By Sarah Mac Donald - 14 October, 2014
Today’s tax system gives far less recognition to dependent spouses or children than it did in the past according to a new research paper which analyses tax bands, credits and benefit payments and is published by the Iona Institute.
‘Taxation and the Family: Restoring Balance and Fairness’ argues that successive governments have been gradually weakening support for the family through tax and spending policies.
The think tank’s paper, which was researched by economist Marc Coleman, calls for a new deal for families in Ireland particularly for those families where one spouse works in the home.
It argues that there is an ever-decreasing recognition given to stay-at-home spouses and dependent children in tax policy.
The paper presents an example of a married couple with one wage-earner and three children earning one and a half times the average industrial wage (or around €65,000 a year).
The single-income family is worse off by more than €8,000 under today’s tax system than they would have been under 1974.
Child Benefit offsets some of this. For the same family with three children it does this by €4,680 per annum but that still leaves a gap of well over €3,000.
In 1974 a family earning an Average Industrial Wage (AIW) paid a marginal tax rate of 26%.
In 2014 a family earning below the AIW pays a marginal tax rate of 52%
David Quinn, director of the Iona Institute warned that tax individualisation disadvantaged families where a spouse stays at home.
This measure means that a two-income couple can earn €65,600 before they hit the high 41pc income tax rate.
With a single-income couple, the higher income tax rate come into effect from €41,800.
He called for a commission on family taxation to be set up.
The report can be read here: http://www.ionainstitute.ie/assets/files/Tax-and-the-family-paper.pdf
