Mr Noonan signalled that he wants to reduce levies for lower- and middle-income earners ahead of the general election which must be held by spring at the latest.
“I’m going to cut the Universal Social Charge by at least 1% and maybe a bit more,” Mr Noonan told Newstalk.
“I use the budget for economic management purposes and I’m going to cut personal taxes in this budget.
“But to target all the people I want to target — lower-paid people, middle-income people — I need to use income tax, PRSI, and USC, because there are three different personal taxes.
“But I’m doing it so work pays better than it pays now and there’s more take-home pay and that I’m incentivising more people to go to work and I’m incentivising people to come home who were forced out.”
The decision, with the budget due to be announced in October, will be seen as a boost for Labour after the junior coalition partner won the argument to prioritise USC cuts ahead of income tax cuts.
The move is likely to impact on the 7% USC rate paid by those earning between €17,500 and €70,000 per year.
Mr Noonan dismissed speculation he intends to stand down as a TD, insisting he would put himself forward in September.
Mr Noonan also claimed that the chances of securing a new bailout deal for Greece are better than even.
Mr Noonan insisted he had not adopted an anti-Athens stance in the ongoing eurozone negotiations.
“What has changed is, a lot of us around the table weren’t sure if they were serious about making a deal or if they wanted to leave the euro and blame the European institutions for forcing them out,” he said.
“It seems now they are quite serious and they have started the legal process.”
Taoiseach Enda Kenny has claimed that some 50,000 people will be exempt from USC after the next budget.
A Fianna Fáil source said that while a USC cut was welcome, it was clear the Government intended to use all the financial leverage it could to secure the most favourable election outcome.