Err, yes, The Guardian is correct here

The other, harder project is to get more cash into people’s pockets.

Hmm, so, let’s think about how we might do that.

That’s the weakness in the Lib Dem obsession with raising tax thresholds, now backed by some Tories who are pressing for a further rise, from £10,000 to £12,500. It’s eye-catching, but ineffective. The best thing to do on thresholds would be to tackle national insurance, which still starts at £7,500.

You what?

We don’t put more cash in peoples’ pockets by failing to nick the cash from peoples’ pockets?

What?

11 comments on “Err, yes, The Guardian is correct here

  1. Are you deliberately taking the piss on this one?

    If you want to maximise the benefit to people who are currently working for the minimum wage, then cutting the income taxes (small letters) which most severely affect the people who are currently working for the minimum wage is the best way to do that.

    The income tax which most severely affects the people who are currently working for the minimum wage is National Insurance, not Income Tax (big letters).

    Therefore, cutting NI will do more to achieve the objectives that we all want to achieve (“minimising marginal tax rates and absolute tax paid by very poor workers”) than cutting IT.

    What the hell is there to disagree with there?

    Tim adds: My plan is to raise the NI and income tax allowance to 12.5 k. The Guardian says this is ineffective.

  2. No Tim, the thing you’ve quoted says raising the NI threshold is more effective than raising the Income Tax threshold. Right there. In Pixels.

    Plus without changing higher rates to recoop loses this is a pretty inefficient way of getting money into poor people’s pockets. 1) because most gain go to the rich (as they’re earning the most money, natch) and 2) the really poor aren’t working. There’s a sensible policy here somewhere, but it probably involves higher taxes on the rich and revenue neutrality.

    Tim adds: That’s not the point I’m making. Rather, that The G seems to think that reducing the amount of tax paid by the working poor isn’t a way of leaving said working poor with more money.

    I agree absolutely that NI allowance needs to be raised as well. I have been shouting so for some 5 or 6 years now. And employers’ NI, naturally. And entirely happy with bringing down the income level at which higher rate is paid to cover it all. Indeed, there’s an ASI paper around somewhere arguing that this is the way to move to a flat tax system. Much bigger allowance, 33% I think is the total tax rate over that.

  3. No, the Guardian is arguing against a specific plan which the Lib Dems support, of raising the IT threshold to 12.5k without changing NI. And they say clearly in their editorial that this is what they’re doing.

    Your plan is sensible and would also achieve what they want to do. But they haven’t published a piece saying “Tim’s plan of raising both thresholds to 12.5k is a stupid idea”. Because they’d agree with it.

  4. 1) because most gain go to the rich (as they’re earning the most money, natch)

    Who cares? It’s helping the poor we’re interested in, not gouging the rich.

    And if the threshold were to be decreased, you can bet your life that the left would (rightly) be saying that the poor are hit the hardest.

  5. Following on from what Left Outside said, yes, they will have to change the higher rates to make up for lost income.

    Last April they raised the 20% rate threshold from £8,105 to £9,440, but at the same time cut the 40% threshold from £42,475 to £41,451. The easiest option would be to perform a similar trick, only this time with NI.

  6. If the Guardian is agreeing with Tim Worstall then let’s crack open the bubbly and spare a thought for Dear Little Ed, who’s been left swinging in the breeze a little.

    I would point out, just to add something else into the mix , that there are other taxes that add to poor peoples’ poverty. So abolishing the TV licence would do the trick. Similarly, abolishing Council Tax for homes in the lower bands would work.

    I would also, in answer to what I think Left Outside is thinking, note that a universal abolition (TV licence) or a raising of IT or NIC thresholds benefits the poor more than the rich because these taxes form a greater part of their income.

  7. Ironman: correct, but those taxes don’t do anything about marginal rates (ie incentives to work). Cutting NI and income tax does both.

  8. All those reductions(tax,NI,BBC,council thieves etc) would do a lot for the less well off. But where does that leave patronising middle/upper middle class socialistic twats?. What’s in it for them?. Which is why it is unlikely to happen and why the present “take it off’em and patronise the oiks by handing some back” system is set to stay until it collapses.

  9. If you raise the NI threshold to £12.5k, wouldn’t that lose some people some entitlement to State Retirement Pension? Is that it too minor an issue to matter, or should it be dealt with in some other way than retaining the £7.5k threshold?

  10. Plus without changing higher rates to recoop los[s]es..

    Or maybe the government could cover the losses by – gosh, I dunno – not spending so damn much?

  11. Philip Scott Thomas, that depends if you think the purpose of tax is to pay for the provision of public goods or whether it is to engineer a socialist dream of equality (incidentally I am counting a social safety net as a public good here). I think you will find most people on this blog instinctively agree with the latter, though so thoroughly has the argument been hijacked by Mr Eck’s ‘ patronising middle/upper middle class socialistic twats’, that even here people are talking about having to raise tax on the rich. There are of course many other taxes on the poor, inspired by pm/umcsts, like green taxes and all the sin taxes, designed to ‘use market forces’ to nudge the proles into living the sort of lifestyle approved of by the pm/umcsts. This of course raises the cost of living dramatically for the poor, who are not nudged, but just end up paying a greater proportion of the pocket money left to them by their masters on beer, fags, petrol, public transport, package holidays and heating. It goes without saying that 625 of the pm/umcsts are happy to vote for all of these higher taxes since they eat drink and smoke in subsidized bars and restaurants and charge all their living expenses to the taxpayer…

Leave a Reply

Name and email are required. Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.