November 2014        

A budget for the well off

A budget for the well off The tax measures announced in the recent budget will cost €405 million annually, and they only apply to those earning €32,800 per year (€630.77 per week) in 2014 if single or €41,800 (€803.85) if married. This is very unfair to lower-paid workers.
      The changes in the universal social charge affect only those whose income was more than €10,036 (€193) in 2014. The benefit increases as income rises, to €17,576 (€338); at that point the benefit is €174.20 (€3.35), and all taxpayers at incomes above this level get this €174.20.
      The cost of changes in the universal social charge is only €237 million a year. It is important to note that, even after the budget changes, the charge is applied to incomes above €12,012 (€231), while income tax becomes payable after €16,500 (€317.31) for a single person or €33,000 (€ 634.62) for a married person.
      The Christmas bonus of 25 per cent will cost €63.5 million. It will be given in December 2014 and, if funds are available, again in December 2015. This does not apply to any of the other measures, so social welfare recipients are being singled out for special treatment.
      The increase in children’s allowance of €5 per month per child (€120 per year) will be given to all families with children, regardless of income, as is clear from table 2.
      The massive increase of 40 cents on a packet of twenty cigarettes will raise €53 million annually, which will hit those on low incomes more than those on high incomes, because they tend to smoke more.
      Altogether, the budget was obviously geared towards those on high incomes. They benefited from the changes in tax, the changes in the universal social charge, the water services rebate, and the changes in children’s allowance. And they will be less affected by the tax increase on cigarettes.

Single person

Table 1 shows the effect of the budget on different income levels. It includes the effect of the water charges at a rate of €175.68 per year.

Table 1. Effect of budget changes on a single household

        Social assistanceMinimum wageAverage wageWage
Weekly income188.00346.00673.081,346.15
Annual income9,776.0017,992.0035,000.0070,000.00
Universal social charge 174.20174.20174.20
Tax measures  222.00572.00
Water charge rebate100.0035.1435.1435.14
Christmas bonus47.00   
Water charge–175.68–175.68–175.68–175.68
Annual net change–28.6833.66255.66605.66
Weekly net change–0.550.654.9111.64
      A person over twenty-five receiving social assistance will be €28.68 worse off in 2015 (€0.55 per week). They will not get any benefit from the tax and USC measures. They will get a Christmas bonus of €47 and a water charge rebate of €100.
      A person on the minimum wage will be €33.66 better off in 2015 (€0.65 per week). They will not get any benefit from the tax measures. They will get €35.14 of a water charges rebate, and the changes in USC give them a benefit of €174.20.
      A person on the average wage will be €255.66 better off in 2015 (€4.91 per week). They will get a benefit from the tax measures that kick in at €32,800. They will get €35.14 of a water charges rebate, and the changes in USC give them a benefit of €174.20.
      A person on €70,000 per year will be €605.66 better off in 2015 (€11.64 per week). They will get a benefit from the tax measures (€572.00) that kick in at €32,800. They will get a water charges rebate of €35.14, and the changes in USC give them a benefit of €174.20.
      Single people paid more than €70,000 will benefit by a similar amount. This is because of the claw-back of the 1 per cent tax reduction, from 41 to 40 per cent, in the higher tax rate by an increase in the USC from 7 to 8 per cent on incomes over €70,044 (€1,347 per week).
      It’s clear from the table that the benefit goes up as income goes up, and that those receiving social welfare will be worse off.

Married person with two children

Table 2 shows the effect of the budget on different income levels. It includes the effect of the water charges at a rate of €278.16 per year.

Table 2. Effect of budget changes on a married household with two children

        Social assistanceMinimum wageAverage wageWage
Weekly income312.80346.00673.081,346.15
Annual income16,265.6017,992.0035,000.0070,000.00
Universal social charge 174.20174.20174.20
Tax change   482.00
Children’s allowance120.00120.00120.00120.00
Water rebate100.0055.6355.6355.63
Christmas bonus78.20   
Water charge–278.16–278.16–278.16–278.16
Annual net change20.0471.6771.67553.67
Weekly net change0.381.381.3810.65
      A person over twenty-five receiving social assistance will be €28.68 better off in 2015 (€0.38 per week). They will not get any benefit from the tax and USC measures. They will get a Christmas bonus of €47, a rebate of €100 in the water charge, and €120 extra in children’s allowance.
      A person on the minimum wage will be €76.68 better off in 2015 (€1.38 per week). They will not get any benefit from the tax measures. They will get a rebate in the water charge of €55.63, a benefit of €174.20 from the USC changes, and €120 extra in children’s allowance.
      A person on the average wage will be €255.66 better off in 2015 (€71.67 per week). They will get a benefit from the tax measures that kick in at €32,800. They will get a rebate of €35.14 in the water charges, and the USC changes give them a benefit of €174.20, with €120 extra in children’s allowance.
      A person on a wage of €70,000 will be €553.67 better off in 2015 (€11.64 per week). They will get a benefit from the tax measures (€482) that kick in at €41,800. They will get a rebate in water charges of €35.14, and the USC changes give them a benefit of €174.20, with €120 extra in children’s allowance.
      Married people on incomes over €70,000 will benefit by a similar amount because of the claw-back of the 1 per cent tax reduction, from 41 to 40 per cent, in the higher tax rate, and an increase in the USC from 7 to 8 per cent on incomes over €70,044 (€1,347 per week).
      The benefit to a single person on €70,000 is approximately 17 times the benefit to someone on the minimum wage, while the benefit to a married person on €70,000 is 7 times that of someone on the minimum wage. The ratios are worse when the comparison is with social welfare recipients. All in all, a fair budget à la Fine Gael and Labour.

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