Enda Kenny’s pledge to cut marginal tax rate to 50% in budget assumes economic growth

The precise means to be used will only be determined next year in the light of what resources are available, but the working plan will probably be to use a similar approach to the 2015 budget.
Politically, this allows the Government to target middle-earners without being seen to deliver too significant gains to those on the highest incomes.

Coming out and selling it now is clearly an effort to move beyond the water charge controversy and refocus on the gains to taxpayers on budget day.
Kenny said his approach was that there should be more to come – and further cuts in income tax and in the marginal rate in particular – after the next election.
This will clearly be a key part of Fine Gael’s election platform.

There was debate before the budget about whether to deliver tax cuts via reducing the rate or increasing the standard rate band, which determines the income level at which people start paying the higher rate. In the event, a bit of both was done and – when other changes are counted in – pretty much all income earners got some benefit.

To be able to deliver the promised tax reductions in next October’s budget – the last one possible before the next general election – the Government’s economic growth forecasts will need to be met. A string of advisory bodies – most recently the Irish Fiscal Advisory Council and the OECD – have warned that this cannot be taken for granted.
However, for the moment, the Government finances are on course to come in on target or better for 2014. And if growth does stay on target, plans for the 2016 budget next October will stay on course.

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