A new tax-cutting policy aimed at average middle-class families was unveiled by the Progressive Democrats at the conclusion of the party's national conference in Limerick yesterday. Attacks on the Labour Party over tax, immigration and health dominated much of the conference debate. Stephen Collins and Liam Reid report
Under the tax plan, a couple would pay the standard tax rate of 20 per cent on an income of €100,000 and a single person would pay the low rate up to €50,000. The top tax rate would be cut to 40 per cent.
Announcing the plan, the party chairman, Senator John Minihan, said that during the lifetime of the next government some of the benefits of economic success would be used to radically reduce the tax burden on lower and middle- income earners if the PDs were in government.
The Tánaiste and PD leader, Mary Harney, said that the tax plan was designed to put an end to the notion that tax-cutting was over and the political debate was solely about the provision of services. "That is a myth. It is not a question of increased public spending or tax cuts. You can have both," she said.
The party did not provide any detailed costings for the proposals.
However, The Irish Times understands that some of the proposals would be significant.
Previously, the Department of Finance has produced figures which suggest that a reduction of just 1 per cent on the top rate of tax would cost between €190 million and €200 million a year.
Under the PD plan, 90 per cent of increased revenues over the lifetime of the next government will be spent on improving services and 10 per cent of the projected revenue increase will be allocated to tax reductions.
The Minister for Justice, Michael McDowell, said the PDs were determined not to let everyone take their eye off the tax system. "Tax reform is not just for the wealthy; it is for the coping classes."
The PD tax plan involves three pledges. One is that couples will be taxed at the standard rate on earnings of up to €100,000, with €50,000 for a single person. The second is that tax credits will be increased so that couples earning up to €40,000 will pay absolutely no tax (€20,000 for a single worker). The third is that the top rate will be cut from the current 42 per cent to 40 per cent.
The plan is based on the assumption that gross domestic product will continue to grow by 5 per cent over the next five years and that inflation will increase at an average of 2.5 per cent a year. Day-to-day public spending will grow in line with inflation plus economic growth which comes out at 7.5 per cent while tax revenues are predicted to grow at a rate slightly above economic growth.
The Taoiseach, Bertie Ahern, did not comment directly on the PD proposals but indicated he was open to future tax cuts. Asked by journalists whether it would be a priority for Fianna Fáil, he said his party wanted "to see that the fruits of our economic policies can be shared in a way that can keep on developing this country." He added: "In some cases that can be tax cuts. In other cases it's putting it into services."
The Labour party claimed the proposals should be viewed with scepticism, as the PDs had so far failed to keep their 2002 taxation promises. Labour finance spokeswoman Joan Burton said the Government promised only one in five workers would pay tax at the higher rate. At present nearly a third of all taxpayers are taxed at the higher rate.
Green party finance spokesman Dan Boyle called the proposals "a desperate attempt to buy [ the PDs'] survival at the next election".