Charlie Weston: Householder to carry heavy can for errant banks
HOUSEHOLDERS will be hammered. That is the clear message from the four-year austerity plan issued yesterday by the Government.
In plain language, if you own a home, have a pension and a son or daughter in college, you will end up more than €4,600 a year worse off by the time all of the changes in this plan have been implemented.
Many of the changes will impact early on in the four-year plan, putting additional pain on family budgets.
Middle Ireland is set to pay an extortionate price for the failures of our banks, our regulators and the Government. And significantly, there are no measures in the four-year plan to levy the errant banks.
Instead, homeowners will bear the brunt.
Personal finance experts last night warned the taxes, levies and charges would push many families over the edge financially.
The downturn has left many consumers just one bill away from financial collapse. The severe measures in the four-year plan could be enough to sink many homeowners struggling to pay bills.
People will enter the tax net at a much lower level of income, they will pay tax at the higher 41pc rate on more of their income, and will get lower tax credits than at present.
A tax credit is basically the amount of income you can earn before paying tax. The swinging changes will mean that income tax levels will come back to 2006 levels, Taoiseach Brian Cowen said yesterday.
The changes will mean that a married couple, with one income of €55,000, will see their annual income reduced by €2,310 from the tax changes planned over the next four years.
But one of the biggest surprises was the way pensions investment was pounded.
There is real pain for anyone sensible enough to take out a private pension plan.
Those providing for their retirement will now find it costs them an extra €32 for every €100 they put into a pension.
This is because of the loss of tax relief from PRSI and health levy payments when money is put into a pensions, and from the gradual reduction in the tax relief rate for pensions investment for higher taxpayers from 41pc to 20pc.
All this means it will make little sense to invest in a pension. Additional voluntary contributions (AVSs), used by those with inadequate pensions to top up their retirement fund, will no longer be worth investing in.
On top of all of this, college fees are set to surge by an additional €500 a year.
Then there will be higher VAT (value added tax) on goods and services – a measure which will hit everyone.
Middle Ireland will be disproportionately hit by the new site valuation tax to come in by 2013, even if it is set to average €200, lower than expected.
This is because measures will have to be put in place to exempt low-paid workers and those who have paid stamp duty. The net effect will be that middle Ireland will be carrying the burden here too.
Other taxes and levies, such as the doubling of carbon tax and the loss of tax reliefs, will mean it is set to become very expensive to live in this country.
The banks broke us, but the taxpayer ends up carrying the can.