herald

Tuesday 17 October 2017

Andrew Lynch: We're all going to pay more

BRIAN Lenihan has a fundamental problem. No matter how much he plays around with figures, two plus two will only ever add up to four.

The Minister for Finance is currently putting the finishing touches to a new social charge that will radically simplify the tax system -- but if it's just a fancy way of getting middle-income and low-paid workers to stump up more, he can be guaranteed that the voters will see right through it.

The new scheme was first signalled by Lenihan in last December's budget. As the Minister acknowledged, adding income levies to PRSI and health contributions had made filling in your tax form a bit of a nightmare - it made sense to amalgamate them all into a single payment - the 'universal social charge' (USC).

Now the ESRI has fleshed out that idea -- and suddenly, it doesn't sound quite so innocent. Under their proposals, a 7.5pc USC would be enough to generate exactly the same amount of money. The big difference is that lower and middle-income workers would see a sizeable hike in their tax bill, while those at the top would actually have their marginal rate cut from 52pc to 48.5pc.

For obvious reasons, this is a political no-no. That's why the introduction of a USC would have to go hand-in-hand with an increase in the top rate of tax, at least for those earning €100,000 or more.

Even so, the bottom line is that a new universal charge will hit the middle classes and the poor far more than the rich -- and on Budget day, the opposition will waste no time in pointing that out.

What this means is that for all John Gormley's bleating, a national government remains as far away as ever. Brian Lenihan is adamant that the giant hole in our economy cannot be plugged without bringing the low-paid into the tax net. Labour leader Eamon Gilmore told this newspaper yesterday that he would only tax the very rich and ruled out any social welfare cuts. And Fine Gael's Leo Varadkar has suggested a bumper €6bn budget, which his own colleagues have questioned.

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