Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I thank the Deputy. One has to consider the personal tax package in the round, including all its elements and the combined impact of all the measures. Over the last months, when I was considering what I would consider to be a fair and balanced personal tax package, we built it around three key pillars. One was the changes to the tax credits. We increased them by more than we did in previous years. We changed the standard rate band. The Deputy focused on the third area, the changes to the USC, which relate to this section. In a moment, we will talk about other elements of the income tax package.

Looking at the overall combined impact, the distribution is fair and balanced. It is predicated on a personal tax system in Ireland which is highly progressive. That progressivity is maintained even following the implementation of the budget 2024 measures. For example, even after this budget comes into effect, the top 1% of taxpayer units will pay 24.4% of total income tax and USC. The bottom 80% of taxpayer units will pay 21% of total income tax and USC. One has to examine the impact of all the measures in aggregate. On the table we published on budget day about the effective rate of tax for people on different levels of income in Ireland, it increases significantly in the higher income levels. That is a measure of the highly progressive nature of our income tax system which means that as one earns more, not only does one pay much more tax, but even as a proportion of one's income, one pays much more tax.

The key point is that the USC change has to be considered alongside the tax credits, where a €100 increase is proportionately worth more to somebody on low income than to somebody on high income. The people who are in the broad middle income bracket will benefit from the increase in the entry point to the marginal rate of tax. That gives a sense of what my thinking was in constructing the personal tax package.