My word, Polly T does rather lay into the tax system today. And, umm, quite rightly too (not what you expected to read here, did you?).
Those at the very bottom pay a far higher marginal tax rate than those at the top, with a bungled benefit system imposing a 70% tax loss for every extra pound they earn.
Indeed, it\’s the overlap of the tax and benefit systems. Solvable in a number of ways: lower benefits perhaps (perhaps not a good idea), greater tapering (very expensive), no means testing of benefits (hugely expensive but possibly the way to go with a citizens\’ basic income) but te simplest i simply to take the poor out of the tax system altogether.
He could take all 10p payers out of tax altogether, a move that would cost £7bn and cut everyone\’s tax a bit, with the lowest-paid gaining most.
Of course, I and other vicious right wingers like the Adam Smith Inst would go further. Let\’s really bang that tax free allowance up to £12 k or £14 k, really take the working poor entirely out of the income tax system.
Indeed they are right as secret fiscal drag, failing to raise thresholds, has quietly brought more people into higher tax brackets – but not the richest, whose earnings rose fastest; no new tax band for them.
We\’ve been muttering about fiscal drag for a long time: as wages generally rise faster than other prices, tax bands should go up faster than the general level of prices. Something whih has deliberately not been done, pulling people into those higher tax bands indeed. We could though use this very same argument about raising the IHT limits…..given the rise in house prices.
Now the Fabian Society proposes ways to start winning back the argument. It is too late, the society thinks, to win back IHT. It suggests a capital receipts tax used in other countries, where recipients of gifts are taxed over a lifetime instead of estates after death: everyone could receive up to £80,000 tax free, with tax rising gradually until £260,000, and everything above taxed at 40%.
Not a bad idea: tax the recipients, not the estate.
How odd that, on personal allowances at least, Polly is now onside with the Adam Smith Institute.