Tax cuts undermined by TD's pay hike

Tax cuts undermined by TD's pay hike
Paschal Donoghue and Taoiseach Leo Varadkar.

A series of budget measures aimed at winning over public support which came into effect yesterday risk being undermined by the fact a €3,600 TDs’ pay hike was also introduced at the same time.

The moves, including USC cuts, minimum wage rises, pay restoration for public servants and improved supports for the self-employed, were introduced on New Year’s Day after being initially announced during last October’s budget.

However, while the changes put forward by Finance Minister Paschal Donohoe will mean average workers will be hundreds of euro better off this year compared to 2017, they still risk being undermined.

This is because, under public service pay restoration plans, TDs have also been given €3,600 pay hikes for 2018 as part of three separate rises due to take place between now and the end of the decade.

Under the budget plans which formally came into effect yesterday:

  • The income tax standard rate band has been increased by €750, meaning a person will now be able to earn up to €34,550 under the 20% rate of tax before being put onto the 40% rate, while the higher income tax rate starting point for single income earner households has increased from €42,800 to €43,500;
  • The minimum wage has increased from €9.25 to €9.55;
  • USC rates have been cut from 2.5% to 2%, and 5% to 4.75% respectively;
  • The earned income tax credit has risen from €950 to €1,150;
  • Prescription charges for medical card holders under the age of 70 has reduced from €2.50c per item to €2, while the monthly cap has been slashed from €25 to €20;
  • And legislation to restore pay levels for public servants such as teachers cut as part of the recession-era Fempi legislation has been introduced.

However, despite the fact the changes will leave households hundreds of euro better off this year, the moves risk being undermined by the fact TDs have also given themselves a €3,600 pay hike — to €89,965 — as part of Lansdowne Road agreement-linked changes.

Taoiseach Leo Varadkar, Tánaiste Simon Coveney, cabinet ministers, and ministers of state have all turned down the pay rises alongside a number of political parties, in part due to the PR damage the rises could cause.

However, the majority of sitting TDs are still due to take the pay hike, which is due to be followed by another 1% pay rise in October, a 1.75% increase in September 2019, and a 2% hike by October 2020.

This story first appeared in the Irish Examiner.


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