Less tax for middle-income earners

With the last Budget before the General Election just over a week away, several senior sources have confirmed that the Government will reduce the higher rate of tax to at least 49.5%.

The same sources have also said that for middle-income earners, a desire exists to reduce their tax burden to as low as 49%.

“The desire is there, it is now just seeing what is achievable in the final shake-up of the numbers,” one senior source said last night.

The majority of work on the budget has been concluded, with attention now being switched to the dreaded Universal Social Charge.

While the budget hasn’t fully finalised, both Fine Gael and Labour have conveyed a desire to deliver a 2% tax cut, provided the numbers will allow it. “We would love to do it, but certainly at this stage we are looking at a 1.5pc cut,” said one well-informed Government source.

Were the Government to follow through on the 2% reduction through cuts in the USC, those earning €70,000 would be more than €1,000 better off, those on €50,000 would be €650 better off and those on €35,000 would be €350 better off.

Several key meetings are scheduled to take place between the Minister of Finance Michael Noonan, the Minister of Public Expenditure Brendan Howlin and their Cabinets colleagues. After the conclusion of these meetings, Mr. Noonan and Mr. Howlin will bring a draft of the Budget document to the Economic Management Council, on which they sit with Taoiseach Enda Kenny and Tánaiste Joan Burton.

The overwhelming focus of the tax cuts is on the penal burden of the USC, particularly for those earning €70,000 or less.

Mr Noonan is looking at a cut to the 7pc rate and examining raising the entry point at which people start paying the USC.

“The net effect when both measures are combined will be 2pc,” said a senior Government source.

Coalition sources have confirmed that the USC cut will be used as their ‘big bang’ give-away to workers.

It is understood that the entry point at which people begin paying the current 7pc rate will be raised to bring more than 500,000 people out of the USC net. But it is also known that the 7pc rate will be reduced by up to 1.5pc.


It is also believed that Mr. Noonan is contemplating reducing the gap between self-employed people and PAYE workers on income above €100,000.

In related news, Lucinda Creighton’s Renua party is proposing the introduction of a levy on all public sector pension over €60,000, in an effort to recoup some of the pensions payable to former Taoisigh Brian Cowen and Bertie Ahern and former top officials, some of whom have pensions in excess of €100,000.

“When they imposed a levy on private pensions during the financial crisis, they defined the limit as being €60,000 per annum,” the party said.

“Renua Ireland believes that no public servant should be in receipt of a gross pension exceeding this sum.”