Retired couples targeted for tax

OLD-AGE pensioners should pay more income tax, the Dublin Economic Workshop in Kenmare was told over the weekend.

AIB economist Donal de Buitléir said a married couple with young children and a mortgage pay more tax than a retired couple with a similar income.

The balance, he said, had gone too far and shift in the balance of taxation from the young to the old would make sense.

On an income of €30,000 a married person aged over 65 pays €3,500 less in taxes than a PAYE worker.

“As a result their net income is almost 14% higher despite the fact that the young are likely to have mortgages and higher car insurance and child care expenses (after child benefits). The old have community rating for medical insurance premia, free public transport and medical cards (over 70)”, he said.

For a single person on an income of €30,000, the income differential is almost 5%. Revenue Commissioners data for 2000/2001 show that those aged 65 and over paid tax at an average rate of 13.6% of their total income, €20,307, compared to 19.1% for others (total income €24,889).

“These figures do not take account of social welfare contributions,” said Mr de Buitléir.

A married couple earning €30,000 pay €4,136 in tax and PRSI while a retired couple earning the same amount pay only €600 in tax and pay no PRSI giving a net income of €25,864 and €29,400 respectively.

“The balance between the two groups is open to question. While a change is primarily justified on equity grounds, a relative shift in the balance of taxation from the young to the old could make an important contribution to fiscal sustainability,” he added.

Mr de Buitléir said the differential arises from the relatively high income tax exemption threshold particularly for married couples and the fact that older people do not pay PRSI.

Three measures that would held address this he said were: an increase in personal tax credits; a freeze of the exemption thresholds and a shift from employee PRSI to income tax.