FF to demand USC cuts in move that could scupper Donohoe's Budget plans
Finance Minister Paschal Donohoe's plan to tweak income tax bands are in doubt as Fianna Fáil prepares to demand a reduction in the Universal Social Charge (USC).
A major budget battle is brewing between Fine Gael and Micheál Martin after he warned his party wants the middle rate of USC cut from 5pc to 4.5pc. Such a cut would be worth around €200 a year to a worker earning €70,000.
However, Mr Donohoe and Taoiseach Leo Varadkar have repeatedly indicated they want to focus on income tax changes - despite campaigning for the abolition of the USC during last year's General Election.
"It is very much our desire as a Government to ensure that the Budget does provide for some tax reductions for people on middle incomes in particular.
"One of the most effective ways to do that is to change the standard rate cut-off point to ensure fewer people pay the higher rate of income tax and [those that do] hit it at a higher point than they do now," Mr Varadkar said yesterday.
Mr Martin said such a move would be outside of the deal made in return for its support on budgetary votes.
The confidence and supply arrangement says the USC should be reduced "on a fair basis with an emphasis on low and middle income earners".
Speaking in Longford at the Fianna Fáil think-in, Mr Martin said: "The most effective one [tax cut] would be reducing the 5pc to 4.5pc. That would take in 1.3 million people.
"It would be more effective than what Fine Gael is proposing which will take in far fewer people on higher incomes. We would benefit people on a wider income, particularly low to middle incomes."
Asked whether a USC cut would be a 'red-line issue' in the budget negotiations, he replied: "If tax reductions have to come they have to adhere to what's in the confidence and supply.
"It's very clear from the outset that what underpins our support for the Budget is the confidence and supply."
Mr Martin also launched a blistering attack on his constituency colleague Simon Coveney, saying the Foreign Affairs Minister "ran" out of the housing department.
"Twelve months on he runs out of the housing department and the Taoiseach facilitates him.
"It says to everybody out there 'this housing problem is intractable, I'm getting out of there and going to Foreign Affairs'," Mr Martin said.