Budget 2016 will see the Home Carer’s Credit (HCC) increase by €190 per annum. The HCC was first introduced in 2000 to slightly offset the huge discrepancy tax individualisation created between one income and two income married couples. The increase is good, but doesn’t go nearly far enough.
When Charlie McCreevy announced tax individualisation as part of Budget 2000, it caused huge controversy because it so heavily favoured two income married couples over one income married couples. When McCreevy introduced the HCC the row died down and the issue has only occasionally resurfaced.
The HCC was first set at €770 per annum and had risen by a miserable €40 per annum in the years since then until this latest Budget.
Finance Minister Michael Noonan was asked on air last year why he had not increased the HCC and he said he did not rule out doing so in the future. The €190 increase he announced this week is the first meaningful increase since the credit was introduced 16 years ago.
However, as mentioned, it doesn’t go nearly far enough. The discrepancy in the amount of tax paid by a two income married couples compared with one income married couples is still huge.
For example, a married couple on a single income of €70,000 per annum will still pay close to €6,000 more in tax each year than a married couple on a combined income of €70,000.
The Iona Institute released a paper on tax individualisation [1] in 2007, giving the case against it. Joan Burton wrote the foreword.
She said (based on figures at the time) that to close the discrepancy caused by tax individualisation would cost €700 million. She said this could not be done at one go.
Therefore she proposed increasing the HCC to €1,760. She said this would cost €100 million.
Thanks to Budget 2016, the HCC will soon be €1,000 per annum. This is still far short of Joan Burton’s modest proposal, never mind getting anywhere close to eliminating completely the unjust gap created by tax individualisation.