The “cost-of-living crisis” is now part of the political narrative, along with its cousin, the “hard-pressed household”. The upward twist in prices in recent years has hit lower earners hard and left many in the middle ground juggling their finances to try to get by.
But the increase in employment and the rise in more highly paid jobs has also created a new group of better-offs, the quietly prosperous class who are at the top of the earnings ladder, even if they still complain to their padel partners about the price of everything.
The figures tell the story. The latest Revenue pre-budget statistics show that the number of taxpayers – single earners and jointly assessed couples – earning more than €100,000 is estimated to rise to 457,300 next year, more than double the 206,500 in this group in 2020. That is not a high income for a jointly assessed couple, of course, but it is a useful marker and the kind of earnings needed to get into the housing market in many areas.
But it is at the higher end that the numbers are most striking. The number of taxpayers earning more than €150,000 will rise to close to 200,000 next year, from 80,000 in 2020, while over the same period the number of €200,000-plus earners has grown from 41,000 to almost 109,000. Even allowing for the increased size of the workforce and the impact of inflation, higher-income households are now larger and more economically powerful. Just look at the growth of the “wealth management” industry, the high-end beauty and health business and the boom in extensive home renovations.
The emergence of the quietly prosperous class is related in large part to the arrival of higher-paid jobs in the multinational sector and the spin-off in areas such as professional services. Their spending is important, benefiting everything from high-end restaurants to top-of-the-range car dealerships and the economy generally.
Within the prosperous group, there are the outright rich. The 50,000 taxpayers earning more than €275,000 annually – reported as a group in the Revenue figures – earn an average of €520,000, on which tax of €221,000 on average is paid. In reality, the spread of incomes will be substantial, with a significant number of millionaire-earners distorting the averages and the figures suggesting a rise in recent years in the numbers at the “lower” end of this exclusive club.
The impact of a high-earning group of households is a widely studied phenomenon in economics. It leads to higher prices for assets and a generally higher-cost economy, pushing up the cost of living for all. For example, this group has clearly provided a vital prop to the higher end of the housing market. The study from the Economic and Social Research Institute (ESRI) this week showing that Irish houses are 17 per cent overvalued on average relates in part to the spending power of higher earners.
Once there are some buyers at higher prices – and inadequate housing supply – then prices can remain overvalued for a lengthy period. The ESRI finds that the market is not driven by the kind of credit bubble we saw before the tech crash, which is good. But it remains vulnerable to an economic reversal, which would hit incomes – particularly those at the higher level.
Record €66bn in tax collected in first eight months of 2026
A bursting of the AI tech bubble, in which the many big multinational employers are so heavily invested, is the most obvious risk to the housing market. And also, of course, to corporate tax payments through its potential impact on the profits of companies such as Microsoft and Apple, two of the “big three” Irish payers.
Targeting those who need support in the middle ground – who are really hard pressed – is one of the key policy challenges, and something that the Government has not got to grips with
The reliance of the well-off sections of society on this sector for their income also poses a wider tax risk. The 200,000 or so taxpayers earning more than €150,000 pay half of all income tax collected, and USC. A quarter of all income tax comes from the 50,000 earning more than €275,000. Add in the small number of huge corporate tax payers and you can see that Government claims to be protecting a wide tax base are a bit of a joke.
Ireland faces lower employment and weaker growth if AI bubble bursts
This tax bounty has helped to fund public services and a system of redistribution through taxes and welfare. It has allowed this Government and its predecessor to insulate the public to an extent in recent years from the various shocks that have hit. But now the popular narrative of a universal cost-of-living “crisis” and the Coalition’s implicit message that it can help across the board are going to lead to very difficult budget negotiations.
There is, indeed, a crisis for many people, and the upward twists in prices in recent years have made this worse – those behind on energy bills, unable to pay rent and without enough money to live a decent life need support.
At the other end there is, as we have seen, an increasing minority doing very well, who do not need State help to pay their energy bills or subsidise their lives.
And then there is the large middle ground, which includes a whole range of groups. Some need help – such as many younger families on incomes at or a bit below the average. Some do not – such as retired people on decent pensions.
Higher energy prices and rising rents increase cost-of-living squeeze for Irish households
But most feel entitled to a share of the budgetary cash, given the impact of higher prices and costs on their lives, and their disadvantage – perceived or real – compared with others. This is the political difficulty the Coalition faces – just look at the threats of disruption from the public sector unions, which feel the fuel protesters succeeded in getting more than them in the fight for State resources.
Targeting those who need support in the middle ground – who are really hard pressed – is one of the key policy challenges, and something that the Government has not got to grips with. Its messaging has been confused and it has over-promised again and again.
There are options in the tax and welfare systems and in public service provision to help the squeezed middle ground, but they typically cost a lot and are hard to focus upon those who really need it. Now, with mortgage rates set to rise and higher gas prices threatening further rises in household energy bills, the noise in advance of the budget is only going to escalate. And the Government does not seem to know how to respond.