Young people, those in receipt of social welfare and middle-income families will find the measures particularly hard to swallow, writes CONOR POPE
A MIDDLE-INCOME family will be out of pocket by about €300 a month as a result of the significant changes announced in the Budget yesterday.
A married couple with three children earning €75,000 will see their net income fall by €1,815 (3.6 per cent), or €151.25 a month. They will also lose a further €40 a month in reduced children’s allowance payments.
If they have one child in university, one in secondary school and one in primary school a combination of increased registration fees and transportation levies would take a further €75 a month from their net income.
When the higher cost of fuel, a significantly reduced number of tax reliefs and higher taxes on savings and investments are factored in, families are likely to find it harder to make ends meet.
The Budget will be tough for everyone, but young people, those in receipt of social welfare and middle-income families will find the measures particularly hard to swallow.
Changes to the tax bands and credits will see more than 132,000 extra people brought into the income tax net next year, while an additional 84,000 people will find themselves paying tax at the higher rate of 41 per cent, many of them for the first time.
A single person working in the private sector earning a salary of €45,000 and making an annual pension contribution of €3,300 will see their net income fall by €1,101, a drop of 3.4 per cent.
Most of the reduction will be accounted for by a 10 per cent drop in their tax credits and the widening of the tax base by the same percentage.
A public sector worker in the same position will be slightly less worse off and will lose €1,053 a year, a fall of 3.2 per cent.
Older people have been somewhat protected by this Budget, with no cuts to State pensions for people aged 66 and over, but there will be a significant reduction in most social welfare payments.
The jobseeker’s allowance will fall by about €8 to less than €190, the carer’s allowance for those under 66 drops by the same amount to €212 a week, while the disability allowance is being cut by €8 to €186 a week.
Child benefit is to be cut by €10 a month for the first and second child, and by €20 for a third child.
Families with students who are in third-level education will have to find a further €500 a year per student to cover the cost of increased registrations fees. With effect from the 2011/2012 school year, a transport fee of €50 per annum will be introduced for primary school pupils, with a maximum family charge of €110 applying. The annual charge for post-primary pupils will be increased by €50 from €300. The combined maximum overall family charge will remain at €650.
For people with savings and investment properties and those who benefit from inheritances, the news is also bleak.
Dirt tax is to increase by 2 per cent next year, while the threshold for capital acquisitions and inheritance tax is to fall by 20 per cent. This will reduce the threshold below which a child pays no tax on an inheritance or gift from a parent by more than €80,000 from today’s threshold of €415,000. Tax relief on income from rental properties is to be phased out.
The abolition of the PRSI ceiling will hit high earners hardest. At present people pay PRSI on the first €75,000 they earn, but that ceiling is to be scrapped so someone with a gross salary of €100,000 will pay an extra €1,000 in PRSI payments next year.
The decision to scrap stamp duty in its existing form was something of a surprise. While the news may be welcomed by some families anxious to move in the coming months, it will be met with dismay by those who were stung for much higher levels of stamp duty in recent years. From today the duty will be paid at a rate of 1 per cent on properties below €1 million, and 2 per cent on properties over that amount.
Equally surprising was the decision not to increase the excise duty on cigarettes, while alcohol also remained untouched.
A litre of petrol has increased by 4 cent overnight, while diesel has risen by 2 cent. This, coupled with reported increases of similar proportions on petrol forecourts over the weekend, will see the cost of filling up a mid-sized car rise by €6 a tank.
There were some crumbs of comfort. The controversial €10 air-travel tax is to be reduced to €3 to assist the tourism industry, while the Minister for Finance announced he planned to put 14 million towards the fuel allowance scheme because of the current cold weather. This amounts to €40 for each household who qualifies.
“Citizens have demonstrated enormous forbearance,” Brian Lenihan said as he delivered his Budget. More forbearance will be needed in the years ahead as there are further deep cuts coming.
There is the property tax which will apply to 1.8 million houses and costs an average of €200.
Carbon taxes are to double in the years ahead and will take a further €150 out of the average taxpayer’s pocket. Water taxes will also become a reality and will cost at least €100 a year, and VAT will increase from 21 per cent to 23 per cent over the next three years which will add €200 to an average consumer’s tax bill.