Who wins from the Tories?

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I know others have already done some of this, but I couldn't resist looking at who wins from the Tories proposed tax reforms. So I've looked at each of the main reforms and simply decided who wins most - the top 10%, or the rest. That, broadly speaking is higher rate taxpayers, or the rest of society (just over 10% of taxpayers in the UK pay at the 40% tax rate).

¬? Cutting income tax from 22% to 20%

Cost £7.4 billion. The biggest winners are those who have highest income - because they save right through their tax band. The poorest don't win - they don't pay either rate. Standard rate taxpayers on average earn about £18,000 per annum according to current HMRC data that I've extrapolated. So they will save about £220 from this. Higher rate taxpayers will save over £600 on the other hand. Overall winners therefore are the best off. They get almost £2 billion of the benefit.

¬? Raising the tax-free personal allowance from £5,035 to £7,185 and abolish 10% tax rate

Cost £5.9 billion. The rich will save at 40% on the increase I.e. £860. The poor will save about £210. Overall winners? £2.7 billion of the cost goes to the top 10% in society.

¬? Reducing the higher rate from 40% or raising the starting threshold to £33,300

The Tories didn't even price this. But all the savings go to the rich, by definition.

¬? Scrapping stamp duty on shares

Cost £3 billion. Almost all wealth is owned by the top 10% - but let's be generous and only allocate only 75% of this to them - that's £2.25 billion to the top 10%.

¬? Scrapping employee tax perks, incentives for research and development and the film industry, and tax credits for higher earners

Employee perks, saving £1.1 billion, other savings £1.2 billion. The savings on corporation tax will cost the top 10%. At least half of all perks go to them too. So, let's cost this at £1.8 billion to the rich.

¬? Replacing inheritance tax with a short-term capital gains tax

Cost £2.6 billion. All inheritance tax is paid by the top 10% as only 7% of estates pay inheritance tax, and capital gains is almost entirely paid by the top 10%. That's all to them then.

¬? Corporation tax would be cut by £8bn

£4.4 billion saved by broadening tax base though. The rich own shares (just about by definition) and the rich make up by far the largest group of private pensioners. Let's say that's only £3.2 billion to them then.

The summary:

£11 billion (near enough) of savings to the rich out of the total identified here of £20.2 billion. Or 54% to the top 10%. Never let it be said the Tories don't look after their own.

What does this remind me of? The following quote came to mind:

"The only thing that really matters in your country is those 5% of the people who create the jobs that the other 95% do. The truth of the matter is a poor person never gave anyone a job, and a poor person never created a company and a poor person never built a business and an ordinary working class guy never drove economic growth and expansion and it's the top 5% to 10% who generate the growth for the other 90% who pay the taxes to support the 40% in government. So if you don't feed them [i.e. the 5%] and nurture them and care for them at the end of the day over the long run you've got all these other people who have no aspiration for anything more than, you know, having a house and a car and going to the pub. It seems to me that's not the way you want to run a country in the long run so I think that if the price is some readjustment and maybe some people in the middle in the short run pay a little more those people are going to find their children and their grandchildren will be much better off in the long run. The distributional issue is the one everyone worries about but I think it becomes the tail that wags the whole tax reform and economic dog. If all you're going to do is worry about overnight winners and losers in a static view of life you're going to consign yourself to a slow stagnation."

That sounds like Michael Forsyth justifying his proposals to me, but it wasn't. It was Alvin Rabushka, inventor of flat tax in conversation with me earlier this year, and he gave me permission to published the (recorded) conversation.

Nice, isn't it? But he's the sort of guy who's influencing this thinking.