A conference presentation requires at least one new idea. This is mine for the morning at Class.
It's a fact that the poorest 10% of households in the UK have the highest overall tax rate on their income in the UK. They pay about 35% of their income in tax. The next most taxed group are the top 10% who pay maybe 34% in tax (but with the top 1% probably paying less).
Now let me be clear — of the tax that they pay only 5% is income tax and national insurance which is what most of us think of when it comes to tax. They pay more than double that in council tax and more still in VAT, but for them the real killer is other indirect taxes like television licences, alcohol duty, tobacco duty and the like which weigh heavily on this group; so heavily in fact that I repeat the important point that the poorest 10% of households in this country pay the most tax as a proportion of their income.
So what can be done? If the current government is to be believed the solution is taking people out of tax, but the fact is that most in the bottom 10% do not pay income tax now. We can't help them by changing the personal allowance, lowering tax rates or tweaking that system. They're not in it.
In that case if we want to do something to make the system just a bit more progressive then we have to take out a direct cost that burdens this group more than most. My idea is a simple one: let's make sure that those who are long term unemployed or on DLA do not have to pay for their television licence. That would save these households £145 a year.
That's worth £750 a year on the personal allowance for many - but instead of the scattergun approach that such a change entails it's totally focussed on those who need the benefit and it delivers it precisely and accurately to them alone. Changing income tax cannot do that.
What is there not to like about such a change?
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Richard – so much of what you write is absolutely spot-on, but I think you’re having an off-day with trying to promote free TVlicences for SOME deserving categories. As with all means-related largesse, high marginal withdrawals (or a straight cut-off in this case) create just another obstacle for anyone leaving the group that qualifies. Have another go, more along the lines of a decent income in the first place, to spend on a TV licence or anything aeen as being more worthwhile. Let’s take up the Tory mantra of “choice”‘, but make it “choice for all”
I argue for citizen’s income
But we’re not there yet
This is tinkering
But a lot better than much current tinkering
That is the basis of the idea and the logic is correct, I contend
What’s not to like about this proposal – given that it’s easy to implement, equitable and just? Why – just that – it would be helping the “scroungers” and the lumpenproletariat that the Tories want to squeeze out of the system. Goodness, we can’t have money or benefits going to the undeserving poor, can we, when the “oppressed deserving rich” are having to go short? Goodness me, no!
I absolutely agree with you (Let’s say that again, I absolutely agree with Richard Murphy) as far this analysis goes.
If this exemption only applied to long-term unemployed and other benefit claimants then you have added to the very high marginal rates for lower incomes you have yourself previously highlighted. You have previously been very consistent in defending the principle of universality (something with which I am also inclined to agree, at least in principle).
There is also then the principle of funding tpfor the BBC. Now it actually ISN’T funded from the licence fee. Rather it’s funding in direct Parliamentary hrant that has always wached the licence fee. So, no change in principle, but there is a ‘thin end of the wedge’ element to this. It shouldn’t bother me – y’know, me being an evil neoliberal an’al – but separating the perception of BBC’s funding fom the licence fee does bring closer the day when a completely new funding models e.g. advertising, e.g. subscription. The Tories may say ‘the NHS is safe with us; they’ll never bother saying that about the BBC.
As I say though, the TV licence is a tax and one the poorest can ill afford.
It is a tax
And I want progressive taxation
the unemployed on benefits always say , If I get a job I lose my , council tax benefit, free tv licence, free school dinners, and you are simply adding one more item as a disincentive to work
Which is why I ultimately argue for a citizen’s income
This is an interim, step: I never said otherwise
in UK we pay more than £262million per day in government debt interest, other countries not captured by the banksters do not have this cost, this will always make UK uncompetitive
30% f that goes straight back to the government
About 70% of the rest pays UK private sector pensions
Your problem is?
Oh,I would broadly agree too,but I would like to see the taxes on alcohol and tobacco raised considerably more,what ever income groups are affected,and indeed levied on sugary soft drinks,and sweets also,as has been mooted elsewhere. The health benefits,plus the savings to the NHS,on the treatment of related problems,could be considerable.
Re the TV Licence – why is it free to all pensioners? I guess Richard would not favour it being income related – or it`s too complicated to administer,for the saving involved.
