Married couples would feel the heat of a tax band cut
MARRIED COUPLE, ONE BREADWINNER
A married couple with one breadwinner can earn €41,800 before paying the higher rate of income tax. If the Government reduces tax bands by 10 per cent, that couple would start to pay the higher rate of income tax on earnings above €37,620. How hard the couple would be hit by such a cut in the tax bands depends on how much they earn.
Couple with earnings of €36,000: No worse off
If the spouse earns the average Irish wage of €36,000, the couple pays €4,089 in tax, according to Marion Bradley, human capital tax manager at Ernst & Young in Limerick. This tax bill will not change if tax bands are cut by 10 per cent because the spouse's income still falls within the standard-rate tax band for a married couple with one breadwinner -- the amount of earnings on which they pay the 20 per cent rate of income tax.
Couple with earnings of €50,000 or €100,000: €878 worse off
If the spouse earns €50,000, the couple pays €9,591 in tax, according to Ms Bradley. If tax bands are cut by 10 per cent, the couple's tax bill will increase to €10,469 -- €878 more.
If the spouse earns €100,000, the couple pays €33,591 in tax -- and this bill would increase to €34,469 if tax bands were cut by 10 per cent, according to Ms Bradley. Therefore, they'd also pay an extra €878 in tax next year.
MARRIED COUPLE, TWO BREADWINNERS
A married couple with two breadwinners can earn €65,600 before paying the higher rate of income tax. If the Government reduces tax bands by 10 per cent, that couple would start to pay the higher rate of income tax on earnings over €59,040. Again, the amount earned by the couple influences how badly they would be hit by tweaking the tax bands.
Couple with joint earnings of €50,000: No worse off
A couple earning €50,000 between them pay €8,219 in tax, according to Eimear McArdle, tax adviser with Dublin tax firm Purcell McQuillan. The couple would not pay any more tax if tax bands were cut by a tenth as their entire income still falls within the standard-rate tax band, says Ms McArdle.
Couple with joint earnings of €72,000 or €120,000: €1,377 worse off
A couple earning €72,000 between them pay €16,383 in tax and PRSI. The couple would pay €17,760 in tax in 2012 -- an extra €1,377 -- if tax bands were cut by a tenth, according to Ms McArdle.
A couple earning €120,000 between them pay €41,343 in tax. "The couple would pay €42,720 if the standard-rate tax band were cut by a tenth," said Ms McArdle. That's an extra €1,377 in tax.
Sunday Indo Business