Sunday 17 December 2017

Labour plans to cut taxes for people earning up to €120k

Taoiseach Enda Kenny and Tánaiste Joan Burton are at odds on tax reform. Photo: Sam Boal
Taoiseach Enda Kenny and Tánaiste Joan Burton are at odds on tax reform. Photo: Sam Boal
Kevin Doyle

Kevin Doyle

The Labour Party is promising tax cuts for individuals with incomes of up to €120,000, while those above that figure can look forward to an effective tax freeze.

Tánaiste Joan Burton will seek to entice the middle-class and high earners to her candidates with a series of tax reforms that she says will raise the standard of living.

The latest move to revive Labour's flagging fortunes in the polls comes in the wake of Fine Gael targeting Labour's traditional working-class voters with wage subsidies for those on low incomes.

Labour's manifesto will outline a reduction in the much-hated Universal Social Charge (USC) for people earning up to three times the average wage, which is currently around €36,000.

On the opposite page today, Ms Burton outlines where her party differs on taxation from its coalition partner.

"Fine Gael's natural instinct is to drive the bulk of available resources to tax reductions, with the remainder to public services. In Labour, we take a different view," she says.

The Tánaiste argues that the Labour Party can find the correct balance between tax reductions and public spending.

Making her pitch to a section of voters who would be seen as more likely to be Fine Gael supporters, she says that the USC will be abolished for everybody on a salary of up to €70,000.

All those earning above that threshold will benefit from that change too - but they will continue to pay USC on the portion of their income over €70,000.

A new 'claw-back' mechanism will then kick in at €100,000 and it will gradually reduce the USC benefit as a person's income increases - but everybody earning up to €120,000 will enjoy some level of tax cut.

"This means that under our plan those on individual incomes above €120,000 will continue to pay precisely the same taxes as they do now," Ms Burton writes.

She says that the "progressive tax reform" will ensure that low- and middle-income workers will see the greatest increase in their take-home pay.

"There will be those who say this sounds like auction politics. It is nothing of the sort," says Ms Burton.

Labour believes the reforms will be achievable within the term of the next government. Labour strategists say the €120,000 threshold was chosen so that the top 5pc of earners would not get tax reductions.

"The plan will be laid out very clearly in the manifesto. It will be the low- and middle-income people who will benefit the most," said the source.

Despite agreeing to a vote-transfer pact, Labour and Fine Gael have now proposed vastly different changes to the tax and welfare systems.

Already, Enda Kenny has confirmed he wants to abolish the USC, which collects around €4bn a year for the Exchequer.

Hikes

It also wants to introduce a State-funded Working Family Payment as an alternative to Labour's Living Wage initiative.

The Labour Party has committed to a Living Wage of €11.50, hikes in the minimum wage, that would see it rise to €11.30, and an extra €25 a week for pensioners.

Despite the differences, Ms Burton insists that the current Coalition has largely rebuilt the economy and should be allowed to continue its work.

"We are different parties, with different outlooks on economic and social issues. But the people chose a balance of centre-left and centre-right parties in 2011 to turn the country around and the balance has worked," she says.

Irish Independent

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