Labour income tax revenue ‘highly uncertain’
THE REVENUE Labour’s proposed income tax changes on higher earners would raise is “highly uncertain”, according to economists.
Some 1.6 million people who have taxable incomes over £80,000 a year from April 2020 would see their contributions increase under Shadow Chancellor John McDonnell’s plans, a briefing note from the
Institute for Fiscal Studies (IFS) says.
Its analysis suggests this is in line with Labour’s commitment for just the top five per cent of earners to be asked to pay more, although says it would affect “ever more people over time”, with approximately 1.9 million people having incomes exceeding £80,000 in 2023/24.
The IFS also said a “reasonable”
estimate for the revenue raised by the plan is around £3bn a year.
Mr McDonnell has previously said Labour’s policies would result in the top five per cent of earners being asked to “pay a little bit more”.
He added his party wants to make changes to income tax rate, with the threshold for the 45p additional rate lowered to £80,000
– from £150,000 –- and a new 50p rate on earnings above £125,000 introduced.
The additional rate was 50p for earnings above £150,000 from April 2010 until it was lowered to 45p in March 2012.
The IFS briefing note states: “The tax revenue that Labour’s proposals would raise is highly uncertain, and depends on the extent to which people reduce their taxable incomes in response to the rise in income tax.
“If no-one changed their behaviour, the tax rises would raise around £10bn per year on average between 2020/21 and 2023/24.”
Conservative Treasury minister Simon Clarke claimed Labour is planning a “reckless spending spree that everyone will end up paying for”.