Finally, something I agree about

Stephen McPartland, the MP for Stevenage, said he was urging Hammond to lower the “taper rate” on universal credit again to encourage people receiving in-work benefits to increase their hours without seeing so much of their additional pay taken away.

Hammond bowed to pressure from Conservative MPs at the autumn statement last year, reducing the taper rate from 65% to 63% at a cost of around £1bn over five years.

At the very worst the taper rate should be no higher than the top marginal income tax rate. For the same reason. That Laffer Curve exists and there’s somewhere between no and little evidence to say that it works differently dependent upon income band. Rates that are too high are too high.

Sure, holes blown in budgets and all that but let’s get the basics right before we construct those perhaps?

7 thoughts on “Finally, something I agree about”

  1. The only benefits Hammond should be concerned about are the benefits he deserves to be on instead of his remain treason turn masquerading as a Chancellor.

  2. If it is indeed a Laffer effect, then the hole created in one budget should, once things have had time to stabilise, be more than filled by extra receipts elsewhere.

  3. This was one of the things that IDS argued (and lost) with George Osborne about. Basically because Osborne was an idiot.

    Big problem is that the system wont actually work very well – it’s complex and is unlikely to be easy to access for those on the fringes of society. IDS couldnt manage a whelk stall and the cretins in DWP are useless.

  4. @ Tim
    Yes, of course you are right. There are, however, problems with subsidies paid to those earning above median income – from the income tax on those earning less – unless you increase the personal allowance to the level of the median income (which it ought to be IMHO), So maximum subsidy has to be 45% of median income instead of the 100% of median income imposed by the wicked Tories.
    Alternatively make some benefits non-means-tested so that it’s only the balance that is limited to 45% of median income.

  5. @ ken
    Osborne is not an idiot – I can sympathise with idiots who are dealt a rotten hand by their genes, but not with Osborne. George Osborne was a calculating politician targeting no 10 and could see that the numbers didn’t add up if he wanted to pretend that he was introducing “austerity” by reducing the budget deficit to £100 billion unless he did something massively unpopular so he ignored the Laffer curve on benefit income rather than raise basic rate income tax to 40%

  6. VAT on all food, and a taper rate of 53.4% ( being the marginal rate of income tax paid by the highest employed earners – 45%paye, 2% employee and 13.8% employer NICs ).
    Should be close to revenue neutral. And the poor benefit little from the VAT exemption on food anyway based on the distribution of take-away outlets

  7. @ Bongo
    Distribution of take-away outlets may be affected by the large number of people living with parents in council flats for whom their earnings or JSA is effectively pocket money. The genuinely poor are a different matter.

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