I am a pemsioner living with and caring for a disanled sister, By choice I have not had a telly for nearly forty years. I noticed how my co-workers were influenced in their opinions by ‘last nights telly’. I am glad that I did not have the 9/11 obscenity and other prime examples of mans inhumanity to man thrust in to my living room. Most people consider this very strange but I feel quite happy without the one eyed monster in the corner broadcasting propaganda at me.
“It’s a fact that the poorest 10% of households in the UK have the highest overall tax rate on their income in the UK. They pay about 35% of their income in tax. The next most taxed group are the top 10% who pay maybe 34% in tax (but with the top 1% probably paying less”
Nonsense. It’s not a fact at all. If you earn £150k you are paying £53,598 income tax and £6,214 NIC. That’s 40% of your income before you’ve paid a penny in VAT, council tax or any other tax. To be in the lowest 10% of incomes, you’d be on about £8k a year. Paying no tax and minimal NIC. Even if you spend every penny you earned on VATable goods that would be nowhere near 35% of your income.
So? Can you back up your argument with figures as I have with mine?
All data is from the ONS and is by decile
Chris,
Not that you would expect me to be defending Richard’s figures but here he is correct. The point is that the top decile includes people a lot further down in the income scale that your example of 150 k. That’s about the number for the top 1% in fact. The top 10% goes down to around and about 50k I think.
And yes, those are the ONS figures for total tax burden for those deciles.
Tim
Richard claims that the ‘top 1% probably paying less’ than the 34% tax quoted for the top 10%. That’s the nonsense I challenge. As pointed out in my simple example, you’re already paying 40% tax the moment you hit that top 1%. That’s before a penny of VAT, stamp duty, CGT or any other tax. And then remember that those in the lowest decile will probably not be paying council tax, will be getting WFTC and so on. It’s just a complete absurdity to suggest the richest pay less tax as a proportion than the poorest. I suspect it’s those in middle income who pay most as a proportion.
Sure if you want to conjecture about tax reliefs you can make any argument you want. Certainly if I earned £120k a year I’d be chucking £20k a year into my pension which would affect the proportion of tax paid but only because of the perverse removal of personal allowances. But such conjecture, if it is to mean anything, would have to take into account tax credits and benefits paid to the poorest that are (obviously) not paid to the richest.
To be in the top 10% I think it’s about £50,500. At that level of income you’ll pay about 29% in IT & NIC but that’s not the point. Richard is trying to peddle a myth that the poorest pay more as a proportion in tax than the richest. And they don’t.
“And then remember that those in the lowest decile will probably not be paying council tax”
Ahem….as this nice government have cut funding for councils by 10 percent, the unemployed now have to pay towards council tax!
You’re right Richard it is tinkering. The answer is more jobs and a reasonable level of remuneration (the Living Wage) However if we can do something about punitive indirect taxes in the meantime all well and good. Sadly by highlighting the BBC and the licence fee you leave the door ajar for the baying mob who would like to see the end of public broadcasting and the BBC – not to mention anything else that may be publically owned.
If you want to abolish the licence fee for some – why not for all? The BBC makes huge amounts of cash selling it’s output around the world and for major series it works in collaboration with other major players.
Surely if the BBC was that good it would survive as a subscription only service (other than say R4 and BBC2 / 3 which has no comparable commercial rivals). The BBC World Service should be paid for by the FCO.
The reasons why the BBC needs to be paid for by licence fee are so obvious that candidly only those whose opinion is not worth noting argue against
David Drinkwater
The same logic applies to you though. Just because you like the BBC, it doesn’t make the TV licence any the less a poll tax, impacting disproportionately on the low paid.
And please think about what it signifies for the citizenry. We don’t need a licence to bear children, but we do to own a television.
We get a massive social benefit from advertising free television – as I know as a parent
The vast majority willing,y pay for it
But that does not mean that means testing is not sensible whilst other reforms are on their way
I would, of course, expect the government to pay
“The vast majority willing,y pay for it…..”
So make it voluntary then if you are so sure that it will be paid for so willingly.
Please do not waste my time if you want to keep commenting here
Who said I liked the BBC and I’m not a citizen I’m subject!
