A new report has found that Ireland has the highest pre-tax income inequality in Europe.
The ESRI study found that the Irish tax system does more than any other in the EU to offset this inequality – with Ireland around mid-table when it comes to the take-home pay gap.
The study finds that the broad base of the Universal Social Charge (USC) and the low entry-level for the higher rate of income tax are both “particularly progressive” when it comes to tackling income inequality.
Fianna Fáil has pledged to cut the main rate of USC from 4.5% to 3.5% if elected. It is also promising to increase the entry-level for the higher rate of income tax.
Fine Gael has also pledged to raise the entry-level for the higher rate of income tax.
Sinn Féin has promised to take one million workers out of the USC altogether by raising the entry-level for the tax to €30,000.
ESRI economist Dr Barra Roantree said the study examines how some taxes are redistributed to struggling households.
“It takes into account where the taxes are going and being redistributed back in to other households in the form of social welfare benefits or pensions,” he said.
“What it shows is that the Irish tax system does the most in the EU to reduce inequality from a point where we are one of the most unequal before taxes and welfare to one where we are in the middle of the league table.”
The report notes that pre-tax income inequality has increased in the last 30 years – with the top 10% of households now earning 2.6 times more than the average household.