Clegg Middle Class Tax Squeeze

[Ignitionnet]

Hmmm.

http://www.telegraph.co.uk/news/news...ick-Clegg.html

http://www.telegraph.co.uk/news/news...help-poor.html

Add that to the Child Benefit cut and it'll hurt some people quite grievously.

It's 'progressive' but also strongly anti-growth. Typical Liberal Democrat policy actually

Thoughts? Will anyone making around that sum notice the pain?

EDIT: This one could be phrased better but I largely agree - http://www.telegraph.co.uk/comment/c...stupidity.html

Shuffling money from one group to another isn't going to reboot the economy, increasing opportunities for everyone to keep more of their money and generate their wealth more easily will.

Calculating the impact all of this will have on this household it's far from inconsiderable, over 2,000 quid a year ignoring VAT rises, doesn't really make me feel overly motivated to go and work that bit more and make that bit more money when the government is eating 51% of a large proportion of it before I see it.

[Will21st]

Shuffling money about is not economic policy,agreed...
the coalition should have cut much more brutally into the welfare state;and by that I mean welfare for EVERYONE!!!
Industry,the poor,the middle-classes,the rich,charities,NGOs and what-not...far too many people rely on hand-outs here and in Europe,and I don't know why?
I wish we would let people take responsibility for their own poor behaviour,let them work their way out of whatever situation they're in.

but that's too Libertarian for most people,I guess...

[Ignitionnet]

Originally Posted by heero_yuy

And who is "rich" depends upon your viewpoint and income: From my point of wiew, anybody who is a higher rate taxpayer is rich.

I wish.

[danielf]

Originally Posted by Ignitionnet

Calculating the impact all of this will have on this household it's far from inconsiderable, over 2,000 quid a year ignoring VAT rises, doesn't really make me feel overly motivated to go and work that bit more and make that bit more money when the government is eating 51% of a large proportion of it before I see it.

Really? I make it a lowering of the threshold of ~ £2,500, meaning you will pay an additional 20% on that amount. That's £500 a year instead of £2,000.

[Ignitionnet]

Originally Posted by danielf

Really? I make it a lowering of the threshold of ~ £2,500, meaning you will pay an additional 20% on that amount. That's £500 a year instead of £2,000.

I was referring to other things as well as this but excluding anything based on consumption.

[danielf]

Originally Posted by Ignitionnet

I was referring to other things as well as this but excluding anything based on consumption.

Could you give us a rundown of what you included then?

You mentioned child benefits and 'shufflling money around'. I'd be interested to hear your thoughts on the eligibility of higher earners for child benefits. You also mention making it worthwhile for people to work, and this move being anti-growth. What you don't mention (but what is in the linked article) is that this bracket change is meant to pay for reducing the tax burden for low earners by increasing the personal allowance by £1,000, thus putting £200 in the pockets of everyone except those who are affected by the lowering of the 40% threshold. So how exactly is this anti-growth, and how does it disencentivise working, when it is meant to pay for lowering the tax burden (and increasing the income) of low income workers?

Sorry, but it just sounds like you are having a moan because you are personally affected. You are very vocal on these forums about needing to balance the books. Why the apparent hesitance to contribute? The reality is that the cuts in public services are going to disproportionately affect those on lower incomes. I think it's only right that those on higher incomes contribute.

[Ignitionnet]

I wrote a huge response, the forum lost it.

Happy to contribute to balancing books, happy to pay for essential municipal services well in excess of those we actually use, not so happy to pay purely to supply a tax cut to others, that's redistribution of wealth plain and simple.

It's anti-growth as every tax increase is, and like it or not while those who benefit from this cut are the engine they are not going to be the main source of growth. This purely strikes me as compensating lower earners for loss of some other welfare by taking it straight from the pockets of higher rate tax payers, who have consistently been paying more for years anyway as the 40% threshold hasn't come close to keeping pace with inflation so to say it's only right we contribute is disingenuous.

Far better to deliver this tax cut by reducing spending elsewhere, not by simply shifting the tax burden. The tax burden is already far higher than it was 13 years ago - absolutely no need for it to be.

As a reminder I thought my receiving CB was ridiculous anyway, which it is.

36.865% of my income goes to the tax man, I don't see it. This ignoring all indirect taxes. How much is enough?

Lastly I'm apparently, despite my income slightly below the average person's wealth, and for the pleasure of living where I do in a 2 bedroom maisonette I pay 1,360 / month.

Of course none of this is taken into account and I'm clearly super-rich and worth wringing some cash out of.

[danielf]

Originally Posted by Ignitionnet

I wrote a huge response, the forum lost it.

Happy to contribute to balancing books, happy to pay for essential municipal services well in excess of those we actually use, not so happy to pay purely to supply a tax cut to others, that's redistribution of wealth plain and simple.

