MOST taxpayers will be better off, but the very lowest earners and those on higher incomes will gain most from the snakes and ladders of the 1996 Budget. For many on middle incomes the gains are limited.
It is a package which tries to strike a balance between fiscal prudence and electoral popularity, while also addressing the crisis of long term unemployment. Inevitably it achieves more in some areas than in others.
The gains to income taxpayers vary significantly depending on their circumstances. The very lowest paid will benefit from increases in the exemption limit below which no tax is paid, from PRSI reform and from an increase in the personal tax allowances.
At the other end of the income spectrum, the biggest gains will accrue to those who pay a significant amount of tax at 48 per cent and so benefit in full from the extension of the 27 per cent income tax band. Married couples with one spouse in employment need to earn more than £25,000 to benefit fully from the extension of the standard band, while single workers need to earn more than £12,500.
However, people on lower to middle incomes who are not liable to pay tax at the 48 per cent rate get no benefit from the extension of the band and thus gain much less from the Budget. A married couple earning £25,000 enough to benefit from the extension of the standard band gain £6.20 a week from the tax and PRSI package. Those on a £20,000 income only gain £2.50. For many mortgage holders these gains will be significantly reduced by lower mortgage interest relief.
Excise increases including 10p on a packet of 20 cigarettes and a rise from £2 to £5 in the charge of bank ATM cards will further whittle away the gains.
For social welfare recipients the Government will trumpet that increases of 3 per cent are ahead of inflation. In cash terms the gains for many will be just £2 a week, although child benefit has been pushed up by £2 a month after a £7 increase last year.
Businesses will also gain a little. Employers' PRSI is being cut although the drop will chip away at the cost of employing people rather than make a significant dent. A reduction to 30 per cent on the corporation tax rate on the first £50,000 of profits will yield a £4,000 gain to many service companies, not a significant amount for the likes of AIB but a help to a smaller business.
The other main focus was long term unemployment. Many of the measures put forward recently by the Enterprise and Employment Minister, Mr Richard Bruton, are included, as are measures put forward by the Tanaiste and the Minister for Social Welfare. While all three parties may thus claim to have got some of their points in, it remains to be seen whether a few weeks of hectic horse trading can build into a sustained attack on long term unemployment.
One of the Government's main aspirations for the Budget is that it will not upset the economic applecart, which has been rattling along at a near record rate. Mr Quinn will hope this is continuing when he stands up to deliver his pre election package this time next year. He may even hope to deliver the 1998 Budget late next year, if the Coalition is returned to office and a proposal to bring the timing of the Budget forward is accepted.
