‘Permanent’ Income Gains from Budget 2024

Budget 2024 has included a combination of measures for both the current year (2023) and next year (2024). In Chart 1 we focus on the additional income that households will receive in 2024 as a result of permanent changes to income taxation and headline welfare payments.

Therefore, we are focused on the effect of changes to income tax bands, tax credits, and both USC and PRSI rates and thresholds. Our comparison is to the outcome at the end of 2023, again excluding temporary measures in that year. The temporary measures we exclude are all the once off cost of living payments including electricity credits, and all one-off welfare payments. The recurring Christmas bonus welfare payment is included. The analysis provides a clearer picture of the ongoing impact of the Budget’s tax and welfare measures on the income distribution (see also p3 of our Budget 2024 Analysis and Critique | Social Justice Ireland).

In our calculations we have not included any changes to other welfare allowances and secondary benefits as these payments do not flow to all households. Similarly, we have not included changes to other taxes (including indirect taxes, property taxes, rental credits etc) as these are also experienced differently by households. Some lower income earners may also benefit from the increase in the minimum wage.

Chart 1 shows that it is those households with the highest income that will gain most in 2024. There have been welcome income gains for those who are unemployed; although these are less that we argued for (see p3). The chart also highlights how, once again, the Budget has provided limited gains for low income working households.

Chart 1: Impact of Income Tax and Headline Welfare Payment Changes from Budget 2024  -  all temporary measures (one off electricity credits and welfare top-ups) are excluded

Notes: * Except in case of the unemployed where there is no earner. Unemployed aged 26 years plus. All other earners have PAYE income. Couple with 2 earners are assumed to have a 65%/35% income division. Lower income earners may also benefit from an increase in the minimum wage. We examine the impact of permanent and temporary measures on page 8 of our Budget 2024 Analysis and Critique | Social Justice Ireland.