An increase in income tax threshold is a popular topic among both left- and right-wing politicians. Will it help decrease income inequality? At the end of last week, Employers of Poland presented their calculation, drawing attention to the fact that the threshold has been frozen for years.
– The phenomenon of cold progression, which we have dealt with in recent years, is certainly an argument for increasing the income tax threshold – says Lukasz Kozłowski, economic expert of Employers of Poland. The point is that when the threshold is maintained at the same level and wages increase, it is easier to earn the money subject to taxation. Kozłowski argues that the cumulated consumer price increase in 2009-2015 is 15.7 percent. – Thus, in order to compensate for inflation, the threshold should be ca. 3575 PLN. This would contribute to a 7 PLN net monthly increase in wages which – though it is hardly a shocking sum – would still cause budget income from income tax for physical persons to drop by 2 bln PLN – he calculated.
How much would it cost to increase the threshold?
Łukasz Kozłowski has also presented other scenarios for an increased threshold. And so, if it was increased to:
– Considering the need to maintain budgetary discipline even after the conclusion of the excessive deficit procedure, a rapid increase of the income tax threshold appears unlikely – assesses Kozłowski. In his view, the most likely scenario is an increase of 15-16 percent in order to compensate for inflation in 2009-2015, roughly to the 3575 PLN mentioned above. He also emphasizes that a significantly higher threshold would have a negative impact on the situation of communes and counties where income from PIT is ca. 50 percent of all income.