Boris Johnson’s tax proposals would cost “many billions” and benefit the wealthy the most, according to the Institute for Fiscal Studies. Mr Johnson, the front-runner in the race to lead the Conservative Party, has outlined plans to raise the threshold for the highest rate of income tax to £80,000.
The IFS said only 8% of individuals would gain in the short run.
Under Mr Johnson’s proposals: the higher rate of tax would be paid on earnings over £80,000 (rather than the current threshold of £50,000), and the point at which workers start paying national insurance contributions would rise, although a new threshold was not specified.
Raising the point at which workers start to pay national insurance contributions would help low-earning individuals, the IFS said, although it benefited higher earners as well. The IFS said increases to tax credits would be a more effective way to help low income households.
“These are expensive pledges to cut tax [which] between them will cost many billions of pounds”, said Tom Waters, research economist at the IFS and co-author of the report.
“It is not clear that spending such sums on tax cuts is compatible with both ending austerity in public spending and prudent management of the public finances,” he added.
Following the financial crisis government spending was curtailed in order to reduce borrowing, but the government has recently signalled an easing of austerity.
According to the IFS, about 4 million income tax payers with the highest incomes would benefit from Johnson’s tax promise, standing to gain almost £2,500 each on average. There are 32.75 million British workers, while the average salary is about £26,400 a year.
About three-quarters of the reduction in tax liabilities would go to those in the top 10% of the income distribution, while 97% of the gains would go to the top 30% highest earners.