Tax cuts for the mid­dle class?

The Irish Times - - Comment & Letters -

Sir, – It is in­cor­rect for Jim O’Don­nell to state (Septem­ber 15th) that the pro­posed tax cut “will, in fact, ben­e­fit the ‘up­per class’ the most”.

The pro­posed widen­ing of the tax bands would pro­duce an equal sav­ing in euro terms for those on the av­er­age in­dus­trial wage and higher earn­ers alike. The ef­fect of such a change is capped. For ex­am­ple, widen­ing the band by in­creas­ing the stan­dard rate cut-off point by ¤1,000 (from ¤33,800 to ¤34,800 for a singly as­sessed per­son) would re­duce the an­nual tax li­a­bil­ity for those earn­ing over this limit by a max­i­mum ¤200, re­gard­less of how much in ex­cess of this limit they earn. In per­cent­age terms, those on the av­er­age in­dus­trial wage would ben­e­fit more.

Mr O’Don­nell is en­tirely cor­rect to state that we cur­rently have an un­equal so­ci­ety – at least be­fore the ef­fect of taxes and trans­fers is taken into ac­count. This is mea­sured by the Gini co­ef­fi­cient. Our in­come in­equal­ity be­fore taxes and trans­fers is among the high­est in the OECD. How­ever, once the re­dis­tribu­tive ef­fect of tax­a­tion is ac­counted for, we rank just be­low av­er­age. In short, we are do­ing more to ad­dress in­come in­equal­ity via tax­a­tion than any other coun­try.

The ar­gu­ment over whether this is suf­fi­cient is a sep­a­rate one, but it is im­por­tant to un­der­stand which mea­sures would ex­ac­er­bate in­equal­ity and which would not. The ex­pected change falls into the lat­ter cat­e­gory. – Yours, etc, BARRY FLANA­GAN, Dublin 2.

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