Tax cuts for the middle class
Sir, – It is incorrect for Jim O’Donnell to state (September 15th) that the proposed tax cut “will, in fact, benefit the ‘upper class’ the most”.
The proposed widening of the tax bands would produce an equal saving in euro terms for those on the average industrial wage and higher earners alike. The effect of such a change is capped. For example, widening the band by increasing the standard rate cut-off point by €1,000 (from €33,800 to €34,800 for a singly assessed person) would reduce the annual tax liability for those earning over this limit by a maximum €200, regardless of how much in excess of this limit they earn. In percentage terms, those on the average industrial wage would benefit more.
Mr O’Donnell is entirely correct to state that we currently have an unequal society – at least before the effect of taxes and transfers is taken into account. This is measured by the Gini coefficient. Our income inequality before taxes and transfers is among the highest in the OECD. However, once the redistributive effect of taxation is accounted for, we rank just below average. In short, we are doing more to address income inequality via taxation than any other country.
The argument over whether this is sufficient is a separate one, but it is important to understand which measures would exacerbate inequality and which would not. The expected change falls into the latter category. – Yours, etc,