Dáil Éireann Debate, Tuesday - 26 May 2026
148. Deputy Emer Currie asked the Tánaiste and Minister for Finance the income tax measures he is considering for budget 2027 to support middle-income workers; and if he will make a statement on the matter. [39178/26]
Amharc ar fhreagraWorking families are under pressure. They feel like they are often chasing their tails and that there is not enough at the end of the month to show for all their hard work. It is what I have always described as the struggle to juggle. We have consistently supported working families over the years. The Tánaiste and others have said this budget will include income tax changes, which I welcome because those families deserve to get more back based on what they are putting in.
I thank the Deputy for the question and for her consistent raising of this issue around working families. Programme for Government 2025: Securing Ireland's Future contains specific undertakings with regard to personal taxation. It commits to "implement[ing] progressive changes in taxation if the economy remains strong, including indexing credits and bands to prevent an increase in the real burden of income tax". It also states that "in the event of an economic downturn and unexpected deterioration in the public finances ... [w]e would also postpone changes to income tax credits or bands, as we did in Budget 2021". As we plan for budget 2027, it is my intention to have a personal income tax package as part of that budget.
As the Deputy will be aware, to ease the burden facing average and middle-income earners, over successive budgets the previous Government substantially increased the entry point to the higher rate of income tax for all earners by €8,700, or around 25%. The main tax credits increased by €350, or around 21%. In line with the Government's policy of ensuring full-time workers on the minimum wage remain outside the top rate of USC, the ceiling of the 2% USC rate band was increased. Budgets 2024 and 2025 also cumulatively reduced the 4.5% rate of USC to 3%. Broadly, the income tax measures implemented over the period of the previous Government are expected to be in line with wage growth. We used a formula in the previous Government to allow people to earn more before they paid the high rate of tax and to make changes to the USC. That formula was an interesting and potentially desirable one.
Budget 2026 was the first of five budgets to be delivered by this Government. There was not a personal income tax package in the first one. I think there needs to be one in the next four, all things being equal.
On the exact levers we will pull and the exact menu to use around personal tax, I am not an ideologue when it comes to that. I want to see what is in the best interests of families and how people benefit the most. I would like, if possible, to anchor tax policy for the next four budgets. In other words, if we pick an option for the next budget, could that be a roadmap for the following three to provide certainty?
I welcome the principles of what the Tánaiste is setting out. I know he cannot get into the details. I can see the Government, in an extremely difficult geopolitical situation, is trying to future-proof our country with the infrastructure and the foundations it needs as a growing modern state, and to deliver on our promise to move away from cycles of boom and bust to something far more consistent, stable and sustainable, planning ahead with the Future Ireland Fund and the Infrastructure, Climate and Nature Fund. However, workers need to feel more of the benefits of that strategy now, especially considering what has happened in the last six months. A quick look at other countries in the EU will show we are pushing average workers into the higher tax band at one of the lowest entry points. This is having an impact on people's decision-making, livelihoods and home lives.
I fully agree. We want work to always pay and we want people who work hard to be able to get ahead, not just get by. The tax system is an important part of that. That is why we are committed to delivering a personal income tax package.
I will make a point to somewhat balance my comments. While it is absolutely correct that Irish people pay the higher rate of tax at a lower entry point than many other European countries, when you look at the social insurance contributions other countries make, that somewhat adjusts for that. The broader point the Deputy makes is entirely correct. We have taken people from paying the higher rate of tax at around €33,000 in 2015 up to €44,000 now. I would like to see more progress on that.
I do not need to tell the Deputy this as she champions issues like this, but when these families we are talking about are looking for a break and a chance to get ahead and not just get by, tax is a part of it. Other costs, like childcare, are part of it. Also, how can we structurally try to reduce energy costs? The budget will need to look at all of this in the round. Tax is a part of it, but so too is whether we can make permanent structural cost reductions in key areas like childcare.
The Tánaiste is right that it is difficult to compare like for like and that we have to look at working families and their budgets in the round. He has consistently referenced childcare as an area where he wants to support working families. Every week, I speak, as I know the Tánaiste does, to families, women and services about the cost of childcare and about provision.
Today, with Deputy Carrigy, I met with Longford Women's Link. I know the Tánaiste is completely committed to reducing childcare fees to €200 per month over the next four years but the wider reform I spoke of earlier is critical too. That means putting systems in place that last and that people have confidence in. State-led childcare is a major opportunity in the short and long term and should be allowed to evolve. The not-for-profit services that are due to provide it, at least in the short term as it evolves, need a system around them so they can scale up. That is achievable. Core funding requires reform but it is fixable as the State continues to play a greater role. I could go on but my point is this: these are not just problems to fix; they are opportunities for genuine reform and innovation.
I did not realise the Deputy met members of Longford Women's Link today. They are amazing. I visited them in the not-too-distant past and am grateful for the work they do and the opportunities and accessibility they provide to people in a range of areas. I met them in the context of higher education.
The commitment in the programme for Government is clear. We want to get childcare to €200 per child per month in the lifetime of the Government. The Deputy is right that fees and the cost to families make up a part of it, but there is also building the system and reform. I would like in the next budget to make progress on childcare costs but also make progress in the roadmap. In fairness to our colleague, the Minister, Deputy Foley, some important steps have been taken in the recent past around capital being for the first time available to invest in public facilities.
We need to be conscious - and we are - that one size does not fit all when it comes to childcare. We have to empower parents to make the decisions that make sense for them. Sometimes it is someone coming into your house to mind the children, sometimes it is your children going to someone's house, sometimes it is your child going to a crèche and sometimes it is a voluntary provider. There are many options.
That is why to get the best return for the taxpayer, the parent and the child, we need to see the roadmap of reform alongside the fee reduction.
