The Mirrlees review is proposing a merger of the incomex and National Insurance systems.It is a common proposal from right-wing sources.
But was there a single mention made of the injustice that would be created as a consequence, particularly for the elderly,who are currently entirely exempt from National Insurance charges but who would, under the Mirrlees proposal be taxed at a rate that would, by implication, include the equivalent of a National Insurance charge?
No,there was no such mention.
And who arethe single biggest group who constitute those in poverty in this country? Why, the elderly,of course.
This was so typical of those presenting the Mirrlees review who seemed to mention the needs of capital whenever they could, and the particular needs of driving those from age 55 to 70 back into the workforce (without ever mentioning where the jobs might come from) but whose indifference to those suffering real poverty seemed absolute.
Of course, the issue may be mentioned deep in the text of the review. I can, I suppose, retain that optimism. But why then wasn't the issue addressed head on in the presentation? Basically said they would be winners and losers.It's odd that the losers seem to be the poor. Why is that, I wonder?
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To be fair to Mirrlees, I’ve often advocated combining income tax and NICs from a left-wing perspective. It would end the under-taxation of investment income (which is not currently subject to NICs), for example.
It would also end the fiction where politicians cut income tax with one hand while raising NICs with the other – surely one of the most bizarre modern rituals in British politics.
But combining IT and NICs would have to go hand in hand with a more progressive marginal rate structure. And you’re absolutely right Richard, the Mirrlees team should have mentioned that pensioners would lose out unless the pensioner allowance was adjusted upwards to compensated.
@Howard
I have tried time and again to see how this could work, and doubt it can
It is my preference that there should, instead, be a return to investment income surcharge on all unearned income which imposes the equivalent of a National Insurance charge on such sources of income
it would be entirely plausible to exempt those over a certain age from this, it considered desirable or to provide exemption to a certain level of income for those in retirement
yes I know this sounds complicated, but candidly simplicity is an overrated virtue in tax system
the world is complex, and the solutions are likely to be similar
The elderly aren’t the largest group of poor people and haven’t been for a while. DWP statistics
@Jonathan Monroe
I stand corrected. Thank you.
But it’s not going to help the elderly, either way.
Just as the increase in VAT will not help any of these people – and on the margins, there will be a massive number who will be be penalised by what they propose when VAT exemptions would be removed, and the rate increased, both of which are inevitable under the proposals they make
Richard, I think you must have been too busy blogging, and missed a bit of this morning’s talk.
They specifically said that the elderly (in fact over-55s) should pay tax at a lower rate than younger people, and that this should be done either by not paying NI (as at present, but by reducing the age at which the exemption starts) or by an equivalent reduction in the income tax rate if their plan to merge income tax & NI were enacted.
That was part of what you call “driving those from age 55 to 70 back into the workforce.”
@Richard Teather
I heard comment in the context of finding jobs for the elderly (those over 55) – which was itself absurd – where do they think they’re coming from?
But limited work incentives are not the same as what i’m talking about
I have been in favour of a return to IIS for some time, but we should certainly not exempt people from the charge on the basis of age. As with IIS 1.0, the charge should be levied on investment income above a threshold. That will deal with old peoples poverty.
Can you confirm this was correct – written by a blogger who was also at the Mirrlees review?
“I was at the presentation yesterday.
Murphy spent the whole time on his phone, blogging away, so didn’t really pay attention to the proceedings. When he came to ask a question at the end, he managed to misquote the speakers twice, meaning he had drawn conclusions that they hadn’t actually made. So their response was “go away and read what we wrote, because it isn’t what you claim”
I wonder whether he hadn’t in fact written his entire ‘response’ before he got there?”
@Richard Price
Yes, I blogged throughout much of the presentation yesterday.
If anyone thinks that strange they clearly have not had an education in a UK university where a person standing in front of an audience expecting the students listening to them to take notes is the norm. Believe it or not a reasonably competent person is both able to listen, process, note and these days publish all at the same time, and with a high degree of accuracy — enough even in many cases to get a degree. So if this is the criticism you should wonder, seriously, about the competence of the person making it. The simple fact is I can walk and chew gum at the same time – shocking as it might be to neoliberals who have probably simplified the possibility out of their analysis as the maths would be too complicated unless they did.
Yes, you’re right though — Steve Bond did so I misquoted him twice. I strongly deny that. His claim was that he had not said that the UK rate is currently acceptable. Except he did: he said that if UK corporate tax rates are considered by the government and confirm to international norms (and both seem logically true) then the UK collects too much tax as a result and as a result the tax base should be changed, which he went on to recommend. In the circumstances I think my conclusion that he was supporting current rates as acceptable — which is what I suggested he said — was true. What he obviously disagreed with was the base — which he clearly thinks too big.
Next, I argued that if — as he’d said — the tax rates on income from self employments and corporate earnings should be aligned — as he did — it must follow that he was arguing that the new top rate of income tax must be 24% which he’d appeared to endorse as the reasonable rate of CT to which we should aspire. He had explicitly stated that this rate alignment was what he desired. He denied it — despite claiming that the alignment was to eliminate the whole purpose for sheltering trading income in corporate entities. It was then suggested by one of his colleagues that what he’d meant was that the CT rate on corporate income plus the rate on corporate distribution should equal the self employed rate on similar income including NIC. Except that was not what Bond said, at all. Because this would still allow for long term deferral within corporations providing a continuing benefit from incorporation — which he’d said his measure would eliminate —and which I believed was his intent. So what transpired was I made a wholly logical assumption based on what he said to then find that what he said his objective was could not be delivered by the solution he proposed which then meant that — as ever — the Mirrlees team has clearly making proposals to allow the accumulation of wealth behind continuing — or new — tax shelters they wish to provide to capital whilst (in the case of Bond) openly advocating the shifting of the tax burden to labour and disguising all this — in his case incompetently — behind a faced of eliminating an abuse when he was doing no such thing. I listened carefully to what he said, drew a logical conclusion from it, and then successfully exposed it for the fraud it was when he denied having said it.
Candidly Bond made a fool of himself yesterday in my opinion, whichever way he wriggles on what he said. He showed his pre-disposition to pander to capital, and his contempt for labour. He showed his lack of understanding of tax avoidance. And he failed to deliver coherent arguments from the platform so keen was he to display his bias. So typical of the Oxford Centre for Business Taxation, in my experience.
But let’s while we’re at it note the question the entire Mirrless team ducked that I asked. I asked them what the impact of their proposals would be on the Gini coefficient. Not one of them tried to answer. Why was that, I wonder? I’ll tell you what I think: they know it will increase inequality. Dammit, it’s obviously designed to do so.
And they wouldn’t say so. Shame on them.
PS As for the suggestion I might have had a preformed view — some of this stuff has been out for two years. Was there a crime in reading it? Actually though I did base my commentary on what was said on the day but sure pre-reading of draft reports pre-disposed my thinking — but the fact that this was a prescription for the late twentieth century from a bunch of neoliberal economists did so much more.