IFS: Richest to be hit hardest by tax changes in April

The respected economic think tank, the Institute of Fiscal Studies, have released a sneak preview of their annual 'Green Budget', to be launched on Wednesday. What we know so far is that the IFS are saying that tax changes to be brought in in April will cost the richest tenth of households typically 3 per cent of their income, compared to 1 per cent for the general population.

The respected economic think tank, the Institute for Fiscal Studies, has released a sneak preview of their annual ‘Green Budget’, to be launched on Wednesday. What we know so far is that the IFS are saying that tax changes to be brought in in April will cost the richest tenth of households typically 3 per cent of their income, compared to 1 per cent for the general population.

Other findings include:

• 750,000 individuals are due to enter the higher rate taxpayers as a result of a reduction in the level of income at which the higher rate starts to take effect;

• Those with incomes of over £100,000 will be affected by the loss of personal tax allowances;

• Those on means-tested benefits will be worse off due to the decision to link payments to the Consumer Prices index (presently at 3.1%) instead of the Retail Price Index or the Rossi Index (presently at 4.6% and 4.8% respectively)

The IFS has described the pattern of winners and losers as complex. Left Foot Forward will be reporting on the analysis as it is unveiled.

17 Responses to “IFS: Richest to be hit hardest by tax changes in April”

  1. terry o'brien

    RT @leftfootfwd: IFS: Richest to be hit hardest by tax changes in April: //bit.ly/emln0a writes Daniel Elton

  2. 750000 ‘to pay higher tax rate’ – BBC News « Google News « Big Tony's Big Network

    […] hit thousands claims IFSShareCastIFS: 1.6m to pay higher rate of tax for first timeTelegraph.co.ukIFS: Richest to be hit hardest by tax changes in AprilLeft Foot ForwardPublic Finance -The Guardian -Independentall 193 news […]

  3. 750000 ‘to pay higher tax rate’ – BBC News « Google News « Big Tony's Big Network

    […] hit thousands claims IFSShareCastIFS: 1.6m to pay higher rate of tax for first timeTelegraph.co.ukIFS: Richest to be hit hardest by tax changes in AprilLeft Foot ForwardSpectator.co.uk -Public Finance -The Guardianall 193 news […]

  4. Anon E Mouse

    About time too.

    Why the Labour government never put the poor first I will never know.

    This is a good link from Luke Akehurst: //www.progressives.org.uk/columns/column.asp?c=583

  5. Higher tax rate to hit thousands claims IFS – ShareCast | MyBlogWorld

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    […] NewsIFS: 1.6m to pay higher rate of tax for first timeTelegraph.co.ukFinance Markets -Left Foot Forward -Spectator.co.ukall 200 news articles » Bookmark on Delicious Digg this post […]

  7. Mike Thomas

    Looks like the coalition have re-distributed incomes in a way Labour couldn’t in 13 years.

  8. anon e mouse

    RT @leftfootfwd: IFS: Richest to be hit hardest by tax changes in April //bit.ly/dGtXfj

    Tax rebalancing finally! Well reported LFF…

  9. Liz McShane

    Anon – The Minimum Wage etc? They were policies that Labour brought in to help the low waged/poorer members of society.

  10. Anon E Mouse

    Liz – Labour chopped 10p tax which directly hit the poor whilst deregulating the banks and allowing the rich to go nuts.

    Hat tip to Jack Straw who on 29 April 2008 admitted the 10p Tax removal was wrong.

    Jack Straw said: ‘Sometimes, even with the best brains available to government, there are inadvertent consequences of changes. We put our hands up … we should have known more about the impact.’ Read more: //www.thisismoney.co.uk/news/article.html?in_article_id=440927&in_page_id=2#ixzz1CcG35wvt

    And what was Gordon Brown’s response to this remark? He said he was “Just getting on with the job”. Right.

    The National Minimum Wage, coupled with the Labour open borders immigration policy (Andrew Neather — a former adviser to Straw, Blair and David Blunkett — revealed that Labour ministers had a hidden agenda in allowing immigrants to flood into the country. “There was a reluctance … in government,” he wrote, “to discuss what increased immigration would mean, above all for Labour’s core white working-class vote) however noble, resulted in Polish plumbers cutting the rates of skilled men in this country and they had the cheek to say “British Jobs for British Workers”.

