Tuesday, August 26, 2008

Tax The Rich Until The Pips Squeak

I've just discovered that Denis Healey never said he would "tax the rich until the pips squeak". There's one illusion shattered. But back in the heady days of glam rock in 1973, at the Labour Party conference he did say "I warn you that there are going to be howls of anguish from those rich enough to pay over 75% on their last slice of earnings".

In Tribune, 11th July 2008, Paul Anderson wrote the government should increase personal allowances and pay for it by introducing a 60% tax rate on incomes over £200,000 and abolishing the upper earnings limit national insurance. The income figure of £200,000 was chosen so as not to frighten the middle classes, but is in danger of being useless as so few people earn that figure and pay tax.

According to HMRC, in tax year 2005-6 99% of tax payers earned less than £132,00. So there are probably less than 2 in a thousand people earning more than £200,000. Is it worth having a 60% tax rate on such a small number of tax payers? How much tax do those on such high incomes actually pay and how much do the avoid and how much do they evade?

It's either sending out a signal or it's a tax to generate income for the treasury but it's not really doing both.

After writing this post based on his Tribune piece I find this Swiftian polemic on his blog, Gauche.
1. An increase in personal allowances to take everyone on £10,000 a year or less out of income tax altogether.

2. Introduction of new top-rate income tax of 60 per cent for everyone earning more than £60,000, 80 per cent on £80,000-plus and 100 per cent on £100,000 or more.

3. Standardisation of national insurance rates so everyone pays the same percentage on every penny of income above £5,000.

4. An end to all non-dom privileges.

5. A council tax revaluation with abolition of bands and a straightforward proportional relationship between value and payment, so households in £10m homes pay 100 times what a household in a £100,000 home pays.

6. Abolition of inheritance tax up to £500,000 and introduction of 100 per cent inheritance tax over £1m.
That's more like it but I'd still debate the amounts.

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