herald

Sunday 22 October 2017

'Squeezed middle' took most of tax hit

squeezed middle-income earners took the greatest hit of tax increases in the last five years, new research has shown.

The Economic and Social Research Institute (ESRI) said those on social welfare have been cushioned by a series of tax rises and spending cuts introduced by successive governments.

As the economy collapsed, more people joined the Live Register which in turn put a strain on the incomes of middle-income earners.

The average income has fallen by 8pc from the peak, while the welfare bill has risen from 13pc of income before the crisis to 20pc.

Disposable income has fallen from €22,800 in 2008 to around €20,900.

Economist John Fitzgerald said that over the last few years the people who were worse-off were those who lost jobs.

But he said the rest of the population "took a hit" to pay for welfare supports.

"With three times as many people unemployed, they weren't paying tax and on the top end you had a dramatic reduction in the numbers of really high earners. This left the rest of the population who were earning to pay taxes," he said.

"The people who did worse obviously were the people who lost jobs, and the rest of the population had to take a hit to pay the welfare payments.

"The number of high incomes fell very significantly.

"Given that they had to find a lot more tax revenue, where else do you find it but with the bulk of the population?"

Mr Fitzgerald also cited research that showed many people on reasonable incomes are in financial distress due to excessive mortgage repayments.

crisis

Ireland differed from other EU countries where the gap between the richest and poorest increased significantly as a result of the crisis.

"The Irish experience and that of Portugal [who adopted a similar policy] stand out as being exceptional; public policy more than reversed the effects of market forces on the distribution of income, resulting in greater equality in the distribution of incomes," the report revealed.

hnews@herald.ie

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