David Quinn: Tax burden weighs heaviest on families with one-income
It seems that the only thing stopping the Government going ahead with full and absolute individualisation is the Constitution and fear of a further public backlash
Where is George Lee when you need him? In 1999, Lee sparked uproar when he drew the nation's attention to the introduction of tax individualisation by Charlie McCreevy in Budget 2000.
Lee was passionate in pointing out the unfairness of this measure which imposed a much heavier tax burden on one-income married couples than on double-income married couples.
As this newspaper reminded us the other day, Michael Noonan reacted to the introduction of tax individualisation with suitable indignation. He called it "the most socially divisive Budget I have seen presented to the House".
Thanks mostly to Lee, half the country was up in arms and Fianna Fail backbenchers revolted, forcing McCreevy into a minor adjustment in the form of a small credit for spouses who stay at home to mind a dependent child or relative.
That put paid to the rebellion and McCreevy and successive Finance Ministers have implemented tax individualisation with full force, resulting in one-income married couples often paying thousands more in tax than their double-income counterparts. Budget 2011 widens the gap further.
To take just one example, a married couple with dependent children and one income of €60,000 per annum will pay €5,600 more in tax each year than a double-income married couple where the spouses earn €30,000 each.
Under Budget 2010, the gap was €4,260 so next year the difference between the two couples will grow by €1,340 per annum, or by more than 25pc.
This is astonishing. The justification for charging double-income couples less tax than single-income couples is that the double-income couple has to incur the cost of getting to and from work plus paying someone else to look after their children.
But even if we accept this argument does it really justify widening the gap still further, especially at a time when many two-income couples have suddenly become one income because of unemployment?
You begin to suspect that the Government actively dislikes stay-at-home spouses, or more accurately, stay-at-home wives, because it is still overwhelmingly women who stay at home to mind their children.
This suspicion only deepens when we look at how Budget 2011 treats one-income married couples compared with single people.
Admittedly, single people pay more tax than one-income married couples on equivalent earnings. But this Budget narrows that gap. This time, let's take a single person earning €45,000 and a one-income married couple also earning €45,000.
What the Budget does is increase the tax load (including PSRI etc) on the single person by €885 per annum, whereas the tax load on the married one-income couple with children is increased by €1,071 per annum.
How in the world can this be justified? The typical single earner has no dependents.
A married single-income family will have a dependent spouse at a minimum and probably one or more dependent children as well. But the Government has decided to use this Budget to hit the married family with dependents harder than the single person without dependents.
This is basically an extension of the noxious philosophy behind tax individualisation, which treats taxpayers purely as individuals and takes no account of whether or not they have dependents.
In effect, it is a declaration by the state that a decision to get married or not to get married, to have children or not to have children is of no relevance to either it, or society, or the future.
At this stage, it seems that the only thing stopping the Government going ahead with full and absolute tax individualisation is the Constitution --which offers some small protection for marriage -- and fear of a further public backlash.
The Budget's attack on single-income married couples hasn't been noticed by the media or by the opposition parties. Nor was the declaration in the four-year plan that the Government intended to launch such an attack (see page 102), and will step it up.
What will Fine Gael and Labour do when they get into power in a few months' time? At the last election both declared themselves in favour of easing somewhat the effects of tax individualisation. So did Fianna Fail for that matter.
At the very least they should be opposed to making a bad situation even worse and, logically, they should be bitterly opposed to narrowing the tax difference between single people and one-income married couples.
As mentioned, back in 1999 Michael Noonan was strongly critical of tax individualisation. Did he mean that, or was it all for show? What about Joan Burton, what's her view today?
The Government has almost certainly given the opposition parties a significant hostage to fortune by targeting one-income married couples in this way. There are still tens of thousands of them out there, despite the best efforts of Charlie McCreevy et al, and Fine Gael or Labour ought to alert them to what has happened, and promise to reverse it.
P.S. Two OECD reports out this week show that in the latter years of the boom obesity went up and literacy went down, so it seems the Celtic Tiger also made us fatter and dumber.
- David Quinn
Irish Independent
