FIGURE 2.9 A formula-based tax can raise around £16 billion and still increase post-tax incomes for the poorest 40 per cent of households Distributional effects of raising around £16 billion per year from counter factual Liberal Democrat and Labour proposals, an illustrative IPPR proposal, and compared with a world where the 2017/18 schedule remains in place, disposable household income after housing costs by equivalised income deciles, 2017/18
0.5 0 -0.5 -1 -1.5 -2 -2.5 -3 -3.5 -4 -4.5
Liberal Democrat counter factual Labour counter factual
IPPR 3
Source: Author’s analysis using Office for National Statistics, ‘The effects of taxes and benefits on household income’ (ONS 2017a) and the IPPR tax and benefit model based on Department for Work and Pensions, ‘Family Resources Survey: financial year 2015/16’ (DWP 2017b) Note: *Our ‘Labour counterfactual’ scenario requires a marginal rate of 57 per cent on incomes above £80,000, an effective marginal rate of 77 per cent on incomes between £100,000 and £123,000 and a final marginal rate of 62 per cent on incomes above £123,000. Our ‘Liberal Democrat counterfactual’ scenario requires an increase of 2.5 percentage points on every tax band.
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IPPR | Tapering over the tax Reforming taxation of income in the UK