High-Tax Tories: Fiscal Drag Agenda to Add Four Million People to Top Tax Bands, Cost Public £78bn

Millions of British taxpayers face the prospect of being artificially placed into higher tax brackets as a result of inflation and the government’s decision to impose a “deep freeze” on the thresholds, meaning the country will take an extra £78 billion in taxes over the next period. six years.

Prime Minister Rishi Sunak’s move to secure income tax limits in March of 2021 while he was serving as the de facto top man in Boris Johnson’s Treasury will cost taxpayers £78 billion more in taxes than previously expected in part as a result. from rampant inflation.

Sunak’s decision as finance minister is also likely to move four million taxpayers into higher tax bands by 2028, according to an analysis by the Center for Economics and Business Research (CEBR), The telegraph reports.

The process by which millions of taxpayers are artificially placed into higher tax bands is referred to as fiscal drawdown, whereby thresholds are kept the same during periods of inflation, meaning that while workers are paid literally higher wages, albeit in value terms The real salary remains constant or even decreases, and then they are classed as higher earners, and thus penalized by a tax system that was initially sold to the public as a means of taxing the really high earners.

While Sunak initially pushed for a tax band freeze in 2021, the Office for Budget Responsibility (OBR) predicted it would cost taxpayers an extra £1.6bn in the 2022-23 financial year, and £3.7bn in the following year. However, the Office for Budget Responsibility would later go on to revise this estimate last March as a result of inflation rising to £2.9 billion and £10.4 billion, respectively.

The CEBR said this week it now expects the cost to be much greater for the public, saying it expects the freeze to result in £4.7bn and £17.6bn in tax bills.

CEBR’s Pushpin Singh said: “The split reflects the change in the UK macroeconomic landscape over the past year, with strong wage growth in response to inflationary pressures being a major reason behind our rise.

“As a result, more people are being pushed into higher tax bands, and while this may bode well for public finances, the same cannot be said for individuals who see their take-home pay reduced.”

Financial withdrawal is by no means a new phenomenon in Britain, with Breitbart London reporting in 2014 that people in upper- and lower-middle-class jobs such as police officers and teachers are taxed as if they were members of the wealthy classes. .

In 2014, the number of people classified as high earners was an already staggering 3.6 million and currently stands at around 4 million. However, largely due to the Sunak freeze in 2021, this number is expected to double to Eight million By 2028, which means that just under a tenth of the population will be treated as if they were the rich upper class.

Daniel Prior, head of research at the Adam Smith Institute, a think tank, said: “Few people are at fault for the Sunak tax raid two years ago, but millions of Britons are now paying tens of billions more than expected. This may please HM Treasury but it is A hammer blow to those who are drawn into higher tax brackets.

“Freeze thresholds are no way to manage the state’s finances – any tax increase must be clear and transparent and not subject to volatile shifts in inflation.”

John O’Connell, chief executive at the Taxpayers’ Alliance, said: “Stealth taxes are depressing the higher wages that workers understandably seek during a period of high inflation. Ministers claim they want people back to their jobs, yet the Treasury is discouraging business by wanting to make a profit.” fast.

“The government should raise tax thresholds in line with inflation.”

An effective tax increase will come as grim news for millions in the UK, which has been burdened by a misleadingly named Tory government that has imposed the highest level of taxation since World War II.

Follow Kurt Zindulka on Twitter here @tweet

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