For some years now, income tax in Ireland has been structured around two rates. The lower or ‘standard’ rate and the higher rate. In 2007, a single person will pay tax at 20% on income up to €34,000, and tax at 41% on income over €34,000.

In his Budget speech last December, Brian Cowen reduced the higher rate of tax from 42% to 41%. He promised that if returned to Government after the election, Fianna Fáil and the PDs would cut the higher rate again to 40%.

In his conference speech on February 10th, Pat Rabbitte stated that, rather than reducing the higher rate, Labour would cut the standard rate from 20% to 18%.

At present, cutting the top rate of tax only benefits taxpayers who earn more than €34,000 (single person) and those who earn most benefit most. When the standard rate is cut, all taxpayers benefit. Those on lower and middle incomes gain most, as a proportion of their incomes.