A reduction in the top rate of tax helps those on low income – wtf???????

Sam over at Pull Out The Pin in his PD Conference reaction post claims the following

The tax cuts are terrific, as I am a supply-sider and am firmly convinced that reductions in the upper rate benefit people on lower incomes profoundly

Now I must say that is news to me. I left a comment on his blog saying

How can a lower upper rate benefit those on low incomes. I speak from a family in the lower band that the tax cuts introduced in the last budget on the upper tax band did nothing to help us. I just dont get it, it only helps the rich, those paying the top rate. The Labour proposal will help us, but the PD proposals will not

So here’s my scenario. I’m on the lower tax band, earning €30,000 a year, and the PD’s go ahead and reduce the top rate of tax to 38% and increase the tax band to €50,000. How does it help me?

It dosent on the other hand, here’s another scenario a I’m a single person €60,000 a year, current €34,000 of this is taxed and at 21% and the remainder (€26,000) is taxed at 41%. So if the PD’s go ahead and reduce the top rate of tax to 38% and increase the Standard Rate Cut Off Point €50,000, I’m singing and dancing in the street.

So how does it help people on low incomes Sam?

All tax information taken from the Citizens Information Website

Author: Stephen

Cork born and bred, proud European and Irishman. Involved in many organisations and politics. Also writes for SpirtualityIreland.org and UCC Express.

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