OK Ignoring the anti-growth repercussions of this an
article in the Wall Street Journal has reminded us of the social implications.
Quote:
Yes, the poor pay way too much tax. But the sensible answer, if you’re a tax cutter and want to alleviate the burden on the poorest, is to maintain a broad tax base with thresholds starting at a reasonable level. And then keep tax simple and rates, the pennies in the pound, as low as possible.
Instead, imagine what is coming down the line under the coalition’s preferred arrangements. A couple with children earn £10K each (total £20K) and they will soon pay zero income tax. They’ll still get their £1500 or so in child benefit. Just along the road lives another couple with two children. One partner works, earning £35,000-ish, the other looks after the children. Soon the working partner will pay 40p in the pound on every extra pound he or she earns. Doesn’t sound like much of a spur to wealth creation. Oh, and now he or she is a 40p taxpayer their partner is just about to lose their child benefit. That’s another £1500 (the family holiday?) gone. Very family friendly.
So, the potential gap in household terms, between no income tax and crossing into 40p tax, will soon narrow to somewhere in the region of just £15,000. That is extraordinary.
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His numbers are out of course, he forgot to include the personal allowance within his calculations for higher rate tax payers so the gap will actually narrow to £25,000 which is, nonetheless, very low indeed.