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Former Tory PM Rishi Sunak and his chancellor Jeremy Hunt had a similar problem. They drove our taxes to a 70-year high but it wasn’t the super-rich who paid. Middle and lower earners bore the brunt.
It will be the same with Labour, too.
Properly wealthy people are adept at avoiding tax. Millionaires and billionaires employ expensive tax advisors to reduce their exposure and if push comes to shove, they’ll simply quit the UK altogether.
There’s no point hiking taxes if people aren’t around to pay them. Which is why both Labour (and the Tories before them) prefer to target taxpayers who won’t flee to an offshore tax haven.
In other words, middle income, middle class, middle England.
To justify this, they have to demonise them. Suddenly, millions of ordinary people are being labelled wealthy, when in fact they’re getting poorer all the time.
Until recently, you had to be pretty well off to pay higher rate income tax at 40%. Thirty years ago, only 3.5% of UK adults earned enough to pay. That’s just 1.6million.
It’s a different story today.
In the 2022/23 tax year, more than 11% of adults paid 40% tax. That’s 6.1million in total – almost four times as many.
Thanks to Sunak’s six-year income tax threshold freeze, that will hit 7.8million by 2028.
At that point, one in five taxpayers (20%) will pay higher rate income tax. That’s a huge jump from just 3.5%.
Which would be fine if wages had been soaring, but they’re not. Wages haven’t grown in real terms since the financial crisis more than 15 years ago.
If they’d continued to grow as they were before the 2008 crash, real average weekly earnings would be £11,000 a year higher than today.
Wages have fallen by more than a third in real terms (37% to be precise). At the same time, we’re all paying more tax on them.
Being a higher rate taxpayer doesn’t make you wealthy anymore, but Labour pretends it does. As did the Tories.
And they’re using it as an excuse to slap tax after tax on struggling middle earners.
Labour has a particularly weird definition of what it means to be wealthy. It justified depriving 10million pensioners of their winter fuel payment by claiming they are wealthy and don’t need it.
Yet the cut-off point for losing a payment worth £200 (£300 if over 80) is just £11,350 a year, or £17,313 for couples.
As people get poorer, the definition of wealth is constantly being widened.
As I warned last week, Labour backers are now pushing for Starmer and Reeves to introduce a wealth tax. They pretend only the rich will pay, but don’t believe them.
Once again, it’s middle earners who will pay from their shrinking incomes, while being demonised at the same time.