Tory Proposal

That is, a proposal from Tim Montgomerie to the Tories.

It would cost £44 billion to take approximately 14,000,000 people out of the tax system altogether. The Conservative government doesn\’t have to set a timetable, but it would be the greatest of missions; as radical and just as Margaret Thatcher\’s sale of council homes. It would sow panic in Labour\’s heartlands.

Indeed a grand and wonderful idea. That\’s why it is already UKIP policy.

8 thoughts on “Tory Proposal”

  1. “It would cost £44 billion”

    No, it would save £44 billion. It depends if you think your money is yours or the governments.

  2. It’s barmy for at least 3 reasons.

    1. How would it operate – VAT would have to be scrapped, as would any other indirect tax?

    2. He mentioned inheritance tax, yet the removal of that, a tax paid only by the well-off of course makes it much more difficult to lower taxes on poorer workers.

    3. He brings up thet Telegraph’s meme of the moment, ‘the coping classes’, who last month were those earning up to £200,000/y and struggling to pay private school fees, and now are your salt-of-the-earth hard-working working classes. You can’t remove all of them from the tax system.

  3. Matthew – it was talking about income tax.

    I would suggest that most of those 14 million currently hardly have enough to live on and rely on various benefits. Consequently, taking them out of income tax would increase their income, increase incentives and remove the deadweight cost of taxing them and then returning some of their money through an inefficient bureaucracy.

    Inheritance tax is largely avoided by the well off. It tends to be the ‘middling off’ who are hardest hit. The reason why the Tory inheritance tax proposals are so attractive to the middle classes is that, since the demise of decent pensions, they are relying on inheritance to fund their retirement. The well-off aren’t affected by the pensions crisis and the worst off didn’t have pensions anyway and will get pension credits.
    Were pensions made more attractive again, I suspect that people would be less worried about inheritance tax. In any case, in my opinion, inheritance tax is misconceived as it is paid on the value of the estate, not the amount that someone inherits – they are literally taxing death. It would be better to tax it as capital gains (for that is what it is) for the recipients. This would incentivise people to spread their wealth around in their will.

  4. What Kit says (unusually).

    Matthew, you miss the point. IHT raises £4bn or so and should be scrapped and the money raised by having many more Council Tax bands (all the way up to Band Z AFAIAC, i.e. Land Value Tax).

    As HJ says, IHT clobbers the people in the middle.

  5. It’s a bit pointless though to talk just about income tax – if the Tories raised the income tax threshold to £10k and raised VAT to 30% it’d hardly be a great boon to the lower paid.

    Inheritance tax – well let’s not go over that argument again (I think it’s a tax on the workshy and entitled), but we can all agree that it does not help the lowest-paid much, not say as would using the money to raise the income tax threshold.

  6. Matthew, did you read the article.
    The author says that if we froze government spending (apart from inflation) for 5 years then this could be done. There is no talk about putting up VAT (or other taxes)to compensate.

    Now, these figures may not be accurrate but the aim to reduce tax at the low end rather than at the high end is a) fair & b) probably the best way of making tax cuts popular.

    This is probably why cameron won’t touch this plan with a bargepole 🙂

  7. Matthew, if you want to ‘help the poor’, the next bit is to scrap Employer’s National Insurance, a more or less tax-neutral exercise that would create the jobs to enable (some) people to get of benefits.

  8. I’m not sure this is a brilliant idea from a Tory perspective – if someone is a non-taxpayer, presumably that’ll make them less likely in future to vote for the party that wants to lower government spending (and hence taxes)?

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