A new 30% income tax rate is being considered as a leading economist believes it could “give workers some breathing room”.
The government plans to introduce the new rate to help ease the pressure households are facing as inflation rates remain high.
Professor Stephen Kinsella, head of the economics department at the University of Limerick, is in favor of the new tax rate because ‘it would be very helpful, especially in the situation we find ourselves in now’.
Professor Kinsella explained on Newstalk Breakfast that this new average income tax rate would not be difficult to implement.
“There would be a law from the Oireachtas, they would introduce a new tax rate, the tax authorities would start enforcing it.”
“Instead of 33%, they would apply it to 30% and so on. It would indeed be a lower tax than what people are currently paying.
“Workers who pay income tax would get some relief; it would be a few hundred euros for someone earning 50,000 a year.
ESRI’s latest forecast shows that the temporary measures put in place such as the energy credit will not be enough for the future.
“What the ERSI showed us yesterday is that inflation could be up to 8.5% this year, but next year 2023 it will be 5%.”
“(Which) means that the exact situation we have now will be for this period next year or could be for this period next year.”
“What that means is that people who work, people who have to commute with childcare, with other types of caregiving duties, experience inflation very differently.”
Professor Kinsella suggested that the government index tax brackets to inflation.
“So if inflation goes up 5%, your income tax bracket goes up 5%.”
He also believes that a mini-budget could take place in the coming weeks.
“The last time we had one was in April 2009, and that made perfect sense because the assumptions that underpinned the previous budget turned out to be wrong.”
“That exact situation applies now.”
“They (the government) might not call it a mini-budget, but something very close can happen.”
“And if it’s going to happen, it will happen in April because they have to get a new finance bill through the Dáil etc.”
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