WHO IS BET­TER OFF: THE FAM­ILY WITH ONE OR TWO BREADWINNERS?

Sunday Independent (Ireland) - Business & Appointments - - FRONT PAGE -

THE squeezed mid­dle are still worse off than at the height of the Celtic Tiger in 2006 when it comes to take-home pay — but next year some fam­i­lies with two work­ing par­ents will al­most take home as much of their pay af­ter tax as they did in 2006. Fur­ther­more, a squeezed-mid­dle fam­ily with two work­ing par­ents is in a much bet­ter fi­nan­cial po­si­tion af­ter pay­ing their taxes un­der Bud­get 2018 than a fam­ily where one par­ent stays at home to look af­ter their chil­dren, our anal­y­sis found.

EY ex­am­ined the take-home pay of a mar­ried cou­ple in their late 30s who have chil­dren aged seven, five and four. The fam­ily’s in­come is €110,000. EY ex­am­ined if this fam­ily would be bet­ter off af­ter tax if both par­ents worked — or if one stayed at home to look af­ter the chil­dren with the other be­ing the bread­win­ner.

For the work­ing duo, EY as­sumed that one par­ent earns €70,000 as a full-time em­ployee, while the other earns €40,000 as a part-time em­ployee.

At €78,221, the take-home pay of the work­ing duo is only €677 less un­der Bud­get 2018 than it was un­der Bud­get 2006, ac­cord­ing to Pat O’brien, ex­ec­u­tive di­rec­tor with EY. So look­ing solely at take-home pay, this two-in­come house­hold will be only €13 a week worse off next year than they were at the height of the Celtic Tiger.

By com­par­i­son, a fam­ily on the same in­come but where only one spouse works will be €72 a week worse off next year than they were in 2006.

At €70,649, the take-home pay of a one-in­come house­hold on €110,000 will be €3,738 less un­der Bud­get 2018 than it was un­der Bud­get 2006, ac­cord­ing to O’brien.

The main rea­son the one-in­come fam­ily is worse off fi­nan­cially than the two-in­come house­hold is that the USC has a big­ger im­pact on the in­come of the sole earner than it has on the com­bined in­come of two breadwinners. On the plus side for the fam­ily with the stay-at-home par­ent, the home carer tax credit was in­creased to €1,200 un­der Bud­get 2018.

This credit, which was worth only €770 in 2006, is given to mar­ried cou­ples or civil part­ners (who are jointly as­sessed for tax) where one spouse or civil part­ner works in the home car­ing for a de­pen­dent per­son.

The in­tro­duc­tion of the USC to­gether with in­creases in PRSI are the main rea­sons both of these squeezed mid­dle fam­i­lies are com­ing home with less take-home pay than in 2006.

Each fam­ily will pay less in­come tax next year than they did in 2006 — how­ever they’ll pay more tax levies next year (through the USC) than they did in 2006 (through the health levy) and their PRSI bill will also be higher.

Fur­ther­more, the amount of child ben­e­fit this fam­ily will be en­ti­tled to next year will be about €707 less than what they you were en­ti­tled to in 2006. In 2006, child ben­e­fit was worth €5,747 to a fam­ily with three young chil­dren — but next year it will be worth €5,040. There were no in­creases in child ben­e­fit rates in last Tues­day’s Bud­get.

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