the threshold where it started it would only have cost €180 million – instead of €405 million.
That would mean the government would have €225 million more at its disposal if it hadn’t shaved 1% off the tax bill for those with earnings in the highest bracket.
Cutting the lower USC rates and tweaking the thresholds was forecast to cost the government €325 million over a full year – although a small chunk of this was returned by hitting high earners with their new rates.
Some €71 million was expected to flow back into the exchequer’s coffers from its extra USC levy on those earning over €70,044.
Hitting the self-employed on big salaries with an 11% rate for income over €100,000 would yield €42 million over a whole year.
TheJournal.ie tried to find out from Doherty what he wanted with all these figures, but he didn’t return our calls – so that part is still a mystery.
Since launching its Budget, the government has added the carrot of a €100 “water conservation grant” in an attempt to stem the political bleeding over its unpopular water charges – a move which will cost the exchequer around €130 million more.
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