Social Justice Ireland has urged the Government to expand social welfare supports instead of cutting tax for high earners in this autumn’s budget. 

Tánaiste Simon Harris has said €7 billion has been pencilled in for expenditure increases, while a further €1.5 billion will be spent on tax cuts. 

The Minister for Finance has signalled that part of that sum will be spent on increasing the thresholds at which people start to pay the 40% tax rate. 

Currently, people start to pay the 40% tax rate when they earn more than €44,000 a year. 

On Newstalk Breakfast, Michelle Murphy of Social Justice Ireland said increasing the rate people pay the higher band is “not going to do anything for anyone earning under that”. 

“Our proposal would be if you're going to do anything with the income tax system, do it through tax credits rather than looking at the bands,” she said. 

“Looking at the Revenue data just after last year's budget, about 60% of the tax cases in the country earn under €40,000.

“So the reality is they're not going to benefit from this package if it is what it's proposed to change where you start paying the top rate of income tax.”

Public Expenditure Minister Jack Chambers and Finance Minister Simon Harris. Picture by: Alamy.com. 

Ms Murphy said the Government should instead look to increase the disposable income of lower earners. 

“You really need to look at tax credits in particular, making them refundable for those lower paid workers,” she suggested. 

“Then looking at other thresholds and supports that maybe those households are just above in terms of things like the working family payment, maybe access to the fuel allowance and those things.”

Ms Murphy continued that the 40% tax threshold has already been increased many times in previous budgets. 

“If you look over the past 12 years, we've seen substantial [tax] nuggets,” she said. 

“Someone earning €60,000 has seen a reduction in their overall PRSI tax and USC of over €5,000,” she said.

“Someone earning €40,000 has seen a reduction of €3,480. 

“Yet at the same time, people still feel squeezed - so, clearly it's not working.”

'Get a bit of extra money'

Also on the programme, Fine Gael TD James Geoghegan described Ireland as an “outlier” with regards to when it levies the higher rate of tax. 

The Dublin Bay South TD also said that many people are “stuck in the middle” because they are not entitled to many social welfare payments, but still do not have huge incomes. 

“Just to put it into perspective, average earnings in Ireland are around €56,000 and then median earnings are about €47,000, €48,000,” he said. 

“So on both metrics, we're an outlier.

“What I suppose Minister Harris has made clear is that he wants to address that so that people who are middle income earners, who maybe are earning a little bit more in a particular year or they get a bit of extra money.”

Main image: An elderly woman takes money from her wallet. Picture by: Alamy.com.