Homelessness could rise if the poorest are made to pay the economic cost of the pandemic. Picture, SC Cook
The Welsh Labour Government is not using tax raising powers it acquired last year, which would allow it to increase taxes on the most wealthy in society.
In April 2019, Welsh Government gained the ability to raise taxes on all income brackets by 10%. But an economics professor at Cardiff Metropolitan University, Gerald Holtham, confirmed in an interview with voice.wales that these powers have gone completely untouched.
Under these laws, taxes could be raised by up to 10% on those earning between £50,000 and £150,000, and those earning over £150,000.
Currently income tax is 40% and 45% for these two top tax bands respectively. The other bands are up to £12,500 (0% tax) and £12,500 to £50,000 (20%)
Holtham, who did not give an opinion on whether taxes should be raised or not, told voice.wales that if taxes were to increase by 1% across all income brackets, it would raise somewhere in the region of £200million.
However if progressive tax rises were introduced and went up by an extra 10% on those earning over 150,000 as well as increasing for those on £50,000 or more, then clearly more money would be raised for the public purse.
For people in these brackets, they are not taxed at a higher rate on their total income, only for the amount they earn above the threshold.
Welsh Labour ruled out raising taxes in its 2016 manifesto, but that was before these powers came into force and before the pandemic had hit.
Taxing the rich is rarely discussed in mainstream political debate, but the question of who will pay for the cost of the Coronavirus pandemic will be crucial in the months to come. As the possibility of a vaccine becomes a reality, government and business will be looking to make back money lost due to the pandemic.
Following the Great Recession of 2008, over a decade of punishing cuts was brought in under the auspices of balancing the public finances. But it was the poorest and most vulnerable in society who were made to pay the price of the credit crunch.
Wales has subsequently been devastated by austerity, with some 1 in 4 children living in poverty, and communities further hollowed out by the closure of essential public services. While the number of foodbanks soared as thousands went hungry, the coalition government handed huge sums to the rich in the form of tax cuts.
Corporation tax – controlled by Westminster – is now just 19%. But In 2010 it was 28% and in 1981 it was 52%.
The amount raised by Welsh Government if it were to hike taxes on the country’s top earners may be small in comparison to spending in areas such as health and education, but it would send a clear political message about who should bear the economic brunt of the pandemic.
It would also provide some funding to help groups of people and workers who are especially vulnerable at the moment.
It’s possible that Welsh Labour don’t want to talk about raising taxes ahead of the Senedd elections in 2021, but polling shows that taxing the richest is widely popular.
Despite this, there is almost a cross party consensus against the idea. Plaid Cymru went into the last election pledging corporation tax stay at the current historically low rate of 19%, but that policy is under review and the party could well advocate even lower rates in future.
The SNP government in Scotland have had more tax raising powers for longer than Welsh Government has, but have also refused to use them.
Following Jeremy Corbyn’s leadership of Labour- where the party was in favour of fairly modest tax rises on the wealthy- Keir Starmer has sent mixed messages on the topic. In September he seemed to ditch the idea and spoke out against the idea of tax rises, although has also indicated that the top 5% of earners may have to pay more in future under a Labour government.
All this comes at a time when the wealth of the very richest is booming, even during a pandemic. In 2020, every major world economy saw an absolute rise in the number of billionaires. Swiss banks specialising in wealth management are seeing a boom in clients wanting to store enormous sums of money.
At the same time, millions of people, even in rich countries, are struggling to survive. Just this weekend it was reported on how some taxi drivers have been considering taking their own life due to poverty, after they’ve received no support from the UK or Welsh Government during Covid.
