Marginal 50% tax rate for those earning €80,000

A SINGLE individual earning about €80,000 will have a marginal tax rate of 50% for 2009, when the provisions of the supplementary Budget comes into effect, the Dáil has heard.

Labour finance spokeswoman Joan Burton said the Minister for Finance had confirmed the tax rate figures in a parliamentary reply.

She said the 50 per cent tax rate “is a combination of income tax at 41%, income levy of 4% and health levy of 5%”.

An individual “earning €175,000 or more will have a marginal tax rate of 52% for 2009. This is income tax at 41%, income levy of 6% and health levy of 5%. When tax credits and so on are taken into account, an individual on €80,000 will have an effective average tax rate of 36%. These tax rates have not been seen since the early 1990s,” she said.

Ms Burton was speaking during the opening of the debate on the Finance Bill which gives effect to the provisions of the supplementary Budget. She said this era in Irish political life “will go down in Irish history as the crony capitalism period that destroyed much of the prosperity that had been built up during the Celtic tiger years”.

Ms Burton said “it is the ordinary family with two parents and two or three children and an income of €40,000 to €90,000 that is bearing the brunt of the Government’s mismanagement of the banking crisis.”

But introducing the legislation, Minister for Finance Brian Lenihan said Ireland’s tax system remains competitive and pro-enterprise despite recent increases. “Tax increases are required. They are not palatable, nor are they easy to accept, but the measures detailed in this Bill are progressive and fair,” he said.

He said “I do not for one minute underestimate the difficulties it is causing workers and their families. However our capacity to make these adjustments in labour costs and work practices is critical to our recovery. The sacrifices we make now will reap large economic gains in the near future.” He also renewed the Government’s commitment to the 12.5 per cent corporate tax rate, which he told the Dáil “is essential to economic recovery”.

The economy is expected to contract by 8 per cent this year, which a “more moderate decline” in 2010 “but as the international recovery gains momentum and the sharp shock in residential housing output passes through, our economic growth rate is expected to turn positive by 2011”.

He added that “though the challenges are great, we should not forget that our economy has many strengths on which to build a recovery”.

But Fine Gael finance spokesman Richard Bruton believed the Budget’s main measure – Nama – was a “time bomb”.

He asked “will it get credit going? Is this the least expensive way of doing so? If it does not work, will it be possible to pull out without incurring too much cost?” He said Ireland faced “frightening challenges” and unemployment could rise to more than 600,000 by the end of next year, but despite the prospect of another 300,000 people becoming unemployed the Finance Bill “offers no new initiative as to how we shall protect the employment that is now so vulnerable”.

The Government’s response in the Budget looked solely “at one narrow public finance problem, and addressed it in just one way, by hiking up taxes to fill the gap”, he said.