Pensioners Lose Medical Care While the Rich Pay Less PRSI

  • PRSI Ceiling removal would pay for medical card reinstatement three times over

As we all know by now, Fianna Fáil have taken the medical card away from pensioners, causing huge consternation and uproar.

Just as bad was the bare-faced bailout for developers, where the Government will now provide mortgages to those who can’t get bank mortgages – fair enough, as long as they confirm that people can pay. Until, that is, you read the details. It only applies to new houses. Now, if your aim was to unfreeze the property market by getting some property sales going, wouldn’t you include second hand houses too? This is clearly not being done to ease the property market. It’s being done to help out developers.

But the big one that’s gone unnoticed is that, despite being “desperate for cash” as one FFer put it this week, the PRSI ceiling still wasn’t moved. Under the current system, PRSI is only charged on income up to €50,700 (changing to €52,000 in January). This is about as regressive a tax as you can design. Taxes are supposed to levy more as you earn more. PRSI levies less as you earn more.

Last week’s Turbine had a good rundown:

Income above €50,700 is only liable to the 2% [health] levy (or a 2.5% levy above €110,000). If the ceiling is abolished, all income would be liable to both PRSI and the levy.  It’s worth looking at the impact of such a change on take-home pay. The ceiling, currently €50,700, caps the amount of an employee’s income liable to PRSI at 4%. Income up to this point is also subject to a further 2% levy.

Some calculations below the fold.

Mr Regular (€50,000 salary)

All of Mr Regular’s income is currently under the PRSI ceiling, so he is paying a total of 6% PRSI and levies in 2008. After taking account of the weekly PRSI exemption, his 2008 PRSI/levies liability is €2,735. The abolition of the ceiling will have no impact on his PRSI/levies liability in 2009 (assuming no change to the weekly exemption or rates).

Ms Up-and-Coming (€80,000 salary)

A portion of Ms Up-and-Coming’s income is currently over the PRSI ceiling, so that not all of her income is subject to PRSI in 2008. After taking account of the weekly PRSI exemption, her 2008 PRSI/levies liability is €3,460. Should the ceiling be abolished in 2009, Ms Up-and-Coming will be worse off by €1,172 per annum.

Mr Made-It (€175,000 salary)

A significant portion of Mr Made-It’s income would not be liable to PRSI in 2008. After taking account of the weekly PRSI exemption, his 2008 PRSI/levies liability is €5,826. Should the ceiling be abolished, Mr Made-It will be worse off by €4,972 per annum.

Answering a Parliamentary Question (ref 12243/07 if the link isn’t working) from Ruairi Quinn TD in 2007 (which I’m reasonably sure I wrote, and I’m certain I submitted), then Minister for Social & Family Affairs Seamus Brennan said that removing the PRSI ceiling would result in a return to the Exchequer of €295m.

Mary Harney and Brian Cowen have both said during the week repeatedly that the withdrawal of the medical card from the over-70s will save €100m.  So, by removing the PRSI ceiling and making sure that the rich pay more, we could not only let those who have given a lifetime of service to the country keep their hard-earned benefits, but we could also do any of the following too:

  • Leave the standard rate of VAT at 21%, rather than increasing it
  • Not increase the excise duty on petrol
  • Cancel the Air Travel Tax
  • Double all the benefits to pensioners in this year’s budget: increase the pension by €14 instead of €7 per week; and increase the fuel allowance by €4 instead of €2 per week; and increase the fuel allowance period by a month instead of a fortnight

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