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Thursday, October 06, 2022

And now the stealth taxes

For a Prime Minister who has built her reputation on tax cuts and growth through trickle-down economics, the latest report by the Institute for Fiscal Studies must be quite a reality check.

The Guardian reports that millions of households are facing a “stealth” tax raid under Liz Truss’s government despite her promise to support workers through the cost-of-living crisis by lowering their tax bills.

The paper explains that the Institute for Fiscal Studies (IFS) has calculated that for every £1 given to workers by cutting headline tax rates, £2 was being taken away through a freeze on the level at which people begin paying tax on their earnings.

When taken with plans for benefits, the IFS say the poorest in Britain will see their incomes hit hardest over the next three years. While the richest 10% of households will benefit by £2,290 a year on average from cuts to national insurance and income tax, the poorest will benefit by just £13.

And as if to make matters worse, the freeze on the tax-free personal allowance, above which workers pay tax at the basic rate, combined with soaring inflation means millions more will be dragged into higher income tax brackets. The IFS estimate that 1.4 million more adults will pay the basic rate, while 1.6 million would move into the higher-rate bracket.

And just to complete the picture, a freeze for the benefit cap – which sets a maximum for the amount of support some out-of-work families receive – will mean the number of affected households doubles to 250,000, while 500,000 more families will lose some or all of their child benefit entitlement.

This isn't trickle down, it is trickle up.
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