Press release from The Iona Institute
Michael Noonan and Joan Burton must honour promise to end tax individualisation
The tax system “hugely and unfairly discriminates” against the family today compared with the tax system in the 1970s, The Iona Institute has said.
A new paper (click here to download) from The Iona Institute called ‘Restoring Fairness and Balance’ (see note 2) shows that a married couple on one income of €65,600 and three children pays a massive €8,236 more in tax each year than they would if the 1974 tax system still existed.
This is offset to some extent by Child Benefit which gives today’s family with three children an additional €4,680 but it still leaves a difference of €3,556, equivalent to roughly three monthly mortgage repayments for the average family.
Commenting on this, Iona Institute Director and social affairs commentator David Quinn said: “The tax system hugely and unfairly discriminates against the family today compared with its counterpart in the 1970s. The family today is being hit with far higher taxes, even after taking into account Child Benefit. The tax code today takes far less account of dependent children, which all young families have, or a dependent spouse, which a quarter of a million families still have”.
He said: “Add to this the effect of tax individualisation introduced by Charlie McCreevy and the situation is even worse. The family as a whole pays far more tax than it once did and one-income married couples pay more again”.
He called on Tanaiste Joan Burton and Finance Minister Michael Noonan to keep their promise [see note 3 below] to tackle tax individualisation by doubling the Home Carer’s Credit to €1,650 “if not in this budget, then as soon as circumstances allow”.
He continued: “We need to have a proper debate about our tax system and how it affects families. We can see from our new paper that our tax system takes very little account of the children and possibly a stay-at-home spouse who are dependent on the family income. The tax system treats people as individuals with no dependents far more than it once did. This is completely unfair”.
Key findings of the new paper are as follows:
– Tax regime moving against the family: A one income family of three children on 1.5 times the Average Industrial Wage pays over €8,000 more in tax relative to the same family in 1974 (although this is offset to some extent by Child Benefit)
– Allowance for Children: Compared to 1974 – when family child allowance per child equated to 10 per cent of the Average Industrial Wage – child benefit per child amounts to just 3.5 per cent of today’s Average Industrial wage
– Marginal taxation: Compared to 1974 – when it took three times the average industrial wage to hit a marginal tax rate of 50 per cent or more – today a rate of 52 per cent affects workers on less than the Average industrial wage
– Tax individualisation: Compared to a double income family on an income of €65,600 a single earning family today on the same income pays €5,838 per annum more in taxation
– Single income –v-Single families: Compared to a single parent family with one child and an income of €65,600 a single earning two parent family with one child receives nearly €8,000 less per person after tax income.
The controversial “Tax individualisation policy” was introduced in December 1999 by Charlie McCreevy following pressure from the EU Commission.
Quinn concluded: “The Irish tax system must stop treating children and parents who care for them as second class citizens. Tánaiste Joan Burton and Finance Minister Michael Noonan should begin by doubling the Home Carers Credit next Tuesday to end the disgraceful discrimination of stay at home parents. Then a Commission on Family Taxation should be established to phase in a “Family-Fair” system of taxation by 2020 to end the gross injustices against dependent children and home workers that distorts our tax code”.
Notes to editor:
1. The Iona Institute is a pro-family think tank.
2. The main author of the paper is economist, Marc Coleman.
3. Responding to Budget 2000, Michael Noonan said to Charlie McCreevy: “You are forcing women to go out to work…you are changing the kind of Ireland we have known and changing it for the worse. Joan Burton said in 2007: “Across the tax and welfare code there is now a significant anti-family bias that is worrying.” She said in the foreword of the paper on tax individualisation issued by The Iona Institute in 2007, she said the Home Carer’s Credit should be doubled.
