Michael McGrath (Cork South Central, Fianna Fail)
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To give the Fianna Fáil perspective on this issue, I disagree with Deputy Doherty's assessment. It is important to point out the cost in 2017 of the USC reductions is €335 million and is more in a full year, but the cost to taxpayers of not indexing the income tax system in 2017 is €385 million. If we were to do nothing whatsoever in respect of income tax reductions in this budget, then working people paying income tax would collectively be paying an additional €385 million in 2017. At a time when we have an economic recovery of some form, I do not believe that is an acceptable situation.

This measure is very modest. It is not even bringing this to a position where we are standing still overall because some people are enjoying salary increases and so forth, and more and more of people's income will creep into the higher rate band. If their salary goes above €33,800, for example, then more money is being captured through the non-indexation of the system. This is a very modest measure. It brings the marginal rate of tax on income up to €70,000 down to 49%.

I put on the record on budget day that we disagree with the Government's overall strategy on USC. We do not believe it is right or sustainable to seek to abolish the USC over the lifetime of this Government and our view on that is copper-fastened by more recent events and the economic uncertainty we spoke about earlier. I believe it will be unavoidable over the coming years to address the entry point issue to the higher rate of income tax, which is exceptionally low in Ireland compared to other OECD countries. However, it is important to put this reduction in context. The real context is that, before the crisis, the amount of the overall tax take accounted for by income tax was under 30%; it is now over 40%. Therefore, we have seen an enormous increase in the burden of income tax put on the shoulders of taxpayers. The fact that there is a policy decision not to index tax bands and tax credits means the Government would be collecting almost €400 million more anyway next year. This goes a long way to offsetting that but it does not even fully do that. If the Government was not to do this, there would in real terms be a very significant increase in income tax for workers in 2017. That is not a position we believe could be defended. The overall gain is capped at some €350 for an individual. It is quite modest and, in our view, it should be supported.