The vast majority of people would see no benefit from a cut to the 41% higher income tax rate, according to a new policy briefing from TASC. The progressive think-tank says just one-third of income tax payers pay any tax at that rate, and that the effective rate of income tax – the percentage of income actually paid in tax – is well below the 'marginal' rate of 52%.
Responding to a demand from employers’ body IBEC, TASC director Nat O'Connor blogged that “if the tax-cut lobbyists are successful, there will be cuts aimed at the 41% rate, which will only benefit the better-off in society. Public services and social transfers will be cut again to fund those tax cuts."
The OECD recently demonstrated that taxes on average workers in Ireland are the lowest of all 21 EU members who are also in the OECD. O’Connor said this refuted claims that Ireland needs lower tax. "Moreover, over one million adults of working age cannot work due to disability, care duties, full-time education or the lack of job opportunities. None of them would benefit from any kind of income tax cut," he said.
TASC says more progressive options, like cutting the high level of VAT, would be preferable to cuts in the 41%, which would only help a small proportion of high earners.
The report echoed calls by IMPACT’s outgoing president at the union’s conference last month. Kevin O’Malley said focussing solely on tax cuts would leave taxpayers subsidising low-paying but profitable employers, and would mean more cuts in public services.
“Employers’ organisations are telling us that pay must stay static while taxes fall. I’ll translate that argument for you. It means working people must trade any sort of income recovery for worse public services, while profitable businesses and their shareholders make no contribution at all. It means profitable companies can continue to have their low-pay business model subsidised by taxpayers through the benefits system, which is fast becoming a safety net not for citizens who are down on their luck, but for profitable corporations exploiting the minimum wage and zero-hours contracts. That is not acceptable to us and it should not be acceptable to the politicians who run the country,” he said.
The TASC briefing document is available HERE.
