Oireachtas Briefing - Does a £3,000 allowance solve the Budget’s problems? - December 1999

Oireachtas Briefing dealing with the introduction of a new tax allowance for one income families.

Summary

In a statement yesterday (8th December) announcing the introduction of a new tax allowance for one income families- where a spouse was caring for children, people with disabilities, or older people - the Department of Finance stated that this new tax relief would be " greater proportionate value to lower families because it is standard rated".

However, as can be seen below, it is of no value to full time workers on the proposed national minimum wage (NMW) of £4.40ph. The full benefit of the relief isn't available until income reaches £13,400. As with the rest of the budget, the low paid have been ignored in this measure.
In addition, the allowance creates a new poverty and unemployment trap. This is because if the spouse decides to take up paid work, they effectively have to work 150 hours at the NMW to compensate for the loss in the first earner’s income.

Briefing note: the 'net' figures below only take account of income tax, and not PRSI or the Health Levy, to compare the effect of the new allowance