Budget changes affecting the medical card entitlement of people who have recently returned to work will mean that thousands of new workers will pay higher taxes – on top of losing their medical card.
Under Medical Card rules, medical card holders are allowed to retain their card for three years if they have rejoined the workforce from long-term unemployment. On Budget day, it was announced by the Minister for Health that savings of €11 million would be made in 2014 by revoking all such medical cards.
However, by revoking these medical cards, these workers will also face higher taxes in 2015.
A person who has returned to a job worth €26,000 per week will pay €300 extra in tax, someone on €30,000 will pay over €420 extra, and someone on €35,000 will pay €570 extra.
This arises because people with medical cards pay the Universal Social Charge at a reduced rate. The standard rate of USC is 7% (for incomes above €16016); the lower rate is 4%.
The net effect is that once medical cards are withdrawn from thousands of people who have recently returned to work, they stand to lose hundreds in their pay packet as well. Under Revenue rules, the higher tax rates will kick in in 2015 for people who lose their cards in 2014.
This is an absolute slap in the face for people who have recently returned to work. Not only will thousands of new workers see their medical cards revoked, they also have to look forward to a reduction in their take home pay. It is yet another sneaky measure that went unannounced in the Budget.
These long-standing medical card arrangements are in place for a very good reason… to make work pay. The measure prevented a significant poverty trap developing where people were discouraged from taking up employment out of fear of losing their medical card entitlement.
In the run up to the Budget, we had Fine Gael backbenchers castigating Joan Burton for not doing enough to incentivise people off the dole. Yet it is their own Minister who is imposing very significant barriers to the unemployed and those who have recently re-joined the workforce. And for all their faux concern about raising income taxes, Fine Gael are more than happy to raise taxes on new workers.