Michael Noonan has said the Government was committed to developing a three-year tax reform plan that reduced the 52% marginal rate on low and middle income earners.
To deliver on this plan to ease the tax burden, Mr Noonan told the Dáil he was:
- increasing the entry point to the Universal Social Charge to just above €12,000, removing 80,000 low income workers from the charge altogether;
- increasing the entry point to the second rate of USC from just over €10,000 to just above €12,000 and the upper ceiling for this band is increasing from just over €16,000 to just above the level of the minimum wage;
- reducing the 2% USC rate to 1.5%;
- reducing the 4% USC rate to 3.5%;
- increasing the income tax standard rate band by €1,000 to €33,800 for single individuals;
- reducing the top rate of income tax from 41% to 40%;
- introducing a new 8% USC rate for incomes in excess of €70,000 and an 11% rate for self-employed income in excess of €100,000 to limit the benefits of these changes for the top 10% of earners;
- retaining the exemption from the top rate of USC for medical card holders earning less than €60,000 and these individuals will now only be liable to a maximum rate of 3.5%. This rate is also the maximum that will apply to the over-70s who have incomes lower than €60,000.
Mr Noonan said these changes meant all taxpayers would benefit from Budget 2015.
For example, he said:
- a part-time worker earning €12,000 will continue to face no income tax and now no USC charge;
- a minimum wage worker will now face a maximum USC rate of 3.5%;
- a working family with three children where both parents earn €50,000 each will have an additional €100 per month in their pocket;
Mr Noonan said these changes would result in the top 1% of income earners now paying 21% of all income tax and USC collected.
In contrast, the bottom 76% of income earners would pay 20% of the total.
The minister also said that this marked the first instalment of a plan to progressively reduce the 52% take rate on low and middle income earners.
He said that if the Government was re-elected, it would continue to ease the burden on those in the middle in a targeted manner without giving disproportionate benefits to those on highest incomes.