In his budget speech Jeremy Hunt made the following statement. “The average earner in the UK now has the lowest effective personal tax rate since 1975 — and one that is lower than in America, France, Germany or any G7 country.”
Given that the overall tax burden — the tax take as a fraction of national income — is reaching record levels, it is a remarkable claim. I have neither heard nor seen much commentary on it.
The answer actually is obvious. But not in fact said:
Lots of inflation has been good for VAT revenues.
That’s the only reference.
But the answer is that the tax system has moved – partially, to be sure – over to taxing consumption rather than income. VAT is at more than double the rate it was in 1975. We’ve the insurance tax, APD, landfill tax and on and on and on.
We should have done this too, consumption taxation is less distortionary than income taxation. But that’s what the explanation is all the same.
Surely the point is that, while headline income tax has remained low, everyone has been shafted by flat allowances and higher rate tax bands which haven’t moved despite rising inflation?
“The average earner in the UK now has the lowest effective personal tax rate since 1975 — and one that is lower than in America, France, Germany or any G7 country.”
They’ll be queueing up around the block to vote Tory, eh?
Disingenuous, misleading, economical with the actualite. And from a politician…… “I’m shocked, shocked to find………”
” In 2023, the Adam Smith Institute (ASI) (a neoliberal far right think tank ) has estimated that every penny the average person earned for working up to and including 17th June went to the taxman – from June 18th onwards they are finally earning for themselves”.
My italics…..
That’s recent, yes. But the comparison is back to 1975. When VAT was at 8% (??)
I just can’t shake my vision of us all being followed around by a leering demon with a rictus grin who, every time we do something, screams “Gimme some money!” You go to work, he’s at your side. You go and buy a sandwich and there he is again. You go home and he’s sitting in the corner because when you bought your house he nicked some money because you swapped bits of paper. If you want to heat your home he makes you pay some bloke who was meant to provide gas or electricity even if he doesn’t. The bloke who got paid for not producing electricity bungs a politician £1,000,000 to persuade the politician to give him even more money.
When you need a drink to help you stay sane, he nicks most of the money you thought you were paying to the bloke behind the bar. If you have the temerity to get in your car you’ve already paid him some money just to put it on the road but if you dare drive it anywhere you have to pay him again.
End of rant. For now…
The leering contempt of this prick.
Vote Reform.
Tories Delenda Est.
Note the important qualifier: “the average earner”.
For lots of reason, the *average* earner doesn’t earn that much. The moment you earn above average, the effective personal tax rate soars. Tax bands have remained unchanged, there’s that weird dip around 100K, dividends and other ‘tax friendly’ payments have been largely neutered and secondary taxes like council tax (not exactly discretionary) are at record highs. Sure, it’s not quite the levels we reached in the 70’s, but it’s a serious chunk of money.
I’d argue heavily against the idea that the taxation system has moved to tax consumption. Rather, the government has moved to the “thousand paper cuts” model of taxation, where they’ve splattered tax into a massive number of separate deals – none of which can be argued against – that cannot easily be translated into a headline figure that the “average earner” can read and make sense of. They aren’t targeting consumption, they’re merely trying to hide the total figure by spreading it across as many different areas as possible.
Andy T nails it – great post
It’s really challenging to calculate the personal tax burden, and while I concur with Tim that it’s fairer to tax consumption rather than income as it broadens the tax base, what gets lost is that the amount being spent by the government needs to be reduced by around 50% ideally.
If we accept that the current level of expenditure is normal then we are ceding the debate to people like Murphy. There needs to be enormous cuts to the entire public sector. Even ‘sacred’ cows like Health and education need to be served up as ribeyes and sirloin frankly.
V_P – I think brisket would be more apt!
One bit of “tax simplification” I’d like to see – and we’ll never get, for obvious reasons – is rolling NI into income tax.
Once people have less excuse for not noticing that, above threshold, nearly half their income is being taken by the taxman (20% basic rate PAYE, 8% employee NI, 13.8% employer NI) there might be a few more pointed enquiries about how well it’s being spent…
Still, one can only dream.
Golden Rules of Tax:
1. Lots of small taxes add up to make big tax bills.
2. No matter what name is on the bill, ALL taxes are ultimately paid by human beings.
3. Taxes are kept as invisible as possible (eg: VAT).
James Hannam.
I once explained to a colleague that getting a tax rise putting her into the 40% tax rate wasn’t a big change, because of the NI bill when you pay the 20% rate. The employer contribution is salary you don’t get paid, so I agree with Jason Lynch. It certainly feels to me that the tax system is designed to stop people realising just how much they are paying.
