Married couples with two incomes will do significantly better than single income couples when Mr McCreevy's new tax measures come into effect next year. This is because Mr McCreevy has continued his controversial drive toward full individualisation of the standard rate income band. He has also given significant increases in child benefit.
Mr McCreevy increased the amount of income that will be taxed at the standard rate for both single taxpayers and dual income couples by 10.3 per cent to €28,000 (£22,052) and €56,000 (£44,104) respectively. But for single income couples the band only increased by 0.5 per cent to €37,000 (£29,140).
These moves have no impact where a married couple earn less than €37,000. But where a couple have two incomes substantially above this level, the benefits can be very significant - to gain most they need to have a joint income of €56,000. How much a couple will gain will depend on how their earnings are split between them.
To get the maximum benefit from Mr McCreevy's latest individualisation moves a couple could either earn €28,000 each or could have one income of €37,000 and a second income of €19,000 (£14,964). The annual tax bill of such a couple would be €6,840 (£5,387) in 2002 compared with a bill of €11,680 (£9,199) for a single income couple earning €56,000.
In the current year with the lower standard rate band and PAYE credits a dual income couple on €56,000 split evenly between them would face a tax bill of €8,536 (£6,722) - they will get an annual tax gain of €1,696 (£1,336) from the Budget 2002 measures. This years tax bill for the single income couple is €12,117 (£9,543), giving then a gain of only €437 (£344) from the new tax measures.
The impact of the individualisation moves in Budget 2002 have been accentuated by the 30 per cent jump in the PAYE tax credit - because a dual income couple get two PAYE credits. Single income couples earning over €35,870 (£28,250) also lose out because of the increase in the PRSI ceiling. And in Budget 2002 Mr McCreevy has made only a token gesture to the stay-at-home spouses with a minimal rise in the home carer credit. It was increased by just over one per cent to €770 (£606) compared with increases of between 8.8 per cent and 30 per cent in other tax credits. Mr McCreevy was forced to introduce the home carer credit in 2000 when his first individualisation move was roundly attacked.
Mr McCreevy also announced a big increase in child benefit with a 34 per cent jump to €117.60 (£92.60) per month for each of the first two children and to €147.30 (£116) for each subsequent child.