Friday 20 April 2018

Charlie Weston: The message to the squeezed middle is to keep coping and keep coughing up your taxes

Charlie Weston

Charlie Weston

WE were warned before the Budget not to expect too much.

Finance Minister Michael Noonan, using a quaint old phrase, told us that taxpayers would not be throwing their hats in the air on Budget night.

The squeezed middle will feel they will struggle to afford a hat on what they got, never mind throwing it in the air in celebration.

For a typical middle-income couple, the gain will be around €5 a week, mainly from the cuts in the Universal Social Charge (USC). This is the same amount of money pensioners are getting in March.

No wonder it was dubbed the Fiver Budget.

It seems the message for the coping classes is: here are some crumbs, keep on coping as we need to spread what we have across a whole range of people.

There was a little for everyone in the audience, but not very much for any one group.

However, two main groups of winners have emerged: pensioners and the self-employed.

Pensioners are due to get a fiver in March. They will get 85pc of the Christmas bonus, and for those over the age of 70, the Government is also reducing the €25 cap on prescription charges down to €20.

The biggest winners were probably the self-employed. Some 150,000 people who work for themselves will get a larger tax credit.

A tax credit is money you do not have to pay to the Revenue on your income or pension.

The minister increased what is called the earned income credit.

It has been increased by €400 to €950, which will mean less tax now needs to be paid by the self-employed.

From March all social welfare payments will rise, including jobseeker's benefit and allowance, carer's allowance and disability benefit.

The big change for ordinary workers is to the hated USC.

All taxpayers will be paying less from next year after the USC was decreased by 0.5pc over the three lower rate bands.

As the USC is levied on income, with little or nothing in the way of reliefs, the cuts will mean more money for working people, those in receipt of private pensions and the self-employed.

However, the gains will be limited for most people. Workers will be better off by between €130 and €350 a year.

Anyone earning €70,000 or more will be limited to a gain of €353.

The changes will mean that, for a married couple with one income of €55,000, there will be a saving of €278 a year, or €5 a week.

The Irish Tax Institute pointed out that the USC changes will mainly accrue to those on lower pay.

A person on €18,000 will get a 15pc reduction in their tax bill.

The average worker will see a 2.7pc reduction in their tax bill, while those on €75,000 will see a 1.3pc reduction in their tax bill.

A new single affordable childcare scheme will be introduced from September, which will go some way to mollify those struggling under the weight of expensive childcare costs.

The reduction of DIRT by 2pc will be welcomed, as the tax is seen as a punishment for those prudent enough to save, but with interest rates so low it may not make much difference. People inheriting property from relatives will also pay less tax.

However, for the squeezed middle, who continue to pay a high price for rescuing the State, the Budget will leave a bitter taste.

The system has become increasingly skewed, with middle and higher earners accounting for a higher burden of the income tax take.

It seems that 100 years after the Rising, the squeezed middle is being told that now it's your duty to be squeezed for the nation.

Irish Independent

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