BOOSTING the take home pay of the low paid and making it more attractive to work rather than claim benefit will be one of the main themes of tomorrow's Budget.
The Government will aim to do this through a combination of reducing PAYE and PRSI payments and some changes to specific areas of tax and welfare. Most of these changes, of course, will benefit all taxpayers.
Reform of the PRSI system will be central to the package. Employees' PRSI is expected to be cut from 5.5 per cent to 4.5 per cent. This will be more valuable than a similar cut in the basic rate of tax.
PRSI is payable on earnings of up to £22,300. However, the first £80 of weekly earnings is exempt.
The benefits of a reduction in the PRSI rate will be somewhat offset for higher earners by an increase in the income ceiling on which the tax is levied for employees and employers.
Employees will pay PRSI on the first £23,200 of their income - up from £22,300 this year - while employers will have to pay the tax on the first £27,900 of their employees' salaries, an increase from £26,800.
Taking into account the expected cut in the rate and the increase in the ceiling, a person earning over the 1997 ceiling of £23,200 will save £140.90 over the year with a new PRSI bill of £856.80. This will be of benefit to all PAYE taxpayers.
The PRSI cut is one move in line with the Government desire to encourage people to work.
The only way to do this without cutting benefit levels is to increase net incomes through changes in tax and benefits.
According to the Department of Enterprise and Employment's strategy document, Growing and Sharing our Employment, the most a family with two children would gain form working in the £8,000 to £11,000 bracket would be between £27 and £40 a week.
Net disposable income for a family actually falls by £650 as gross pay rises from £9,000 to £11,000, through a combination of the withdrawal of family income support and taxation.
One measure Mr Quinn will announce to help alleviate this is the extension of the family income supplement to families earning slightly higher wages. At the moment qualification for the supplement is based on a family's gross income.
This year's move will be flagged as the first step in a move towards calculating the qualifying income level for this supplement on an net - after tax - basis.
Last year's Budget already made some moves in allowing those returning from unemployment to work to collect benefit. This year further steps will be taken and the payment of rent and mortgage supplements are to continue for a year after taking up employment.
Child benefit will also be increased. The increases will be £6 for the third child and above. Almost half of all families with six or more children are unemployed. The payments for the first and second child will increase by £1.
The reduction in basic rate tax to 26 per cent from 27 per cent will also help many lower paid workers. If someone is paying the basic rate on the maximum of £9,400, then the saving could be as much as £94 for the year. However, other measures, including the widening of the bands and increasing allowances, should increase the total income tax savings to a PAYE taxpayer.
The Minister is also expected to raise the threshold at which tax is payable - taking many out of the tax system altogether. The limit stands at £3,900 for a single person or £7,800 for a married person. This is increased by £450 for the first two children and £650 for each subsequent child.
Mr Quinn will also allocate a package of around £115 million for social welfare increases. Most recipients are expected to receive increases of around 3 per cent but there will be considerable variations.
