No, this isn’t a joke and here’s why…
Perhaps it’s the age I am at or perhaps it is a societal adjustment from Covid; but I haven’t been to a wedding in 3 years. The substantial majority of engaged or committed friends have instead decided to prioritise having children at the expense of their own weddings in the past couple of years; dare I say it, out of wedlock!
Friends regularly ask me about family finances, maternity leave, tax credits etc. Well, I say, step 1 in your financial plan… “get married”. Why? The married tax credit and ability to transfer part of the 20% rate band from a spouse who is on extended maternity leave or on reduced hours during those expensive pre-school years is crucial.
I suspect one of the key demographic learnings from Census 2022 will be the extent to which the thirtysomethings have prioritised family over the need to be married. Unmarried couples, particularly those with children, create a ridiculous tax anomaly. Whilst a same sex civil partnership can avail of the same income tax benefits as a married couple, a heterosexual couple living together in a jointly mortgaged property with children can not. They are ultimately prejudiced by the Irish tax system. One could go as far as to say they are prejudiced because of their refusal to conform with the church!
Hence, we feel it is now time to replace the concept of ‘married’ in the Irish income tax code with ‘family’. In the 21st century there is no reason why a couple living together with a qualifying child should not have that same entitlement to ‘family’ tax credits and ‘family’ rate bands.
Going back to my friends scenarios… No sooner than they accept that they probably should get married, then they are deflated by the real saving; about €3,500 in a good year. That won’t pay the bills, let alone the mortgage!
Which invariably leads to the following question “sure, if my partner isn’t working, why can’t I take all of their credits and everything until they go back to work?”
That’s a great question, and the more I am asked it, the more I realise that today, in 2022 there is no reason why we should not have full transferability within the family of available credits and the 20% rate band. Full transferability could result in a total tax saving of €9,060 in a year based on a single income family unit earning €75,000 a year; enough money to at least justify a discussion around becoming a single income family for a period.
Will there be a cost to the exchequer? Of course, but it is unlikely to be material, and could well lead to cost savings to the exchequer within childcare subsidies and other costs. Additionally, the cost and exposure could be mitigated if the family were only allowed to elect for full transferability for a limited period, say 10 years per family or 3 years per child.
Unfortunately, I do see one reason why this might not work; the populist politicians will not support it and will likely instead deliberately misconstrue this as a tax benefit focussed on the wealthy in society. Fundamentally incorrect. If structured properly, the principal beneficiaries would be the ‘squeezed middle’; that demographic in society whom no one seem to represent, and who’s financial wellbeing despite being regularly discussed, isn’t actually on any party’s political agenda. Put simply, the system in Ireland does not support the squeezed middle and there is a ridiculously low entry point to the top rate of tax for single income families.