The Coalition made much yesterday of taking millions out of tax as a result of plans to increase the personal allowance in 2013 to £9,205.
Like much that was said yesterday, that's not true. We don't know national insurance rates for sure as yet in 2013, but for 2012/13 anyone who earns more than £146 a week will pay NIC. That's £7,592. And NIC has always lagged behind income tax in this way so although it will go up in 2012, don't expect it to exceed £8,000. In addition, the Coalition has announced a review to plan merger of NIC and income tax. So the NIC limit is going to have much more impact.
In other words almost all of those who will supposedly fall out of tax as a result of yesterday's announcement of the increase in the personal allowance from £8,105 will, in fact, remain wholly within the tax net.
That's another Coalition claim shot to pieces.
And then let's also remember that they also pay VAT, fuel duty, and so much more. A little honesty would help.
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The keystone of the Thatcherite arch is a block of jelly. To get a sense of what UK GDP growth will look like, compared to what Osborne hoped it would look like by 2015, I send the interested to ‘Figure 8: UK and Japanese recoveries in context: Real GDP’ on page 37 of Adam Posen’s ‘THE CASE FOR DOING MORE’ from the 28 September 2010 which can be found at the Bank of England. Today, on that grpah, our GDP will be that of Japan from 1993 not UK 1991.
Good point, Richard. Small error?
“And NIC has always lagged behind income tax in this way so although it will go up in 2012, don’t expect it to exceed £8,000”
Shouldn’t that read 2013?
“And NIC has always lagged behind income tax in this way so although it will go up in 2012”
Wrong, they were the same for a long time until Gordon Brown broke the link, in about 2006 if I recall correctly, about then anyway.
And I’m sure you have been quite happy in the past to ignore the impact of NIC on someone’s tax burden, odd that you should bring it up now.
A little honesty would help.
Honesty?
Well how about the fact that in 2000/01 NIC lower limit was £66 pw so £3,432 whilst PA was £4,385
An honest apology would be welcome
But I won’t hold my breath
I think it is even worse than you suggest, Richard. Because, NI is currently assessed on a payment period basis, some people whose income is even less than £7,592 in 2012/3 can pay NI in some periods if their earnings are uneven.
Integrating NI with tax, assuming it means annualising all tax liabilities, would produce winners & losers even if annual allowances and rates remain the same but losers would lose in the periods they could least afford it and winners would win when they least needed it (because their earnings were highest).
If you consider NIC to be another tax (and I do) then you are, indeed, correct.. but officially it’s not, so technically they can make their claim.. in the same way that Labour were able to claim that they’d not put up taxes when they increased National Insurance. It’s what politicians do.
But nonetheless, they have lessened the burden considerably, and I’m giving them (well, the Lib Dems) credit for that. It’s shocking that in 10+ years of boom, Labour allowed more and more lower paid people to fall into tax rather than move things in the opposite direction… and I think that the complete failure of Ed Balls (et al) to acknolwedge that this bit of coaltion policy is very good is an indication of a deep sense of embarassment that they’re seeing these changes enacted by a Tory government in otherwise austere times.
You say – ‘And then let’s also remember that they also pay VAT, fuel duty, and so much more. A little honesty would help’.
And I say:
Let’s also remember that almost all with income below £10,000 per year will be in receipt of Income Support, JSA or ESA (means-tested at 100%), or Working Tax Credit (means-tested at 39%).
Let’s also remember that almost all with income below £10,000 per year will be in receipt of Housing Benefit (means-tested at 65%), and Council Tax benefit (means-tested at 20%).
The economic and welfare impact of means-testing is indistinguishable from the economic and welfare impact of income tax and NICs. They all mean that, for every £1 that a citizen earns, the net benefit to that citizen is only part of that £1. Almost all with income below £10,000 per year will be subject to overall ‘taxation’ of around 80% on ALL of that income. Almost all with income below £10,000 per year will be earning at minimum wage level(approximately £6 per hour gross), and will be ‘benefiting’ at a net rate of £1.20 per hour.
It is a gross deceit to talk about ‘taking low-earners out of the tax net altogether’, when allmost all such ‘low earners’ are ‘stuck in the means-testing net’ at around £80%.
Agreed