It's anti-growth as every tax increase is, and like it or not while those who benefit from this cut are the engine they are not going to be the main source of growth. This purely strikes me as compensating lower earners for loss of some other welfare by taking it straight from the pockets of higher rate tax payers, who have consistently been paying more for years anyway as the 40% threshold hasn't come close to keeping pace with inflation so to say it's only right we contribute is disingenuous.

I'm still not convinced it's anti-growth. While low earners may not be the 'engine', they are far more likely to spend the extra income they receive. For many (by no means all) high earners the reduction (which incidentally is £300 rather than £500 as I forgot to take the increased personal allowance into consideration) will simply mean less savings. And I don't think it's disingenuous to say that at all, as I'm simply comparing to last year. We are all facing cuts in real terms. The fact that you've been paying more for longer is neither here nor there.

Far better to deliver this tax cut by reducing spending elsewhere, not by simply shifting the tax burden. The tax burden is already far higher than it was 13 years ago - absolutely no need for it to be.

Ermm, yes. As a country we are facing the most brutal cuts in public spending for generations. It seems a bit silly (or rather egotistical) to me to simply suggest more cuts as the magic bullet. We are all in this together, and the cuts were going to be brutal but fair.

As a reminder I thought my receiving CB was ridiculous anyway, which it is.

36.865% of my income goes to the tax man, I don't see it. This ignoring all indirect taxes. How much is enough?

I don't know. All I'm saying is that we should all share some of the pain and contributing an additional £300 isn't the end of the world, and it's certainly not anti-growth when it pays for putting money in the pockets of people that, on average, are more likely to spend it.

Lastly I'm apparently, despite my income slightly below the average person's wealth, and for the pleasure of living where I do in a 2 bedroom maisonette I pay 1,360 / month.

Of course none of this is taken into account and I'm clearly super-rich and worth wringing some cash out of.

I've never stated you are super-rich, and I appreciate that money may be tight even on a high salary. I'm a bit puzzled about the housing comment though. Being the Libertarian that you are, you presumably have a choice in where you live (and work)? I seem to recall you extolling the virtues of renting a home rather than being one on account of your flexibility on the job market not too long ago?

Oh, I appreciate that you copied the thread title from the Telegraph, but don't you think 'LIBCON Middle Class Tax Squeeze' would be more appropriate? The tax cut may be the result of a LibDem manifesto pledge, but at the end of the day, it's a coalition measure.

[Ignitionnet]

Originally Posted by danielf

I'm still not convinced it's anti-growth. While low earners may not be the 'engine', they are far more likely to spend the extra income they receive. For many (by no means all) high earners the reduction (which incidentally is £300 rather than £500 as I forgot to take the increased personal allowance into consideration) will simply mean less savings. And I don't think it's disingenuous to say that at all, as I'm simply comparing to last year. We are all facing cuts in real terms. The fact that you've been paying more for longer is neither here nor there.

I have my doubts that most higher earners are saving - zero incentive to right now, they are investing. There's less money for them to invest with.

No idea of the net impact of the policy as a whole, but taxing one income group to supply tax cuts to the other, regardless of which direction up the income scale, is wrong.

Originally Posted by danielf

Ermm, yes. As a country we are facing the most brutal cuts in public spending for generations. It seems a bit silly (or rather egotistical) to me to simply suggest more cuts as the magic bullet. We are all in this together, and the cuts were going to be brutal but fair.

After the most sustained increase in spending for generations. More cuts are absolutely the way things should go, many other things that should be chopped to reduce the state further in size. Even post-cut 40% of national income is too large.

Originally Posted by danielf

I don't know. All I'm saying is that we should all share some of the pain and contributing an additional £300 isn't the end of the world, and it's certainly not anti-growth when it pays for putting money in the pockets of people that, on average, are more likely to spend it.

It's not the end of the world, of course not, but it's another tax increase on a pile of them over the last 14 years that there's absolutely no need for.

All tax increases are anti-growth, whether the increase in consumption from those less well off offsets it or not I do not know, we'll see.

Originally Posted by danielf

I've never stated you are super-rich, and I appreciate that money may be tight even on a high salary. I'm a bit puzzled about the housing comment though. Being the Libertarian that you are, you presumably have a choice in where you live (and work)? I seem to recall you extolling the virtues of renting a home rather than being one on account of your flexibility on the job market not too long ago?

Of course I chose to live here, however my point was that income and essential expenditure can be quite related. I am paid more because it is more expensive to live in this part of the country, so while my income is higher my outgoings are likewise higher.

I have little flexibility right now actually for family reasons, can't move too far

Originally Posted by danielf

Oh, I appreciate that you copied the thread title from the Telegraph, but don't you think 'LIBCON Middle Class Tax Squeeze' would be more appropriate? The tax cut may be the result of a LibDem manifesto pledge, but at the end of the day, it's a coalition measure.

You are absolutely right there. This is the action of both the Lib Dems and their pretend Conservative coalition partners.

