Fine Gael's plan to abolish USC would be a 'runaway tax cut' - Fianna Fáil
Fine Gael's plan to completely abolish the USC would be a "runaway tax cut" conferring limitless benefits on the better off, Fianna Fáil has said.
Fianna Fáil has pledged to phase out the USC for all earnings up to €80,000 per year. Anyone earning more than that would pay 8pc on the amount above €80,000 and the three existing lower rates of the tax would be eliminated.
Fianna Fáil's finance spokesman, Michael McGrath, also challenged Finance Minister Michael Noonan to explain an apparent €900m "black hole" in economic forecasts for the term of the next government. Mr McGrath said Fine Gael's economic plan had stumbled in recent days, and he accused Mr Noonan of "scrambling" to make his numbers add up.
He insisted Fianna Fáil would hold in reserve an extra €1.5bn which the EU may approve for public spending. He said the amount of extra money in year one of the new government's five-year term would be €500m, with €1.1bn in year two, and all going well the amount would increase as the term went on.
"We are committed to a balanced Budget and we recognise that any expenditure-increasing or revenue-reducing measures are dependent on projected economic growth," Mr McGrath said.
He said Fianna Fáil had learned the lessons of the past. "We will take a sensible approach to tax and expenditure decisions in the years ahead and prioritise public services."
The overall package of €8.3bn is split 2:1 between expenditure and tax.
"We believe this strikes the right balance between improving take-home pay and ensuring families have access to quality public services," he said.
Mr McGrath said a number of international factors - such as changes in oil prices and the prospect of our biggest trading partner, Britain, leaving the EU - could badly affect the Irish economy.
Mr McGrath also highlighted another €250m of unidentified "tax compliance measures" in the Fine Gael numbers, which he described as "highly dubious".
He dismissed the plan to abolish the USC and accused Fine Gael of making changes that would further complicate the tax system and place an undue administrative burden and extra costs on Revenue.
"The Fine Gael USC abolition is a runaway tax cut. For people on €200,000 per year they will gain €7,000 per annum. For people on €300,000 they will gain €10,000 per annum and for people on €400,000 they will gain €13,000. It's limitless - it's a runaway tax cut," he said.
Mr McGrath and public expenditure spokesman Sean Fleming announced their party's plan to scale down the USC. They said the party's proposal would effectively eliminate the USC for the vast majority of pensioners.
The party also gave its assessment of the ongoing controversy of the so-called "Fiscal Space", the term for spare funds available for tax cuts and increased services for the next government. Mr McGrath said Fianna Fáil believed the figure was €8.6bn.
Mr McGrath said Fianna Fáil's economic plans were based on assumptions of healthy economic growth. But if the economy slowed, the party would put more emphasis on public investment rather than tax cuts.
"The priority will be to protect vital frontline services ahead of tax cuts," Mr McGrath said, adding that Fine Gael would favour tax cuts for the wealthy.