Michael Noonan: I have defined what the ‘squeezed middle’ is
Minister for Finance confirms marginal tax rate will fall if Government re-elected
Michael Noonan: I’ve defined what the squeezed middle is in money terms. File photograph: Dara Mac Donaill/The Irish Times
Minister for Finance Michael Noonan has defined the phenomenon of the “squeezed middle” or “coping classes” as those who earn between €32,800 and €70,000.
Mr Noonan also said the Universal Social Charge was “here to stay” but confirmed he wanted to reduce income tax for middle income earners next year and the following year if the Coalition is re-elected.
“There will be a USC for the foreseeable future, “ Mr Noonan said in an interview this morning on Newstalk radio with Pat Kenny.
“The adjustments for low-paid people will be through adjustments on USC so they’re paying less because, as I say, I’d like them to pay a little but not a lot and if you’re not liable for income tax you can’t get relief obviously through income tax,” Mr Noonan added.
Mr Noonan’s comments followed a speech last night by Taoiseach Enda Kenny during which he launched a determined bid to set the political agenda for the coming year with a promise to cut the top marginal tax rate on most incomes to less than 50 per cent if the Coalition wins the next election. After a year of controversies that have damaged the Government’s standing, Mr Kenny delivered a major speech on the economy with a pledge of continued tax cuts if he is returned to office and a warning about the dangers of political instability.
Mr Noonan pointed out there were three personal taxes , USC, income tax and PRSI. “At present the marginal rate, it was 52, is 51% after the budget for the middle income people”, he said.
“My approach to it is the marginal rate of tax is too high and I want to reduce personal taxes as soon as we have resources and people will see it in their wage packages when we go to the first of January.
“Now it’s not a big relief but it’s a start. It’s a start we didn’t think we’ be able to make even a year ago. Now I’m going to mirror it next year.”
Mr Noonan added: “The big idea in it... we’ve all heard about the coping classes and we’ve all heard about the squeezed middle for the first time I’ve defined it in money terms and it’s those people from €32,800 to €70,000 who are going into the higher rate of tax and I’m focussing on those and we’re giving relief to everybody but we are capping the relief at 70 so if you’re on€100,000 you get the same relief as someone on 70.
“But I’ll mirror that next year and if we are re-elected the year after.”
In a wide-ranging interview, Mr Noonan said the State would make a profit on its shareholdings in Irish banks that are still trading, including fully recovering the €21 billion injected into Allied Irish Bank.
The Government has recouped some of its capital in Bank of Ireland, plans to sell shares in Allied Irish and Permanent TSB next year and should also generate a surplus from the liquidation of Anglo Irish, and via the National Asset Management Agency (Nama).
“On the banks, we’ll be more than quids in. Nama’s already running a surplus and it will run a significant surplus by the time it finishes. The liquidation is running a surplus too,” Mr Noonan said.
“We’ll lose overall on Anglo Irish Bank, but I expect to get all the money back (from the others) ... I had someone in with me Wednesday morning from the United States, he was prepared to sign a cheque for the whole of AIB. There’s no problem in flogging off assets in Ireland.”
He said the Government would get its money back from Allied Irish over a period of years and that he had no intention of selling a residual 14 per cent holding in Bank of Ireland, saying he wanted to be able to influence policy in the banks.