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ENDA KENNY HAS said the government will cut the 7 per cent rate of Universal Social Charge (USC) on all those earning less than €70,000 per year in the Budget later this year.
In his speech on the Spring Statement in the Dáil this morning, the Taoiseach outlined plans for the “phased abolition” of the hated Universal Social Charge and said it was intended to have a total of 500,000 low-income workers out of the USC tax net after Budget 2016.
He said that “consistent with the Statement of Government Priorities agreed last July, we will cut the 7 per cent rate of USC on all those earning less than €70,000 per year”.
Finance Minister Michael Noonan indicated yesterday that the government will have up to €750 million available to cut taxes in the October Budget, with a variety of measures in the areas of USC and income tax likely to be deployed.
The 7 per cent USC rate is current levied on the portion of income from €17,576.01 to €70,044.
The government says the benefit of any cut would be capped at €70,000. This means that a person who earns €100,000 would get the same financial benefit as a person earning €70,000. This is aimed at ensuring high earners do not disproportionately benefit from tax cuts.
While the Taoiseach was not specific about how much exactly the 7 per cent USC rate would be cut, a 1 per cent cut to 6 per cent would cost the exchequer €269 million in 2016 and €370m in a full year.
Here’s an approximate estimate of how much a 1 per cent cut would benefit people at various income levels, courtesy of the Department of Finance:
If the government were to cut it by two per cent, from 7 per cent to 5 per cent, it would cost the exchequer €540 million in 2016 and €740m in a full year.
Here’s how it would benefit people are various income levels:
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