It’s been almost nine years since Brian Cowen delivered his fourth budget as Minister for Finance, and his first against a “challenging economic backdrop” back in December 2007. The swingeing budgets that followed in the subsequent years have hit everyone’s pockets.
But the tide has gradually turned – at least for now. This year the Government has about €1 billion to play around with. Most of this is going to spending increases in areas like social welfare payments, with about €300 million provisioned for tax cuts.
It won't be anything like enough to abolish the universal social charge (USC), but projected cuts to USC are expected to return as much as €100 a year to the "squeezed middle", which, as a recent report from the Irish Tax Institute shows, has borne the brunt of measures introduced in the austerity years.
But as the slogan goes, every little helps.
So how much have you clawed back so far? Who are the real losers over the past nine years – and the winners? And what should you watch out for in the Minister’s pronouncements next Tuesday?
Dual income couple
€120,000
Income down 5.1% since 2008
With a combined income of €120,000, Megan and Arthur have found their net income fall substantially thanks to the introduction of the USC. Indeed, the effective tax rate on their joint income rose from 28 per cent back in 2008 to 34 per cent in 2014.
Thankfully it has eased again in recent years, down to 31.7 per cent. These means that the couple are now down by about €366 a month on their 2008 income. They hope changes next week might shrink the gap further. With one daughter the couple have also benefited from an increase in child benefit, even if, at €140 a month, it is still off its 2008 high of €166.
What to watch out for: A cut to USC which should offer some uplift to their monthly take-home pay
Single parent
€30,000
Income down 4.1% since 2008
With an annual income of €30,000, our single parent Stephanie paid tax at an effective rate of just 6.8 per cent back in 2008.
This almost doubled to 12.2 per cent in 2014, indicating that those earning around the average industrial wage fared poorly in the age of austerity.
However, she saw her tax burden fall back to 10.6 per cent last year, and is now down €96 a month on her boom-time take home pay of €2,329.
What to watch out for: Increase in child benefit; tax relief for childcare
Millennial
€22,000
Income down 7% since 2008
Millennials, or those aged between 18-34 in 2015, are increasingly in the spotlight, faring less well than their predecessors.
They are struggling with low-paid, often uncertain work in the form of unpaid internships and contracts, and struggling to get on the housing market.
Sarah-Jane, our millennial case study is one such example.
A 24-year old graduate, she has yet to find a full-time job and is compensating for this by taking on low paid internships and waitressing. While she has only been working for the last two years, if she had been in employment back in 2008, she would have seen her income drop by 7 per cent in that time, as her effective rate of tax has risen from what would have been 4 per cent on someone in her position in 2008 to almost 11 per cent today.
What to watch out for: First-time buyers package of up to €5,000 per person
Pensioners
€48,000
Income down 1.2% since 2008
Thanks to an increase in the state pension in both 2009 and 2016, pensioners have managed to claw back many of the losses austerity wreaked on their wallets. The pensioners in our survey, with an annual income of €48,000, are now just €38 less well off a month, or €9.50 a week, from the monthly high of €3,812 reached back in 2008.
Exempt from PRSI, pensioners have also seen the weight of the USC diminish in recent years, down from being levied at a rate of 1.58 per cent in 2011, to 0.99 per cent in 2016. This means that the total rate of tax levied on their income is 6.17 per cent. The increase in the state pension has compensated for an increase in tax. Back in 2007, they paid an effective rate of tax of just 3.42 per cent, compared with 6.17 per cent today.
What to watch out for: Potential increase in state pension from €233 a week; changes to inheritance tax
Single income couple with kids
€57,500
Income down 5.2% since 2008
Last year our single income couple Sarah and Sean got a bit of a boost when the homecarer credit was increased.
This allowed Sarah to earn up to €7,200 a year from her jewellery business without diminishing the €1,000 credit from which her husband benefits from.
What to watch out for: Potential increase in homecarer credit to €1,200 which would allow Sarah to increase her earnings to €8,640 a year
Higher earner
€175,000
Income down 9.4% since 2008
From an effective tax rate of just 38.9 per cent in 2008, our higher earner (income of €175,000 from sources including rental income) saw as much as 46 per cent of their total income handed over to the tax man in 2014.
While their finances have since improved – somewhat – our higher earner has still lost some 10 per cent of their take-home income since 2008 and continues to bear the biggest brunt of austerity. Proportionately, this may make sense, given that they have the highest income; but our higher earner is also disadvantaged in two key areas.
Number one: he is self-employed, which means that he’s subject to the levy of 3 per cent on earnings over €100,000.
Number two: as a landlord, he has seen an increase in his taxable income in recent years, as a result of budget measures such as the reduction in eligible interest to 75 per cent from 100 per cent.
What to watch out for: An increase in earned income credit for the self-employed; abolition of 3 per cent levy on income over €100,000
Single public sector worker
€37,000
Income down 5% since 2008
Public sector workers have struggled with austerity over recent years, as tax increases and a pensions levy conspired to cut their take home pay.
Our single public sector worker Amelia, for example, earns an average salary of €37,000 and has seen her effective tax rate rise from 16.3 per cent to 20.4 per cent in the period between 2008 and 2016.
This means that her monthly take-home pay has dropped too – down from €2,580 in 2008 to €2,454 last year. A homeowner, Amelia has also been struck by the imposition of local property tax and, latterly, water charges, paying out €225 a year in property tax on her apartment in Kildare every year.
What to watch out for: A cut to USC which should offer some uplift to her monthly take-home pay
Civil partners
€90,000
Income down 0.6% since 2008
Our civil partners Colleen and Anna have fared the best over the past nine years.
However, that’s more to do with benefiting from the tax advantages of civil partnership/marriage than with any government budgetary measures.
Before they became civil partners, their after tax monthly combined income was €5,043 back in 2008. While this shrank to €4,649 in 2010, civil partnership in 2011 meant that they, and their two children aged seven and nine, were cushioned from the brunt of austerity. Overall, their income has shrunk by just 0.6 per cent, or €29 a month, since 2008.
What to watch out for: A childcare package which could alleviate their childcare costs
Property tax: Biggest burden
With average monthly income falling just €29 for our civil partners who, between them earn €90,000 a year, you might be forgiven for wondering why, if austerity has lightened its grip, are you still so broke?
Well, the above figures are based on taxable income, and don’t include the imposition of additional taxes and levies during the period.
Local property tax is the biggest of the additional burdens, at an annual cost of €420 on a house in Clare valued in the €250,000-€300,000 band.
This is acting as a continuing drain on family finances.
And while water charges are now off the agenda, at least in the short term, these have also squeezed more money out of the household budget (or at least for the 928,000 or so households who paid).
Property tax is off the table in this year’s Budget, after the Government decided to postpone the revaluation, which was due to happen this November, given the recent rise in property prices.
However, it will become an issue again in 2019, and could mean a hefty increase for some households, particularly those in the Dublin area.
Families – particularly those of two or more children – also saw their net incomes drop as a result of the decline in child benefit.
Back in 2008, families took home €166 per child each month; by 2013 this had fallen to €130, amounting to a loss of about €72 a month for a family with two children, or a hefty €864 a year.
It has since increased back to €140 a month.
