Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

-----increasing the entry point to the second rate of USC from just over €10,000 to just above €12,000 and the upper ceiling for this band is increasing from just over €16,000 to just above the level of the minimum wage; reducing the 2% USC rate to 1.5%; reducing the 4% USC rate to 3.5%; increasing the income tax standard rate band by €1,000 to €33,800 for single individuals and by €2,000 for households with two income earners; reducing the top rate of income tax from 41% to 40%; introducing a new 8% USC rate for incomes in excess of €70,000 and an 11% rate for self-employed income in excess of €100,000 to limit the benefits of these changes for the top 10% of earners; and retaining the exemption from the top rate of USC for medical card holders earning less than €60,000 and these individuals will now only be liable to a maximum USC rate of 3.5%. The latter rate of USC is also the maximum that will apply to those over 70 with incomes lower than €60,000.

These changes mean that everyone who currently pays income tax or USC, or both will benefit from today's budget changes. For example: a part-time worker earning €12,000 will continue to face no income tax and now no USC charge; a minimum wage worker will now face a maximum USC rate of 3.5%; a working family with three children where both parents earn €50,000 each will have an additional €100 per month in their pocket; but all employees with incomes in excess of €70,000 will continue to face a marginal tax rate of 52%. The changes I have outlined enhance the progressivity of our income tax system, with the top 1% of income earners now paying 21% of all income tax and USC collected. In contrast, the bottom 76% of income earners will pay 20% of the total. This is the first instalment of a plan to progressively reduce the 52% tax rate on low and middle income earners in a manner that maintains the highly progressive nature of the Irish tax system.

I have set the direction and the parameters for this reform today and I will follow this approach in next year's budget. And, if the Government is re-elected, this approach will be followed in the 2017 budget.

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