Analysis of Budget 2019 by the Economic and Social Research Institute says a decision not to link changes in tax and benefit rates to expected wage growth would reduce average household disposable income by 0.7%.
It says lower income households would see proportionately greater losses than higher income households, who benefit more from cuts to Universal Social Charge and an increase in the higher rate threshold for income tax.
Budget 2019 includes cuts to USC rates, and increases the amount of income subject to the lower 20% tax rate. It also includes a €5-a-week increase in the main welfare rates.
But according to the ESRI, these changes could leave households slightly worse off compared with an adjustment to the tax and welfare system that kept pace with expected wage growth for next year of just under 3%.
Researchers say freezing personal and employee tax credits when prices and wages are rising amounts to a real terms tax increase.
Although households across the income distribution are negatively impacted, the higher income groups fare a little bit better because most of the tax cuts in Budget 2019 were focused on the 25% of households that pay the higher rate of income tax.
The tax and benefit changes announced in Budget 2019 will, on average, reduce households' disposable income by 0.7% compared to a neutral benchmark where tax credits, thresholds and maximum benefit payments rise in line with forecast wage growth.
Lower income households will on average see slightly larger proportional losses (0.8%) because of the decision to freeze personal and employee income tax credits in cash terms (a real tax rise), and to increase maximum benefit payments by less than wage growth.
Higher income households, by contrast, will on average see smaller proportional losses (0.5%) because of cuts to the USC and a rise in the income tax higher-rate threshold, which partially offset overall tax increases.
Barra Roantree, a Research Officer at the ESRI and an author of the report, said: "Freezing personal and employee tax credits when prices and wages are rising amounts to a real terms tax rise, which take proportionally most from lower-to-middle income households. Tax cuts in this budget were focused on the 25% of households that contain a higher-rate income taxpayer."
Dividing the country into ten income groups (deciles), the report says "losses as a share of household disposable income are on average largest for the third lowest income decile (0.94%) and smallest for the highest income decile (0.37%).
"With the exception of the very lowest income decile, households in the bottom half of the income distribution (deciles 2-5) lose by more than those in the upper half.
"This pattern is driven by the nominal freeze (real cut) to personal and employee tax credits and to PRSI thresholds, which increase the taxes paid on earnings by households in the bottom half of the distribution.
"Households in the lowest income decile tend not to have sufficiently high incomes to pay tax, so are less affected by these changes, but do lose from the below wage indexation of benefit payments which make up a substantial share of their disposable incomes.
"The upper half of the income distribution see smaller losses because of USC reductions and the increases to the standard rate cut-off, but still lose on average because of the real cuts to personal and PAYE tax credits and the rise in indirect taxes."