Wonks Outraged By Boris’s Tax Hike

September 07, 2021

As expected, wonk world is almost universally outraged by today’s announced tax rises for social care, with everyone saying essentially the same thing: it’s a tax on the young and the poor, largely for the benefit of those with the means to fund it themselves. Here’s the round-up:

The Taxpayers’ Alliance‘s John O’Connell: “Despite claiming to share the burden, this hike will hit low-paid workers and struggling employers hardest, laying the groundwork for more demands for cash after the next election. The government should’ve settled on a fairer and more sustainable solution for fixing social care than forever ramping up national insurance rates.”
The Adam Smith Institute’s John Macdonald: “Today’s announcement marks a historic betrayal from a supposedly Conservative Government that promised to not raise taxes […] It’s morally bankrupt to ask poorer workers to bail out millionaire property owners. This is a kick in the teeth for all the young working people of this country who have already been hard done by the pandemic.”
The Institute of Economic Affairs’ Professor Len Shackleton: “It is absurd that those over state pension age with substantial incomes and assets should not pay part of this burden because they are not currently liable for NICs. As for Employer NI, this is a crude payroll tax which discourages employment at the margin, and over time is passed onto workers in the form of lower pay.”
The Institute for Fiscal Studies’ Paul Johnson: “A levy of 1.25% on employee earnings and on employer wage costs (so a 2.5% overall increase in the tax rate on earnings), will raise £14 billion a year. The extension of this levy to those over state pension age and to dividends is welcome, but this remains a tax which will be overwhelmingly borne by workers with very little coming from pensioners. This continues a trend seen over many decades of the burden of tax being shifted towards earnings. The creation of an entirely new tax will mean yet more quite unnecessary complexity.”
The Centre for Policy Studies‘ Robert Colvile: “The pressure that Covid has imposed on the NHS is clear, as is the need for extra funding for social care – which must, as we have consistently argued, be accompanied by comprehensive reform. The Government should be praised for having the courage to grasp the nettle on this issue. There are no perfect options here – but that said, it is disappointing that ministers have chosen to stick with the Dilnot model, which entrenches housing inequalities, rather than the state pension model proposed by the CPS and Damian Green MP. The dividend tax hike, coming on top of a huge planned increase in corporation tax, will be a blow to business, the self-employed, and Britain’s tax competitiveness.”