    Both those examples mentioned leave aside the Labour NI hikes, Green Fuel Escalators, Travel Taxes, Congestion Charge (Boris Johnson should be ashamed of himself for claiming it’s to do with the environment) etc etc.

    Anyway as a Labour supporter I assume that (leaving the leader’s Inheritance Tax fiddle aside – thanks for the link btw) you have Socialist leanings in which case surely you support this move Liz?

    Or would you rather the rich were better off at the expense of the poor?

  11. Ash

    Anon, Mike at al: since you’re so enthusiastic to hear what the IFS has to say about the distributional impact of these latest tax and benefit changes, you might want to remind yourselves of what they said last year about the distributional impact of 13 years of tax and benefit changes under Labour:

    //www.leftfootforward.org/2010/03/labours-robin-hood-legacy/

    If that truth is not inconvenient enough for you, how about this one: the most progressive tax and benefit being enacted by the Coalition are those they inherited from Labour:

    //www.leftfootforward.org/2010/09/the-graph-that-shames-nick-clegg/

  12. Liz McShane

    Anon – I think taxation should be proportionate and obviously the more you earn then the more you should pay & that the argument for taxation & its benefits (of funding NHS, Education etc)should be made more effectively.

  13. Anon E Mouse

    Ash – I don’t care where the ideas come from as long as they are good ideas.

    All governments pinch ideas from each other – PFI schools and hospitals from the Tories and private healthcare in the NHS from Labour.

    I am just glad the balance on taxation is changing so those with more money pay more tax but more importantly the poorer pay less. Instead of acting in such a tribal manner here I would have thought anyone with”Socialist” leanings would have been pleased for those less fortunate.

    That’s not very New Labour I know but I like it….

  14. Mike Thomas

    Ash,

    Bunkum.

    Perhaps this government isn’t comfortable with people getting filthy rich eh?

    The 10p tax scandal was about as regressive a tax hike as you could get. As for Labour’s benefits, they were a deliberate poverty trap with a marginal tax rate of 90% on withdrawal.

    Not to mention Gini worsening under New Labour than under Thatcher.

  15. Ash

    Mike,

    OK, since you don’t care for proper evidence of the sort the IFS deal in, how about the anecdotal variety: I know from personal experience that Labour succeeded in redistributing wealth to at least some poor families without trapping them in poverty, because Tax Credits lifted my own family out of poverty (pulling our net income up from around £900 a month to around £1250) and allowed our income to keep climbing. (That doesn’t mean the withdrawal of the 10p rate wasn’t a bad thing, but it does put it in a bit of perspective. When you take *all* the relevant tax & benefit changes into account, they tended to make poorer people better off.)

    You’re right that New Labour’s attitude to the ‘filthy rich’ stank, and they didn’t seem to realise that the gap between rich & poor matters in itself (which is why I’m glad Ed M is now talking about equality again.) But it’s just not true that poor people actually got worse off under Labour; in general, they got better off.

    Anon – fair enough; good ideas are good ideas. But the balance is not really changing. The tax & benefit changes the Coalition inherited from Labour continue a trend the IFS had already identified last year: more being taken from the rich and less from the poor. (Some of the Coalition’s own changes ‘water down’ that effect, of course – e.g. the VAT hike. So the main change is that the Coalition’s changes make the poor worse off as well as the rich.)

  16. Ash

    Anon & Mike – actually there’s been another change worth noting, and that’s the shift from Tax Credit increases to income tax cuts. The Tax Credits system benefited the poorest most; income tax cuts are of most benefit to those families which are already somewhat better off (generally, those with two people in full-time work). Given that the VAT hike and benefit cuts hit the poorest hardest, therefore, a general effect of the Coalition’s own tax and benefit changes will be to redistribute wealth from the bottom to the middle. (This is the same thing that happened when the 10p tax rate was withdrawn in order to cut the main rate to 20p, which I think we all agree was a Bad Thing.)

  17. Mr. Sensible

    Agreed Liz; the 10P tax rate was a mistake, but when you think of the minimum wage ETC…

    BTW I think it worth reminding ourselves that the government says it’s putting I think £200 back in peoples’ pockets with its changes to the personal allowances, but I read that the government is making families £200 worse off with the changes to thresholds.

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