Figures clear ‘landing zone’ of tax cuts for middle earners
CUTS to income tax and the hated Universal Social Charge (USC) are on the cards after revised figures confirmed that more than a million people are taxed at the highest rate, sources told the Irish Mail on Sunday.
The news comes as Fine Gael doubled down on calls for a major tax-cutting package for the ‘squeezed middle’ after Revenue figures said 31% of taxpayers pay the top rate, compared to previous figure of 23%.
The new figures, which reflect a change in Revenue’s methodology, significantly undermine claims that the higher PAYE rate applies only to high earners, and tally with Central Statistics Office (CSO) data showing the median annual wage was €41,222 in 2021, the most recent year for which data is published.
The figures were initially confirmed by Finance Minister Michael McGrath, in response to a parliamentary question from Green Party TD Patrick Costello.
Mr McGrath said: ‘Based on the most recent data, the number of taxpayer units that will be at the 40% income tax rate, before tax credits are taken into account, in 2024, is estimated to be approximately 1,077,500 taxpayers.’
He said that according to Revenue figures, this represents ‘31% of total taxpayer units’.
Senior Fine Gael sources said the new figures justify the party’s stance on a tax package to assist middle-income earners.
A party figure source told the Irish Mail on Sunday: ‘A million taxpayers on the top rate is a vast number by any standards.
‘It shows that tax bands make a real difference when it comes to your payslip.’
Minister of State at the Department of Finance, Peter Burke, added: ‘Tax cuts are prudent economics; they actually increase the tax yield.’ Commenting on the political backlash against the party’s plan to reduce the tax burden on the ‘squeezed middle’ earlier this year, he added: ‘It continues to be a priority to ensure middle-income earners get relief in Budget 2024 to ensure they don’t suffer more taxation on pay increases or overtime.
‘Those on the average wage are the engine room of our economy that make the cake of resources to deliver the public services.’
One senior Fine Gael source claimed the revised tax figures ‘show that we have won the argument’.
They added: ‘Our original analysis was proven to be correct. Tax cuts are now firmly on the agenda, they will stay on the agenda and our analysis has been proven, by Revenue, to be correct.
‘The spectacle of a million taxpayers paying the top rate can’t be ignored.’
One Coalition source said the new figures have cleared ‘the landing zone’ for the key Budget package measures.
The source told the MoS: ‘It’s a done deal, the landing zone is clear; Fianna Fáil will get cuts in the USC, Fine Gael will get an increased tax band and the Greens can explain any of their new carbon taxes.’