THE Government shouldn't introduce any further cuts in this year's Budget and should raise taxes for higher earners instead, the Nevin Institute says in a report published today.
The trade union-funded think tank said Finance Minister Michael Noonan could meet troika demands to bring the deficit down to 7.5pc of gross domestic product next year by raising €2.3bn through extra taxation and saving €400m on the public sector pay bill -- something that has already been agreed with unions.
Mr Noonan plans to make cuts of €2.25bn and introduce taxes worth €1.25bn.
"What we are saying in effect is that the Government has choices," said Nevin Institute director Tom Healy.
The institute says €600m could be raised by extra taxes on individuals and couples earning more than €100,000. It also wants a new wealth tax which could generate €200m and a hike in capital gains tax to 40pc which would bring in an extra €100m.
The think tank argues in its latest quarterly report that tax hikes rather than spending cuts create 21,000 more jobs than the Government's consolidation plans.
"Fiscal austerity is not working: unemployment remains high and domestic demand is stagnant," the think tank says in its report. "We recommend a smaller adjustment of around €2.7bn with €2.3bn of this coming in a range of taxes on high-income and high-wealth households and the rest from reductions in the public sector pay bill."
The plan would be good for those on social welfare and those who use the health and education systems.
The biggest losers under the think tank's plan would be households earning more than €100,000 a year who would have to pay an average of €1,500 extra in income taxes.
"The choice between taxes and spending is ours to make," institute director Tom Healy said.
"What we need instead is a strategy that invests in growth and begins to address the huge shortfall in taxes paid at the very top end of the income distribution."
Mr Healy added that corporate tax may have to be raised in the long run but said it should not happen at this time. VAT can't be increased any further, he added.