The silly season usually refers to August. Now we have the silliest of seasons –the run-up to a budget in the run-up to a general election. Minister Richard Bruton has recently called for a low flat rate tax on immigrants and returning Irish, along with cutting capital gains tax to 10 percent. Brian Lucey has called some of the ideas both bad and stupid.
But Minister Bruton runs a poor second to Renua in the race-to-the-ridiculous stakes. Renua has called for a flat-rate tax. It represents a massive transfer from the lowest income groups to the highest income groups. It will require low and middle income groups to fund not only their own tax cuts but even higher tax cuts for those on much higher incomes. As Brian says of Minister Bruton’s proposals – it is an idea whose time has not come (and hopefully never will).
Renua proposes that income tax, employees’ PRSI and USC be abolished and replaced by a flat-rate tax of 23 percent. This will be complemented by what is called a ‘Basic Income’ that tapers out slightly above average earnings (this is not actually a basic income – it is a hybrid of a tax allowance and negative income tax). Renua doesn’t detail how this tapering works so we can’t do an income distribution impact assessment for all income groups. However, here are a couple of examples from their own pre-budget submission with some estimates of my own.
Yes, you’re reading the graph right. A low-paid worker on €20,000 would end up paying more tax. Someone on an average wage would benefit by €800. However, it’s bonanza city for those on €100,000 and more. Calculations for €36,000 and higher are my own.
There is a similar regressive impact when considering couples. Renua states that a couple on €50,000 (both working, same salary) would gain €1,665. A couple on €100,000 would gain €9,741 – or more than six times the nominal amount. Couples on even higher incomes would benefit disproportionately more.