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Workers' incomes are 'swallowed' by high taxes - Harris

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Simon Harris. Photo: Tom Burke

Simon Harris. Photo: Tom Burke

Simon Harris. Photo: Tom Burke

Finance Minister Michael Noonan will examine proposals to slash the deeply unpopular universal social charge (USC) in October's Budget - but reductions in income tax remain the priority.

Junior Finance Minister 
Simon Harris, has claimed that many workers who pay the higher rate of income tax, currently set at 42pc, are seeing their salaries "swallowed up".

Mr Harris said he believed that "all workers" are entitled to a reprieve in the upcoming budget and that one option available to the Government is lowering the rate of USC.

He was responding to a report by the Irish Tax Institute, which says cutting USC will benefit the widest number of people and provide relief to working families.

But significantly, Mr Harris yesterday singled out middle-
income workers who are forced to pay the higher rate of tax.

The Fine Gael TD claimed that point at which the higher rate is applied - once a salary reaches €32,800 - is proving to be a "disincentive" for hard-pressed workers.

His emphasis on this particular band of workers indicates that Fine Gael, in particular, is determined to reward the so-called 'squeezed middle' in the upcoming budget.

"The very low rate at which people enter the higher rate of tax is becoming a disincentive because when I meet people who are asked to work overtime or asked to work extra hours, they say that a lot of that is being swallowed up by tax," Mr Harris told the Herald.

A single worker in Ireland starts paying the higher income tax rate of 42pc, plus 4pc PRSI (Pay Related Social Insurance) and 7pc USC (Universal Social Charge) on any income above €32,800. The lower rate is 20pc.

The combined effect creates a marginal income tax rate of 52pc, meaning a worker only takes home 48c of every €1 that they earn above €32,800.

Last night, a spokesman for Minister Noonan said that "a number of avenues" are available in terms of the Government's taxation measures. The spokesman said budget decisions will be made in the coming weeks.

noconnor@herald.ie


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