I would abolish PAYE. Everyone should feel the pain of writing a cheque to the cunts, rather than not missing what they never knew they had.
Consumption taxes are fairer than income taxes – the taxpayer contributes in proportion to what he takes *out* of the economy, not what he puts in. They are also, as Tim points out, less damaging to the economy so the community – as a whole – benefits.
One reason why the “average earner” doesn’t earn a lot is that more than one-quarter of those employed in the UK work part-time so the “average earner” is in the bottom one-third of full-time workers.
Jason Lynch
When the coalition came to power they said they wanted to merge NI and income tax. I remember naively getting excited at a budget where Osborne announced that the treasury was going to examine the feasibility of this and report back. Obviously that was the last that was said about it, and I learned that “examine the feasibility” means “definitely not do”.
NI is an example of tax being deliberately opaque to hide from people how much they pay. It’s not in the government’s interest to change that.
@bloke in Aberdeen
The venerable Yes Minister series has a very good description of how to bury ideas in feasiblity studies and forming committees etc to study them
“I would abolish PAYE. Everyone should feel the pain of writing a cheque to the cunts, rather than not missing what they never knew they had.”
It would have the added advantage of the fact that they’d never get any money out of a large proportion of people, because they’d have spent it. Which is why it would never even be considered.
We’re taxed to the eyeballs, yet public services are shit, and getting worse as, somehow, the public sector is also broke.
It’s a recipe for national sclerosis much more insidious than the Trades Union/Labour led socialist ratchet of the 70’s, when economic policy became ossified in service of an increasingly shit status quo. They could at least still build motorways and power stations in the 70’s.
One thing’s clear: Net Zero is turning into every bit the nightmare James Delingpole warned us about over a decade ago. I think being right about that, and nobody listening, or caring enough, to stop the preventable disaster of Net Zero is what pushed Dellers into proper Icke territory.
We really can’t afford Net Zero. Our local authorities can’t financially survive as is it. The rest of the pubsec is a financial Jenga tower. They can’t afford to keep spaffing on Net Zero. The public can’t afford heat pumps and electric cars. Something’s gotta give, but our lords and masters in Westminster are still grinning inanely.
Even on a low-£20k wage a couple of years ago I calculated that almost 50% of my wage was going in taxes before it ever went near my bank account, and then an additional 15% went straight out in council tax.
As pointed out, people are angry at council tax levels because they see it when they have to pay if out of their money. People rarely get agitated about NI and income tax because they never see it, it is removed before any money they see, so what gets deposited into their bank account is what they see as being their wages. They never understand the additional 45% on top that has already been swiped.
Similarly, people rarely get uppity about VAT levels ‘cos prices are listed with the VAT already included. Instead they rage at the shops for the high prices, oblivious that those prices are 20% artificially higher because of the government.
“We’re taxed to the eyeballs, yet public services are shit, and getting worse as, somehow, the public sector is also broke.”
It’s called Detroitification. Though plentiful other examples exist.
And on top, we have the Net Zero death cult. Joy of joys.
“ Similarly, people rarely get uppity about VAT levels ‘cos prices are listed with the VAT already included. ”
I’m sure the American sales tax system where the tax is added at the end is why Americans appear to be more engaged local governance.
Jgh – People rarely get agitated about NI and income tax because they never see it, it is removed before any money they see, so what gets deposited into their bank account is what they see as being their wages. They never understand the additional 45% on top that has already been swiped.
I don’t think that’s true, since every payslip I’ve ever seen has had gross pay, income tax, NI and pension deductions itemised.
I’m not sure if it’s maybe that people on lower tax bands don’t mind as much? And that’s the majority of the population. Maybe they just lack ambition. Most English peasants have been pretty docile throughout history, provided they’re fed and have beer.
Then, as BiND suggests, the average person is barely aware of the existence of VAT. That 20% is hidden in the sticker price.
When you’re a top rate taxpayer, sacrificing precious family time and your finite mental health working hard at your stressful, competitive job, only to be raped by Jeremy Hunt for your trouble, it’s a different fishkettle, maybe? I’ve never known a successful salesman who didn’t hate the fucking taxman.
You dream of things like what you could’ve done with the several tens of thou taken from you by the government, for the purpose of harming your fellow citizens. Something constructive instead, such as hookers and cocaine.
Tim the Coder – It’s called Detroitification. Though plentiful other examples exist.
Dick Jones was way ahead of his time with the first public-private law enforcement droid: ED-209.
Unfortunately here in the Pedoph Isles, we’ll probably get chased by gay cyberpolicemen or queer dalek police support officers in day-glo hijabs for hate speech infractions about pikeys or big, fat trannies.
Ooh, chase me!
Expropriate! Expropriate!