Our 'aggressive' tax system means workers pay more than 10 years ago

Huge costs imposed on consumers for bailing out the State and the banks have been laid bare in new research.

It shows a two-income family on relatively modest incomes of €35,000 each a year is paying almost €2,000 more in tax than before the crash.

Families on middle incomes are effectively working three months or longer each year just to service their tax bill. A pre-Budget report from the Irish Tax Institute highlights how the economic crash and the austerity policies put in place to save the economy have resulted in all earners, from single-income workers and one-income families to families with two incomes, being hit hard. The system has become almost "aggressively" progressive, meaning that the burden gets much higher the more you earn.

The Universal Social Charge and changes to how income tax works account for much of the extra tax burden. The USC was introduced in 2011.

Taxpayers are still ponying up extra tax despite reductions in a number of budgets in the personal-income tax burden over the past seven years.

But so severe were the austerity budgets early in the crisis, that taxpayers across all salary levels are still paying much more.

Someone on €120,000 is down almost €6,700 a year in the past 10 years. The net pay of single-income earners on €35,000 is down almost €1,000 a year compared to 2008.

Families with two incomes of €35,000 each are down €1,928.

The new figures come as the Central Bank said that citizens had borne a bigger burden of the cost of bailing out banks during the financial crisis than in any other EU country.

The Government put €64bn into the banks to recapitalise them at the height of the crisis. This prompted a temporary loss of economic sovereignty and forced the country into an EU-IMF bailout.

The crash has left consumers with huge debts. Central Bank Deputy Governor Sharon Donnery said we have the fourth-highest household debt in the EU.

The heightened tax burden means people are spending longer working for the Government each year before they start earning for themselves.

The so-called Tax Freedom Day, which is a mechanical exercise as ordinary workers are not required to pay income tax upfront, shows how those who earn more take longer to pay the State.

Those workers on €18,000 meet their personal tax obligations to the State by the end of the first week in January. Those on €35,000 work for the State for three months before they earn for themselves. It takes workers on €55,000 a quarter of the year before their earnings are their own.

The Government is under pressure to ease the income tax burden in the Budget next month, and is looking at changing the tax bands.

Meanwhile, lobby group Social Justice Ireland said there should be no net reduction in tax in next month's Budget. Its director, Dr Sean Healy, said there was a need to make the income tax system fairer. This could be achieved by increasing the personal tax credit, effectively allowing people to earn more before they pay tax. Alternatively, the USC 0.5pc and 2pc rates could be reduced.