Why do we doth protest so little about the USC? It is something we all complain about, and hate paying, and yet it garners little enough attention. Why?
Introduced in December 2010 as a temporary measure by the late Brian Lenihan in his last Budget before losing office, the USC was a highly efficient, simple tax that hit all gross incomes over €4,004. While different people could avoid paying income tax by different methods, the USC was a catch-all sweeper tax, which immediately boosted the depleted coffers in Merrion Street. The problem now is that the Department of Finance is really happy and immensely proud of their USC and will not relinquish control of it to their political masters without a serious fight.
The origins of the USC were understandable. A worn out Brian Lenihan, just weeks after handing over the country to the Troika, had a plan to simplify his taxation system. He wanted a single charge to replace the income levy and the health levy, which had previously been introduced to plug another hole in revenue left by diminishing stamp duties. When it was imposed on people in their first pay packet in 2011, people were really annoyed. However, it was argued at the time that this charge required everyone to make a contribution, however small, to the provision of services.
But this is a cruel tax and its temporary nature as set out in the beginning is becoming very permanent. There has been some tinkering around the tax in the recent budget and, from 1 January this year, incomes of less than €12,012 are now exempt from the USC but it kicks in thereafter. The self-employed now pay a three per cent surcharge over their salaried counterparts in a controversial move that sees their incomes over €100k levied at 11 per cent.
Considering the USC raises so much money for the government – €4.5 billion a year – it is highly unlikely that it will be removed any time soon.
However, the Government would do well to consider what effect its abolition would have, especially against the backdrop of protests over water charges, property tax etc.
The charge impacts 1.66 million tax payers a year, with more than a million of those earning less than €40,000. In one fell swoop, 1.66 million people who pay taxes, who most likely vote, would benefit from a serious reduction or abolition of this hated tax. Hard-pressed families would benefit most.
This brave move could be quite the election prospect booster and could see Enda and co winging their way back to Leinster House, giving the government another term to really put the country right again.