There will be no simple way to increase income tax revenue using Wales’ new devolved tax powers, according to a new report by Cardiff University academics for the Wales Centre for Public Policy. The Centre is a think tank backed by the Welsh Government to look at the challenges it faces.
The report looks at the possible impact of cutting the very top income tax band -the additional rate- by 5p in the pound. It states that if it led to more than 845 highly paid people moving to Wales -or designating their second homes here as their main residences- the Welsh Government would see its revenue increase. A 5p cut for basic rate payers would only bring in extra money if more than half a million more taxpayers were attracted to Wales.
Making income tax more regressive -less skewed towards taxing the wealthiest- could be widely seen as unfair. One way of making such a change more politically palatable would be to tackle the council tax system at the same time.
The report's authors make no recommendations but they see scope for making council tax much fairer, by moving to a system where more expensive houses attract much moire tax -and the income is redistributed around Wales.
On the idea of a tax increase earmarked for the NHS, the report points out that an extra 1p on the standard rate would raise £184 million, equivalent to only 2% of the current health and social care budget.