Can Ritchie actually read?

The personal allowance will increase very modestly to £10,000 and then 30% tax will due – which will hammer low earners and pensioners in particular, whose tax rates will rise considerably as a result, as will the tax rate for most on less than £45,000 of income a year.

That\’s about the TPA report. In which they say:

Income Tax and Employees’ and Employers’ National Insurance would be merged into a single tax on labour income, with rates levelled down so that certain groups don’t face higher bills

Currently, between £7.something k and £45 k ish you pay three taxes on your wages. Income tax at 20%, employees NI at, umm, 12 ish % and employers NI at 13.8%. And yes, even Ritchie agrees that the actual incidence of that employers\’ NI is upon the employee, in the form of lower wages.

This selection of three taxes will be cut to 30% in total. This is known as a cut in taxes and a cut in tax rates as well. Not, as our innumerate retired accountant seems to think, an increase.

This how the TPA report achieves the following:

For example, a two earner household, with an income of around £28,000 would receive a tax cut of around £3,400.

I do sometimes wonder whether Ritchie can even read.

15 thoughts on “Can Ritchie actually read?”

  1. Unlike Murphy, the *other* taxpayers alliance are at least honest in their approach (whether or not you agree with them) fairer taxes not lower taxes.

  2. (total rate of tax) / (total cost of employment)
    (20+12+13.8) / (100+13.8)
    45.8 / 113.8 = 40.2

    The rate of tax is presently 40.2%. The suggestion is to drop that to 30% and increase personal allowances. What kind of hammering is that?

    Whatever the matter, a more honest reckoning of the cost of employment and the taxation on income is welcome.

  3. Interestingly, what the TPA seems to be proposing is a massive Keynesian stimulus: they want big tax cuts and say

    …if the measures were introduced with no spending cuts…after 15 years, GDP would be 8.4% higher; business investment would be 61.2% higher; and public sector net borrowing would be £35 billion a year lower

    That’s according to their “Dynamic Modelling”, which you might or might not find convincing.

    They do go on to say that “further restraint in public spending” would be needed, but apparently that doesn’t affect their model.

  4. Having been soundly thrashed by HMRC over the ‘tax gap’ and now his desperate twitterfest over the TPA proposals, it’s not a good time for our Ritchie.

    One day even the BBC might realise he is not a ‘tax expert’.

  5. Peter MacFarlane

    “This selection of three taxes will be cut to 30% in total.”

    Yes indeed.

    As opposed to the 20% that pensioners pay now, because they only pay one of the three.

    Will the allowance be increased enough to cover that? I doubt it.

  6. Steve Cook,

    I can’t be certain, but maybe the answer is here:

    “with rates levelled down so that certain groups don’t face higher bills”

    As for Ritchie, I don’t know whether he can read, but it appears he can’t count….

  7. @ Seth
    Because the total cost to the employer of employing Joe Bloggs includes nominal pay, employers’ pension contributions, employers NIC and employers’ liability insurance. The last one is relatively trivial (unless Joe is a test pilot or a steeplejack) so gets ignored. The theory is that the firm will hire or not hire Joe depending on whether the work he does is worth more or less than cost including employer NICs and pension cost. If you called employer NICs part of gross pay, there would be virtually nil economic impact (the odd 67-year-old guy would cease to be marginally cheaper), so it makes economic argument simpler to treat Employer and Employee NICs as being tax on the earnings of the employee.

Leave a Reply

Your email address will not be published. Required fields are marked *