Tipperary councillors calling for the Government to use the budget surplus to abolish the Universal Social Charge have been described as “naive” by an economist. 

The USC was introduced as an emergency revenue raising measure in 2011, as Ireland’s economy was in freefall. 

15 years later, independent councillor Liam Browne wants the tax to be gradually phased out. 

Cllr Browne argued the USC places a “heavy burden” on workers and the Government has no need to levy it due to the State’s healthy budget surplus. 

On Lunchtime Live, economist Jim Power said abolishing the tax would mean a huge loss of revenue used to fund public services. 

“At the moment, for somebody earning €50,000, say, they pay USC of €1,032 - so, it is a significant burden,” he said. 

“The point is, though, that it raises around €5 billion on an annual basis and that €5 billion is used to fund public services like health and social protection. 

“The problem, of course, is that public spending has grown enormously over the last number of years. 

“Funding of that has become reliant on a lot of taxes, but particularly the USC.” 

Mr Power added that calls to use the budget surplus instead were “naive”, given corporation tax receipts remain “pretty fragile”. 

“I have no doubt about it, if the USC were to be abolished in the morning, the revenue would have to come from somewhere,” he argued. 

“Of course, the question is, where would it come from? It would mean higher taxes elsewhere.”

An elderly pensioner holding a leather wallet. Picture by: Alamy.com

Also on the programme, listener Robert said abolition of the USC would “benefit everyone”. 

“I think especially the top marginal tax rates should be reduced,” he argued. 

“It was an emergency and the emergency is over.

“We're out of the Troika years and it shouldn't really be a permanent fixture because I just think you have a squeezed middle reality here. 

“Higher tax payers pay 40% rates and it's actually higher than the EU peers. 

“When you add in USC, PRSI, you're roughly 52% - you're effectively working more than half your week for the State if you're a tax earner.” 

Robert added that people on middle incomes contribute large sums to State coffers but receive little back. 

“They are paying their mortgages while others are getting social housing, education grants, all these different things where the squeezed middle is essentially paying everything,” he argued. 

“So, I think they need a reduction of their higher tax rates.” 

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