Sunday 22 April 2018

Crafty Budget sees hated USC slashed with a focus on families and older people

Minister for Finance Michael Noonan TD delivers the Budget on the steps of Government Buildings.
Pic Steve Humphreys
13th Ocober 2015.
Minister for Finance Michael Noonan TD delivers the Budget on the steps of Government Buildings. Pic Steve Humphreys 13th Ocober 2015.
Charlie Weston

Charlie Weston

Michael Noonan is nothing if not crafty.

He gets the fact that few of us understand the tax system.

In the Budget he could have made alterations to the tax credits and widened the tax bands. These changes would probably have had just as big an impact on people's take-home pay.

However, few would have fully understood changes to the tax bands and tax credits, people like me would have struggled to explain it, and he would have left himself less room to manoeuvre when it comes to changes to the hated universal social charge (USC).

Mr Noonan has been around the corridors of power long enough to know that you have to take people with you.

So he went big on changes to the USC instead.

This is an emotive tax. It was introduced in 2011 to help sort out our messed-up public finances.

People correctly associate it with austerity and want rid of it.

So Mr Noonan took more people out of the USC net, and lowered the rates of USC for those who pay it.

But the gains will only go to those earning up to €70,044, a move to ensure the Government is not seen to be favouring the fat cats.

Some 42,500 workers will no longer pay USC, after the minister increased the entry threshold to €13,000.

Mr Noonan has also reduced the lower rates of USC. But the big change is to the main 7pc rate. It falls to 5.5pc and applies on income in excess of €18,668 and up to €70,044.

This is the big money change, as the reduction to the 7pc rate will benefit some 1.28 million workers. The USC changes would be worth a week's wages to most people, the minister quipped.

Mr Noonan said the USC alterations will reduce the marginal rate of tax to 49.5pc for all earners under €70,044 for the first time since the supplementary budget in April 2009. We have one of the highest marginal rates in the world.

There were also changes to the home carer credit, which will mean extra tax-free income for families where there is a stay-at-home spouse caring for children or a dependent.

And low-income families will gain from changes to the family income supplement, and modifications to pay related social insurance (PRSI) for those who earn little.

Families with children get an additional €5 a month in child benefit, a measure that will be worth €120 a year to a family with two children.

Pensioners will get an additional €3 a week, with changes to the fuel allowance to also benefit. But the inheritance tax changes were a disappointment.

The losers were smokers and first-time buyers.

Those people who purchase 20 cigarettes will now have to break into a €20 note, after 50c was added to the excise duty on fags and a pro-rata increase on other tobacco products

And there was nothing for those scrambling to get on the housing ladder.

They are being hit by ever-rising rents, making it almost impossible to get bigger deposits together.

The Central Bank lending rules mean they need larger deposits and there is a limit on the amount of their income that can be used to calculate how much they can borrow.

This is hitting the millennials hard - those under 30.

However, they do not vote in as big a number as the heads of families and pensioners do.

Irish Independent

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