Green Party among those opposed to 30% income tax rate proposal for budget

Idea seems likely to be dropped in favour of widening tax bands and indexing them to wages

A plan to introduce a new 30 per cent rate of income tax is facing opposition from within the Green Party, with sources branding it impractical and not feasible, The Irish Times has learned.

Tánaiste Leo Varadkar first floated the idea earlier this year and it was included in budgetary option papers produced for the Government by officials that were published last week.

However, the plan is facing internal opposition, not least from the Greens, who have concerns about how feasible it would be to introduce this year, and about the impact on less-well-off households.

A senior Green Party source said it was “not a feasible or practical” suggestion for this year’s budget, and also raised concerns about equality impacts. “What it appears to be is a cut for people on higher incomes,” said the source.

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The plan outlined how more than a million taxpayers could benefit from the new rate, but that double that number would receive a bump from widening tax bands. It now seems set to be dropped in favour of that approach of widening and indexing tax bands to wages, in line with the approach agreed in the programme for government, the document that underpins overarching Coalition policies.

Bargaining chip

Ministers from both the Greens and Fianna Fáil were quoted at the weekend expressing support for the band-widening approach. Some Coalition insiders are confused by the Tánaiste’s support for the measure, suspecting he may be supporting it in order to use it as a bargaining chip during budget negotiations, or to prepare the ground for its introduction in a later budget.

It was reported over the weekend that the Greens were open to extending tax breaks on fossil fuels introduced to alleviate cost-of-living pressures, in exchange for progress on tax breaks linked to climate measures. These include cutting VAT on e-bikes and materials for retrofitting, and extending cuts to public transport fares.

New electricity rebates, an extra week of welfare payments, and a Christmas bonus payment in child benefit are among the other one-off measures under consideration in a package to be introduced before the end of the year worth about €1 billion. Minister for Housing Darragh O’Brien is expected to seek tax breaks for both landlords and renters in the budget amid an exodus of smaller landlords from the market.

The Government is under pressure to deliver on the economy and for households, with Coalition figures intensifying attacks on Sinn Féin in recent weeks — most notably the Taoiseach, who described the party’s policies as “anti-enterprise” earlier this month.

Speaking privately, another senior Government source complained that Sinn Féin “literally oppose pro-business measures at every opportunity”, claiming their policies would damage foreign direct investment and small businesses amid economic headwinds arising from the pandemic, Brexit and the war in Ukraine. “People aren’t fools; they can see through the opportunism.”

Jack Horgan-Jones

Jack Horgan-Jones

Jack Horgan-Jones is a political reporter with The Irish Times