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Who are the "squeezed middle"?

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In view of current interest in the "squeezed middle" ahead of  the 2018 budget, it has been enlightening to identify this group using taxable income statistics generated by Revenue and published by the CSO.

Based on 2015 data, there were 2.3 million tax cases including jointly assessed married couples and civil partners. They had an average taxable income of €36,800  per annum before deducting normal tax credits.

Because some very high incomes shewed this average, a much lower income of €25,700 corresponded to the true middle where half of all tax cases earned less than this value and half earned more.

Going deeper, if tax cases are divided into three equal ranges, corresponding to lower, middle and higher incomes, the middle range in 2015 was €15,600 to €36,000 per annum. Alternatively, if the cases are divided into five equal ranges each comprising 20 percent of cases, the middle range narrowed to between €20,000 and €31,200 per annum.

This analysis suggests that, even allowing for wage inflation since end 2015, most  middle-income tax cases are well below the current €33,800 threshold for the higher 40 percent tax rate.

On this basis a budget increase in this threshold wouldn't benefit most middle-income cases unless the definition of "squeezed middle" is interpreted to also include upper-middle cases with annual incomes ranging from €31,200 up to €52,500.

Letter published in the Irish Times on 7th October 2017.

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This page contains a single entry by Brian published on October 7, 2017 11:41 AM.

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