Another U-turn

Just a few months after the capital gains tax farce, Gordon Brown made another embarrassing U-turn yesterday. With forty of his own MPs opposing the abolition of the ten percent tax band and local elections coming up next week, the prime minister announced that a 'compensation deal' for the losers from the tax changes would be unveiled in the autumn. The 10 percent starting rate of income tax will still be abolished, but the groups that stand to be left worse off – 60-64 year olds and low-paid workers without children – will get more winter fuel payments or new tax credits.

Once again, an attempt at simplification has ended up making the UK's tax code even more complicated and confused. It's already the longest in the world at 9,973 pages, while its administrative burden costs the UK £5.1bn a year. Nor is the government's quick fix (rushed out just in time for Prime Ministers Questions) likely to satisfy opponents of the tax change. The parliamentary rebellion may have been averted, but taxpayers will not be so easily satisfied. They don't want the hassle of filling out forms and applying for tax credits, they just want to pay less tax and keep more of their hard-earned cash in the first place.

A much better solution is to take the poor out of the tax system altogether. At the minimum, the personal allowance should be raised so that no one earning less than the minimum wage (about £12,000) a year pays any income tax at all. Then you could get rid of the labyrinthine tax credit system and all the bureaucracy that goes with it as well.

Unfortunately I can't see the government going for such an obvious solution. They would rather tax you as much as they possibly can, and then give back only as much as they think you deserve.

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written by Mark Wadsworth, April 24, 2008

Yup. If there is one single thing that I could do to change the tax system, it would be at least doubling the personal allowance.

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written by Steve Doerr, April 24, 2008

On the other hand, it's dangerous to have a section of the electorate who can vote for politicians to spend more money but who don't pay taxes themselves. I'm not sure where ASI stood on the poll tax, but if they supported it then there's a basic contradiction between that and their current advocacy of taking lots of low-paid workers out of the tax 'net'.

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written by HJ, April 24, 2008

Steve Doerr's argument doesn't acknowledge two things:

1. Even if you don't pay income tax, you pay other taxes such as VAT.

2. The point of higher tax allowances is to allow people to live without state handouts and to provide incentives. There is simply no point in taking income tax off people if you then have to effectively refund them so that they have enough to live on.

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written by Dave, April 25, 2008

It get's better - we wouldn't need so many civil serveants with their index linked guranteed pensions. Would we even need so many Treasury Ministers. Perhaps there are some other areas where to paraphase Flanders and Swann "it all makes work for the Civil Service to do".

This doesn't take account of all the daft ideas we have to pay for or initaitives which add no value.

Written by Tom Clougherty
Thursday, 24 April 2008
Just a few months after the capital gains tax farce, Gordon Brown made another embarrassing U-turn yesterday. With forty of his own MPs opposing the abolition of the ten percent tax band and local elections coming up next week, the prime minister announced that a 'compensation deal' for the losers from the tax changes would be unveiled in the autumn. The 10 percent starting rate of income tax will still be abolished, but the groups that stand to be left worse off – 60-64 year olds and low-paid workers without children – will get more winter fuel payments or new tax credits. Once again, an attempt at simplification has ended up making the UK's tax code even more complicated and confused. It's already the longest in the world at 9,973 pages, while its administrative burden costs the UK £5.1bn a year. Nor is the government's quick fix (rushed out just in time for Prime Ministers Questions) likely to satisfy opponents of the tax change. The parliamentary rebellion may have been averted, but taxpayers will not be so easily satisfied. They don't want the hassle of filling out forms and applying for tax credits, they just want to pay less tax and keep more of their hard-earned cash in the first place. A much better solution is to take the poor out of the tax system altogether. At the minimum, the personal allowance should be raised so that no one earning less than the minimum wage (about £12,000) a year pays any income tax at all. Then you could get rid of the labyrinthine tax credit system and all the bureaucracy that goes with it as well. Unfortunately I can't see the government going for such an obvious solution. They would rather tax you as much as they possibly can, and then give back only as much as they think you deserve. Bookmark Comments (4) Subscribe to this comment's feed ... written by Mark Wadsworth, April 24, 2008 Yup. If there is one single thing that I could do to change the tax system, it would be at least doubling the personal allowance. ... written by Steve Doerr, April 24, 2008 On the other hand, it's dangerous to have a section of the electorate who can vote for politicians to spend more money but who don't pay taxes themselves. I'm not sure where ASI stood on the poll tax, but if they supported it then there's a basic contradiction between that and their current advocacy of taking lots of low-paid workers out of the tax 'net'. ... written by HJ, April 24, 2008 Steve Doerr's argument doesn't acknowledge two things: 1. Even if you don't pay income tax, you pay other taxes such as VAT. 2. The point of higher tax allowances is to allow people to live without state handouts and to provide incentives. There is simply no point in taking income tax off people if you then have to effectively refund them so that they have enough to live on. ... written by Dave, April 25, 2008 It get's better - we wouldn't need so many civil serveants with their index linked guranteed pensions. Would we even need so many Treasury Ministers. Perhaps there are some other areas where to paraphase Flanders and Swann "it all makes work for the Civil Service to do". This doesn't take account of all the daft ideas we have to pay for or initaitives which add no value. Write comment This content has been locked. You can no longer post any comment. Powered by Azrul's Jom Comment for Joomla!