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People earning more than £ 19,500 a year would pay more under a £ 40bn tax increase scheme to boost public finances in the wake of the COVID-19 crisis.
The Resolution Foundation advocates a series of fiscal changes in the middle of the decade to prevent a return to austerity and address the record peacetime borrowing demanded by the government’s response to the coronavirus.
The last Official figures showed that the Treasury borrowed £ 208bn in the first six months of the current financial year alone, £ 175bn more than in the same period in 2019.
The expert group recommended a ‘health and social care levy’, a 4% tax on all income over £ 12,500, which would be offset by a 3% cut in national employee insurance and the abolition of the Class 2 national insurance contributions for the self-employed. -employees.
He said the change would not penalize those hardest hit by the virus crisis restrictions – the self-employed and those on low wages – and would provide a boost for a social care system whose shortcomings were exposed by COVID-19.
The study calculated that the fee would raise £ 17 billion a year. It was suggested that £ 6 billion of that amount should go to social assistance.
“These compensation would better off employees earning £ 19,500 and less, as well as self-employed workers earning less than £ 17,000,” according to the study.
Other notable measures included a “pandemic income tax,” a windfall tax, on companies that had profited from the crisis during 2020, such as supermarkets and private contractors working on pandemic projects for the government.
A broader impact for businesses, by raising corporate tax from 19% to 22%, would raise £ 10bn, the foundation said.
He also advocated for wealth tax increases of £ 9 billion, including restrictions on capital gains and inheritance tax allowances, with homes worth more than £ 2 million paying an additional municipal tax supplement.
The foundation described its case hours after a separate report, commissioned by the government, pushed for a restructuring of the capital gains tax that would target second home owners and tax avoidance.
The Office for Tax Simplification recommended changes that it said could raise up to £ 14bn annually if rates were adjusted to those of income tax.
Chancellor Rishi Sunak is eager to start balancing the books over the medium term, warning of tough decisions ahead, but has effectively ruled out widespread increases next year as the government has remained committed to supporting the economy and jobs. .
Resolution Foundation Research Director James Smith said: The Chancellor should combine tried and tested revenue collectors with major wealth tax reform and a new health and social care rate.
“This would ensure that post-Covid tax increases reflect the very uneven nature of this crisis, but would also help build a better country after it.”
