Ten per cent
February 15, 2013 2 Comments
I recall wincing when Gordon Brown announced the scrapping of the 10% income tax rate. I am not economist or financial expert, but my gut feeling then was that it was wrong, and that this was likely to cause trouble.
In short order the Labour Government realised its mistake, but rather than re-introduce the tax band put in a most convoluted (in my eyes anyway) set of rules to mitigate, if not offset, the effects on those made worse off by the change. The scrapping of the 10% tax band (the ‘10p’ tax as it has become known) was made to simplify income tax. It backfired because, uncharacteristically, the detail was not subject to the usual Brown scrutiny. Politically disastrous, it pretty much was all downhill after that for the Labour Government.
I believe that direct taxation is fair taxation. The idea that those who earn the most should pay more tax than those who earn least strikes me as fundamental fairness. This is achieved through a combination of tax-free bands (where income is not subject to tax), and by tax rates.
The Coalition Government’s drive to remove all earning less than £10K from income tax would be a laudable aim were it not a case of giving with one hand whilst taking away with the other. It is a meaningless gesture for those who spend the greatest proportion of their income to see all the gains wiped by the VAT increase and large rises in the costs of essentials.
I welcome Ed Miliband’s latest announcement on the 10p tax. Our commitment must be to create the fairest tax system possible, and I am aware that this will require tinkering from time to time. The loss of revenue is to be offset by a mansion tax. Gone are the days when homes were just that – homes. They are now investment opportunities too, especially for the very rich. As an income stream it is right that this be subject to tax. This will only affect the very richest, and I repeat my assertion that they must be seen to pay their fair share.
The return of the 10p tax rate will be a signal that Labour is there for the poorest in our society – a place it should never have allowed itself to be portrayed as having abandoned.
Julian
Two observations
1) The unintended consequence of the Mansion Tax is on anyone that owns a house that has by house price inflation risen in value. There are people that have modest incomes that have lived in houses for a long time, through no fault of their own they now are classed as owning mansions. Hardly seems fair.
2) Both parties give with one hand and take with another labour is just as guilty of reducing income tax and coming up with another wheeze to take it away again.
3) Perhaps a very simple tax system would work. One rate of tax for income, one rate of tax for capital gains, one rate of tax for consumption obivously lower rates but no exceptions and strict enforcement.
I have yet to see the detail but I understand that the proposed initial threshold is £2million – these are hardly likely to be owned by those with modest incomes. The suggestion here – http://www.leftfootforward.org/2013/02/is-a-mansion-tax-fair/ – “if you are past a certain age, you can switch your mansion tax into inheritance taxes, paying nothing while you are alive and staying in your house” seems a sensible way around your issue.
I accept that both parties tinker with the tax systems, but I do not see Labour rewarding the very richest whilst punishing the poorest.
Your simple tax system defies fairness, in my humble opinion. A sliding scale based on income ensures that the wealthiest pay their fair share.