John Grieve Smith, a fellow at Robinson College, Cambridge has written in the Observer:
Cutting public services is not going to be politically popular. At the same time, there is increasing unrest about the reports of the million-pound salaries and bonuses being received by those at the top. So if Labour were to make the case for progressive tax increases, rather than expenditure cuts, to tackle the budget problem, they could win considerable public support.
He is absolutely right.
The required programmes are laid out here.
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Suspec your headline should read ….. more progressive taxation….
for we already have a progressive tax system
Sorry
No we don’t
the richest pay least as a proportion of their income
The bottom 20% having average net tax rate of -46% and the top 20% having average net tax rate of 33% sounds pretty progressive to me.
The figures come from this quote from the IFS:
“If we define “net taxes” as “taxes paid less benefits received”, then the net tax rate of the poorest fifth is -46% of their original income (or -32% of their after-tax income), with the negative number reflecting that they are net beneficiaries. At the other end, the richest fifth have a net tax rate of +33% of their original income (or +50% of their after-tax income). These figures show what one would expect: the tax and benefit system as a whole takes money from the rich, and gives it to the poor.”
Whole article is at http://www.ifs.org.uk/publications/4813 and was written to debunk some misleading LibDem propaganda in the election campaign.
@lusakajoe
Three comments:
a) This shows the fundamental right wing stance of the IFS – who are anything but objective observers of tax in the UK
b) Benefits are not tax – they’re income.
c) If benefits are tax as you and the IFS say why are rats of 80% + acceptable when benefits are withdrawn as income rises at low rates of income?
Re (a) happy for you to offer an alternative set of figures. However I have no reason to believe these figures are not objective.
Re (b) I agree that benefits are not tax. However for the purposes of assessing whether governement actions are fair across the income range, it seems to me that the IFS article makes an eminently sensible point, that it is misleading to assess ‘percentages of tax taken’ against a starting point of ‘income plus benefits received’. Far better to start with income before government intervention, and then assess effect of both taxes and benefits. I accept that in effect my original point was that we start from a ‘progressive tax and benefit system’.
Re (c), we are now discussing marginal rates rather than average tax rates. I am afraid much commentary on the tax system, from both right and left and everywhere else, confuses these two. I am not saying whether 80% marginal rates are acceptable or not. You can have a very progressive tax/benefit system, as I have indicated, and still have high marginal rates at certain points in the schedule. Happy for you to design a system where the effective marginal tax/benefit rates are lower, but it is very difficult. There is a tradeoff between (a) being sufficiently generous to those in need and (b) the overall cost of the system if tax/benefits are not withdrawn quickly as income rises.
I think you are comparing the right’s objection to high marginal tax rates on the rich with their apparent acceptance of high marginal rates on the poor. The issues are different. They are both pragmatic questions in my view. From the point of view of the vast range of the middle earning/taxpaying population, we want the rich to contribute tax to our coffers to help pay for justice/law and order etc and save us having to pay so much. We shouldn’t therefore set tax rates at levels that reduce the total tax take from those people (big debate about what those levels are). At the lower end, we want to be generous to those genuinely in need, but should not expect those living off others earnings to be able to over pick and choose whether they work or not, and if that means a high marginal tax/benefit rate, we may have to deal with the disincentive effects in other ways. If I had my way, we would massively increase the personal allowance/national insurance threshold, and reduce the marginal rates that way.
@lusakajoe
Excuses, excuses, excuses as to why the rich should not pay
Not at all. The fundamental point, where we started, is whether or not the system is already progressive. I say it is, for reasons stated. You haven’t provided a counter-argument.
What we do with that fact is a different matter entirely which I haven’t addressed. I certainly haven’t said the rich shouldn’t pay.
@lusakajoe
If you can only win an argument by changing the definition of income to include benefits then that doesn’t require me to counter it – it just requires me to point out, as usual, hat you and those on the right are cheating their way out of paying what is due.
Nothing new there though
I’m not cheating my way out of paying what is due and you have no evidence that I am and you should not be making such assertions. Such an approach doesn’t sit well with other beliefs you profess to hold.
@lusakajoe
What stating what I think to be true contravenes my beliefs?
You’ve clearly misunderstood me
And I’ve rumbled you!
What I’ve understood is that:
1 you’ve accused me personally of cheating my way out of paying what is due, and that when I denied this and pointed out you had no evidence for this, you neither provided any, nor withdrew the remark. It was this behaviour that I was suggesting was inconsistent with your, as I understand it, position, as I understand it, as a communicant member of the CofE.
2 on the substance of our debate, you proposed ‘progressive tax increases’; I suggested your headline should read ‘more progressive taxation’, and subsequently explained the basis of my belief that he existing system is already progressive, and sourced my numbers; you made an unsubtantiated slur on the organisation that provided the numbers, contradicted me, but provided none of your own to support your own position. You then resorted to ad hominem attacks.
It’s your blog, so you can do what you like, but I feel you could do so much better.
@lusakajoe
I pointed out behaviour consistent with the position you argue from. I have no reason to change my opinion on that position.
Your argument on progressive tax is risible – change commonly understood and accepted definitions of income to include something that is not income and of course you change outcomes – but then putting 13 men on a football field would change outcomes when the rest are playing with 11. If that’s your definition of arguing then my suggestion of cheating stands.
And yes it is my blog, and I note your patronising tone.
Of course I’m sure you think i could do much better.
I could promote inequality.
Or tax cuts for the rich.
And making people unemployed.
Or destroying the environment.
And throwing people out of their homes
No doubt this would be much better in your book
But it would be wholly and utterly inconsistent with being a communicant member of the CoE
If you think being a Christina means being nice think again
It means saying the unpalatable to those in power
And that is what I do.