The gap between the taxation of single income families and those where both spouses work continues to widen as a result of the changes made by the Minister for Finance in this years Budget. A single income family could now pay up to €5,250 more in tax than their double income counterpart compared with a difference of €5,060 in 2006. When you add in the fact that the standard PAYE tax credit for each working spouse is €1760 as compared with the home carers allowance which has remained the same at €770, the gap potentially widens by a further €990. (See figures below).

Budget 2007 has exacerbated the discrimination in tax between the two by continuing the policies initially introduced by Charlie McCreevey through individualisation. The cost of this policy to these families is now close to €700mn per annum, based on the Revenue Commissioners pre-budget analysis. The purpose of the policy was to incentivise as far as possible both parents in a family to go out to work regardless of circumstances.

It’s important to note that there are as many one income married households in Ireland, as there are dual income households. According to the Revenue Commissioners Annual Statistical Report for 31st December 2005 there were approximately 307,000 of each type of household.

There are approximately 75,000 one income households earning between 150% & 250% of average national earnings. These are families most of whom have committed to caring for their children themselves or to looking after aged relatives. In this, one of the most expensive countries in the EU, the policy of individualisation is now costing them very dear.

Who are these one-income families? Well most of them are employees, not owners of businesses. Indeed over 80% of those 75,000 middle-income households I mentioned above fall into this category. They are people who cannot afford crèche and travel fees and have had a decision made for them in many cases. They are people who have a sick or disabled child who needs special care, which has been denied them. They are people who have an elderly parent or relative who requires additional care. They are the people who choose to care for family members at home rather than using nursing homes.

This discrimination was introduced to make work a more palatable choice. However, this is not possible without the provision of many services at a community level, which this Government never had any intention of providing.

It also ignores the reality that peoples’ lives change more than once during their lifetimes and that many of us will need or want to take time out a various stages.

How many of us have already taken time out to look after our parents in their old age or will want to do so in the future? Is it right that we should suffer a double penalty for doing so? Loss of income is a choice that we make, but to pay more tax is a choice that is forced upon us.

If you work in Dublin and you move to Kinnegad or Gorey to get an affordable family home and have two children, crèche fees could cost up to €300 a week, commuting times 4 hours plus per day. Small wonder that in this situation many families make a decision that it is better for one parent, usually the mum, to opt out of work or reduce working hours while the children are very young. The alternative of getting children up as early as 6.30am in the morning, take them to minders, and then do the long commute is so hard that many families do it for a year or two but particularly when the second baby comes along decide that one of them has to take time out.

Children need time with their parents. Parents need time with each other and their children. The burden on families of our current development policies on housing and commuting are not good for relationships. We all know this. Anyone who has had a child or cared for a child knows that the early years fly rapidly and don’t come back. When you then add a €6000 tax penalty for making a decision to opt for homecare it makes you wonder how family friendly this government really is.

This policy of individualisation has led to dramatic transfers from families with children and dependents to two income households, many without dependents. This is the reality of government policy towards the family and care in the community, a startling contradiction to some of the rhetoric we heard this week during the high profile launch of the governments National Development Plan.

Calculation of Tax Difference between Double and Single Income Families

Married Married
Double Income Single Income
2007
Rate Band €68,000 – €43,000@ 41% = €5,250
Paye Credit €1,760 – Home Carer €770 = €990
Credit
Total Difference = €6,240

2006
Rate Band €64,000 – €41,000@ 42% = €5,060
Paye Credit €1,490 – Home Carer €770 = €720
Credit
Total Difference = €5,780