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The £10,000 tax-free sop patronises the low-paid The £10,000 tax-free sop patronises the low-paid
(6 months later)
The idea of earning £10,000 of income tax, as anyone who's working will do from next April, sounds utopian in its generosity. For HMRC it's the public relations opportunity of a lifetime. Imagine the adverts: your first £10,000 – tax-free! And you don't even have to worry about how we're going to pay for your denuded public services.The idea of earning £10,000 of income tax, as anyone who's working will do from next April, sounds utopian in its generosity. For HMRC it's the public relations opportunity of a lifetime. Imagine the adverts: your first £10,000 – tax-free! And you don't even have to worry about how we're going to pay for your denuded public services.
Yet isn't the idea of 3 million people working hard and not being required to pay tax a recipe for their disenfranchisement? The Liberal Democrat segment of the coalition is most likely to see a high tax-free allowance, which goes up to £9,440 on 6 April, as a step towards the goal of a "citizen's income" – a no-strings basic payment from state to individual over and above any earned (and therefore taxable) income.Yet isn't the idea of 3 million people working hard and not being required to pay tax a recipe for their disenfranchisement? The Liberal Democrat segment of the coalition is most likely to see a high tax-free allowance, which goes up to £9,440 on 6 April, as a step towards the goal of a "citizen's income" – a no-strings basic payment from state to individual over and above any earned (and therefore taxable) income.
A fundamental component of citizenship, however, is paying towards the ongoing work of building and maintaining resources for everyone to use. On a practical level, the new allowance means that people who most need help with childcare payments won't qualify for the new £1,200 credits, which will be distributed through the tax system.A fundamental component of citizenship, however, is paying towards the ongoing work of building and maintaining resources for everyone to use. On a practical level, the new allowance means that people who most need help with childcare payments won't qualify for the new £1,200 credits, which will be distributed through the tax system.
More fundamentally, it suggests that people on low wages are effectively earning pin money, not "proper" money that requires being taxed, and therefore that the low-waged aren't full citizens. It also throws those on low incomes further to the wolves in terms of their perceived entitlement to public (or perhaps that shoulid be once-public) resources.More fundamentally, it suggests that people on low wages are effectively earning pin money, not "proper" money that requires being taxed, and therefore that the low-waged aren't full citizens. It also throws those on low incomes further to the wolves in terms of their perceived entitlement to public (or perhaps that shoulid be once-public) resources.
For this reason I was never that keen on Labour's 10p rate, which was no doubt well-intentioned and designed to make it easier for people to take up minimum wage jobs in areas where there was little else on offer. The price of a lollipop, it had a ring of Fisher-Price "My first tax band" about it, and suggested a tacit acceptance by Labour of the idea that, for many workers, the minimum wage was all they'd ever hope to earn.For this reason I was never that keen on Labour's 10p rate, which was no doubt well-intentioned and designed to make it easier for people to take up minimum wage jobs in areas where there was little else on offer. The price of a lollipop, it had a ring of Fisher-Price "My first tax band" about it, and suggested a tacit acceptance by Labour of the idea that, for many workers, the minimum wage was all they'd ever hope to earn.
At the same time, there has been an expansion in highly skilled, high-paying jobs in the past decade or so, leading to an increase in the number of higher-rate taxpayers from 1.6 million in 1991-92 to just under 4 million in 2012-13. A situation in which one in six workers are paying the higher rate while nearly 3 million pay none at all makes a two-tier economy, with two-tier services, official.At the same time, there has been an expansion in highly skilled, high-paying jobs in the past decade or so, leading to an increase in the number of higher-rate taxpayers from 1.6 million in 1991-92 to just under 4 million in 2012-13. A situation in which one in six workers are paying the higher rate while nearly 3 million pay none at all makes a two-tier economy, with two-tier services, official.
The people belonging to the real "squeezed middle" are not those, as the right-leaning press would like to convince you, who stand to lose their child benefit, but those with the skills and experience to earn more than £7-£9 hour but simply can't find the jobs that will pay it. The labour market is like a ring doughnut: it's empty in the middle where there needs to be jam.The people belonging to the real "squeezed middle" are not those, as the right-leaning press would like to convince you, who stand to lose their child benefit, but those with the skills and experience to earn more than £7-£9 hour but simply can't find the jobs that will pay it. The labour market is like a ring doughnut: it's empty in the middle where there needs to be jam.
What should the government do instead? Apart from the obvious measure of raising the minimum wage to something approaching a liveable rate, cutting VAT rather than income tax helps gives individuals both the choice and the incentive to spend. (Although, of course, with food vouchers now replacing cash benefits, those freedom-loving Tories and Lib Dems are most keen to restrict the spending choices of the lowest paid.)What should the government do instead? Apart from the obvious measure of raising the minimum wage to something approaching a liveable rate, cutting VAT rather than income tax helps gives individuals both the choice and the incentive to spend. (Although, of course, with food vouchers now replacing cash benefits, those freedom-loving Tories and Lib Dems are most keen to restrict the spending choices of the lowest paid.)
Tax cuts are always a sop, no matter who you're giving them to. Nigel Lawson's cuts to the basic rate in 1987 and 1988 took people's eyes off the fact that he'd reduced the top rate to 40p. As we know, it took decades for any government to dare implement an increase for super-high earners, let alone think about the consequences of knocking the basic rate down further and further, which Labour continued to do at a time of huge state expansion.Tax cuts are always a sop, no matter who you're giving them to. Nigel Lawson's cuts to the basic rate in 1987 and 1988 took people's eyes off the fact that he'd reduced the top rate to 40p. As we know, it took decades for any government to dare implement an increase for super-high earners, let alone think about the consequences of knocking the basic rate down further and further, which Labour continued to do at a time of huge state expansion.
The previous government colluded not only with big business but also with us, the "little people", to give the impression that a state magnificent enough to include the NHS could be run on a contribution of pennies. "Tax the rich!" is a comforting cry for any of us to make, particularly at a time when the very richest companies and individuals are getting away with murder. To tax only the rich, or the better off, is madness. It's disenfranchisement by any other name.The previous government colluded not only with big business but also with us, the "little people", to give the impression that a state magnificent enough to include the NHS could be run on a contribution of pennies. "Tax the rich!" is a comforting cry for any of us to make, particularly at a time when the very richest companies and individuals are getting away with murder. To tax only the rich, or the better off, is madness. It's disenfranchisement by any other name.
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