Higher tax rate could see gap in households widen

The proposed higher tax rate of 48% for people earning in excess of €100,000 could result in the gap between single income and dual income households widening.

An analysis run by www.taxback.com show the take home pay of the average single income family earning €120,000 per annum would drop by €117 a month to €5,906 whereas the average dual income married couple, with one earning €40,000 and the other €80,000, would see their take home pay remain unchanged.

Christine Keily of taxback.com, said the higher tax rate would see a single earner family hit harder than a dual earner family bringing home the same gross pay. The difference could be up to 18%.

“In 2012 a single income family earning €120,000 a year would expect to come home with circa €72,273.

“If, however, a 48% tax was introduced for income over €100,000 then this family could expect a decrease in their take home pay to €70,873 in 2013. By comparison, a dual income family earning the same gross (€120,000) would see their take home pay remain static at €79,866.

“If this was to happen in next week’s budget it would simply be another step along the tax individualisation route which was introduced in 2000 by then minister for finance Charlie McCreevy — a tax policy which since its inception has been met with resistance due it its preferential treatment of one type of family unit over another.”

Ms Kiely said single income households earning over €100,000 will be double taxed compared to dual income households earning the same gross pay.

“Tax individualisation coupled with the potential introduction of a 48% tax for those earning over €100,000 per annum will amount to a double penalty on families where one spouse has lost a job and the other spouse has needed to increase the family earnings with overtime, additional duties etc,” she said.

Ms Kiely recommended that the Government introduce some form of equalisation so that the gap between households is not widened.

“While it may be too costly for a government to reverse the tax individualisation system it would probably be more beneficial to come to some degree of tax equalisation by not widening the gap between joint income and single income families in next week’s budget,” she said.