Tipperary South TD Seamus Healy has said he believes the United Left Alliance has been "fatally damaged" by the revelations over Mick Wallace's tax affairs.
Mr Healy said the ULA's "mission" to build a broad-based national organisation had been badly hit by the affair.
His group, the Workers & Unemployed Action Group, pulled out of the ULA in the Dáil yesterday.
WUAG has seven local councillors in South Tipperary.
He said he was leaving the Alliance because the question of tax equity was a core principle of WUAG, some of whose members emerged from the PAYE tax campaigns in the 1980s.
Mr Healy said that anyone who falsified tax returns was not a fit public representative.
He said that the group was taken aback that the ULA was not prepared to call for Mr Wallace's resignation from the Dáil.