I’m looking at getting rid of my TV and hence the license. The BBC, in my view has become a neo-liberal propaganda machine with it’s corporate image and excessive remunerations -I don’t want to be part of that. The intellectual content has been dumbed down appallingly and the news broadcasts encourage a servile attitude to the status quo with presenters like paxman a virtual caricature. As far as I know. 75% of the fee goes to the BBC -I would like an opt out by paying 25% and not watching the BBC bit-channels like Al Jazeera and RT are streets ahead in relevant news presentation and no obsequious and cloying nods towards the Royals!
I’m in Richard’s bottom 10% and don’t bother with a tv at all. I do listen to bbc radio tho – 2, 4 & 5. If I see something it’s because there’s a link at a website, or from someone else, in the things that interest me. But I do wish the licence police would leave me alone! There are signifiacant extra costs to being on a low income, or a precarious income that shouldn’t be forgotten by those better off (currently) – for those of us who can’t shop online, or use DDs for utilities are charged considerably more for our goods and utilities than those who can! Many of those in temp work, or seasonal, or zero hours with benefits in between are probably the same ones slammed by bank charges several times a year. Not taxes maybe, but certainly poverty penalties.
The TV licence people are a private company that rely on threats and intimidation and a culture of fear. You don’t need to allow them in your house, nor do you need to give them any information-just tell them you don’t watch TV-or write to the boss of Capita (the company the BBC uses to collect their extortion)saying you are being excessively visited and find it intimidating.
Richard
sorry, think that’s a terrible idea. So, incidentally, is David Milliband’s freeze on energy prices.
Compare what people earn, & what they spend it on, between now & (say) the 1960s or 70s & one thing stands out. We spend proportionately much less on food, on clothes, on heating. Where does the money go? Housing.
I’d
1) Introduce a draconian land tax on all property above £250k
2) Increase IHT to 75% & stamp out any loopholes
3) Make it illegal to offer a mortgage above 80% of value or 3* salary
4) Go through the taxes acts & simply delete all reference to “Non-Domiciled”. Anyone Resident here would pay tax on their worldwide income.
Result, property prices would slump. I’d hope to less than half their current levels.
And once that was done, people could easily afford to pay for energy, food & everything else because they wouldn’t be paying such a ludicrous amount in rent or mortgage payments.
Indeed! Housing prices need to fall and the real estate obsession of the financialized world needs to be dealt with -LVT is sorely needed – you’d soon see the economy regenerating and the quality of life improving -banksters won’t allow this to happen, they’d rather the whole economy collapsed than that!
More here on the housing bubble recycling madness: http://www.theguardian.com/money/2013/oct/31/nationwide-house-prices-rise-help-to-buy
Road map to neo-feudalism!
‘Result, property prices would slump. I’d hope to less than half their current levels.
And once that was done, people could easily afford to pay for energy, food & everything else because they wouldn’t be paying such a ludicrous amount in rent or mortgage payments.’
So – anyone with a mortgage at current house price levels who keeps paying their mortgage wouldn’t have any more money, would they? So they have to stop paying, and then everyone does and then……
Agree with Simon that Al-Jazeera are better than the Beeb on news these days. They are also excellent on sports news, especially cricket.
“So, incidentally, is David Milliband’s freeze on energy prices.”
Unfortunately, I have to agree! Looks great on paper, but really is just gesture politics. All that would happen is that the energy companies would jack prices right up before the freeze and jack them sky high again once it is finished. All that will have happened is that the energy companies made a bit less profit.
I wish he would grow a spine and promise to nationalise the utilities. And do not say there is not enough money. If we can print money to keep banks in the manner that they have become accustomed, then we can print money to buy up the shares in the utilities. It needn’t cost the taxpayer a penny!
uk energy market was deregulated along the lines dictated by Enron a huge corrupt corporation which became the largest bankruptcy in US history. the energy market was designed to allow elites to plunder the public. Enron was the company which caused blackouts in california, it was well connected and had in its pockets politicians and regulators. When california bought a lawsuit to recover $5 billion the thieves merely started a recall motion and toppled the governor and replaced him by placeman arnold schwarzenegger.
Oh dear…..has Richard Jones’s comment been removed? What a shame! 🙂
I don’t recall it