FYI I would actually have absolutely no issue with the government running up deficits if they were incurred through cutting taxes along with services in order to balance the economy back to its historical footings, and I remain utterly convinced that the deficit should be wiped out through 100% cuts not 80% cuts 20% tax increases.

These cuts are poorly thought out, which is frustrating as hell. They could be done so much better and cause far less grief for people even if they were 25% larger, but that would require competent government along with a civil service that serves only the populace rather than itself and it's been a while since we had either of those.

[danielf]

Originally Posted by Ignitionnet

I have my doubts that most higher earners are saving - zero incentive to right now, they are investing. There's less money for them to invest with.

Well, we are simply using any surplus we have to pay off the mortgage early. If we earn more, we are unlikely to spend or invest it. It simply goes into the house. It might go into an ISA with a view to increasing interest rates in the future, but we're unlikely to invest.

No idea of the net impact of the policy as a whole, but taxing one income group to supply tax cuts to the other, regardless of which direction up the income scale, is wrong.

Ok, that's something that we can agree to disagree on, but it's rather different from the measure being anti-growth, which clearly is debatable.

After the most sustained increase in spending for generations. More cuts are absolutely the way things should go, many other things that should be chopped to reduce the state further in size. Even post-cut 40% of national income is too large.

It's not the end of the world, of course not, but it's another tax increase on a pile of them over the last 14 years that there's absolutely no need for.

Maybe, but there still is the issue of the speed of cuts, and the extent to which they are borne by the population as a whole. I still think it's right that higher earners contribute. Seeing they will feel the pinch of the cuts less than low earners, I have no problem with this move.

All tax increases are anti-growth, whether the increase in consumption from those less well off offsets it or not I do not know, we'll see.

Indeed we'll see. But, as we've established, it's an increase that pays for a decrease, so it's debatable if we should call it an increase.

Of course I chose to live here, however my point was that income and essential expenditure can be quite related. I am paid more because it is more expensive to live in this part of the country, so while my income is higher my outgoings are likewise higher.

I have little flexibility right now actually for family reasons, can't move too far

Yes, I understand that. I also said earlier, that I appreciate that money can be tight even on a high salary.

You are absolutely right there. This is the action of both the Lib Dems and their pretend Conservative coalition partners.

Yeah, I blame the Telegraph there. It reeks of smear to single out the LibDems for this. I don't see them harping on about the Tories increasing tuiton fees.

FYI I would actually have absolutely no issue with the government running up deficits if they were incurred through cutting taxes along with services in order to balance the economy back to its historical footings, and I remain utterly convinced that the deficit should be wiped out through 100% cuts not 80% cuts 20% tax increases.

These cuts are poorly thought out, which is frustrating as hell. They could be done so much better and cause far less grief for people even if they were 25% larger, but that would require competent government along with a civil service that serves only the populace rather than itself and it's been a while since we had either of those.

Hmm, I think it's well established that we have different viewpoints on what the role of the state should and should not be, and whether historical footing is an appropriate benchmark. Something for a different thread I think

Gosh, what a polite, well-considered and thoughtful exchange of views in a political CF thread. Well done both of you.

As for me and my house ... well, starting a couple of businesses from scratch (B&B and freelance copywriting) has put us right at the bottom of the income ladder, so we stand to gain out of these changes for the forseeable future. We were nowhere near the threshold for paying any kind of income tax as it was, shifting that threshold further upwards and eventually as far as £10,000 will allow us to get ourselves well established before we're asked to make a contribution to the running of UK plc. If that experience is repeated for other struggling self-employed families, it can only be a good thing IMO.

I should add, by the way, that contributing to society is firmly on my agenda - I'm grateful for the help we've been getting but anxious not to need it any more.

[chris9991]

Surely it is only the middle classes that can be attacked with tax rises. The lower classes are already subsidised and the upper classes can always choose to move on. I think its time that governments stop being commited to unfunded obligations to reduce the burden on future generations

[Ignitionnet]

Originally Posted by danielf

Hmm, I think it's well established that we have different viewpoints on what the role of the state should and should not be, and whether historical footing is an appropriate benchmark. Something for a different thread I think

Indeed, and I think we'll agree to disagree and see what happens.

A pleasure as always

---------- Post added at 12:20 ---------- Previous post was at 12:17 ----------

Originally Posted by chris9991

Surely it is only the middle classes that can be attacked with tax rises. The lower classes are already subsidised and the upper classes can always choose to move on. I think its time that governments stop being commited to unfunded obligations to reduce the burden on future generations

Some of the middle classes can move on too. I will be once Mrs Igni has finished her education and Mini-Igni has finished junior school

[Ignitionnet]

OK Ignoring the anti-growth repercussions of this an article in the Wall Street Journal has reminded us of the social implications.

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.

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.

[chris9991]

http://www.bbc.co.uk/news/business-12389416

Good news for some people here