From The FT:
From April, the richest 2 per cent of families will feel the impact of higher taxes when a 50p top rate of income tax is levied on earnings over £150,000 and their tax-free income tax allowances are abolished.
Compared with 1997, families with people earning more than £100,000 are losing another £1 of every £7 they take home, the IFS calculated. If the tax rates of 13 years ago were in place, these families would be 15 per cent better off than they will be under the new income tax rules.
The poorest tenth are, by contrast, the big beneficiaries since the last year of John Major's government. They are 12 per cent better off now.
Now, whether or not you agree with redistribution from higher earners to low- and non-earners*, the general idea is that £1 is worth more to a poor person that to a rich person; or that a transfer from a rich person to a poor person only reduces the income of the rich person by 1% but increases the income of the poor person by 20%.
But because New Labour were so busy redistributing to themselves, their friends and their families, they couldn't even manage that - as the article says, the top two or three per cent are fifteen per cent worse off but the bottom ten per cent are only twelve per cent better off, i.e. most of the extra tax has been siphoned off, i.e:
3 households earning £100,000 pay £15,000 extra tax = £45,000
10 households with income of about £5,000 get £600 extra income = £6,000
New Labour siphon off the balance = £39,000
* Ultimately, I don't either. I think there should be redistribution from people who occupy high value land to those who don't, and let's scrap taxes on incomes and production completely, separate topic.
You'll find that the bulk of people who say they're against redistribution are quite happy for wealth to be indirectly channelled from income earners to property owners by insisting that infrastructure, local services etc are paid out of income tax, but that property income and gains remain tax free. AFAIC, redistribution sideways and upwards is still redistribution. Under New Labour there was an enormous amount of this diagonal redistribution as well, of course.
A sort of interlude
3 hours ago
5 comments:
Never heard of land value tax, so I had to go and look it up. I feel rather uncomfortable with this; does it mean that we would have to pay tax on our own garden, despite the fact that we have already paid for our property outright?
Isn't this a bit worrying for elderly people who are on fixed incomes and face high tax on land (with their house)that they've owned for years? It could force people to move house when they don't really want to, surely?
I would want to see a lot more evidence of this being "fair". I can't imagine any government using this tax to totally replace all others; they never do anything like that. Similarly, what "reliable and honest" assessor is going to be responsible for determining market values of land? All that sort of thing tends to be a big fiddle, usually in favour of an elect few.
Anon,
"does it mean that we would have to pay tax on our own garden?"
No. It means you pay tax on the value of land that you own. Big garden in cheap area = very little tax. Large house with small garden in expensive area = a lot of tax. What's wrong with a tax on the value of land you consume? Is it morally any different to a tax like VAT that is, allegedly, on the value of goods and services you consume?
"... despite the fact that we have already paid for our property outright?"
And who says you own it outright? The state. WIthout the force of the state, there would be no land ownership.
On a moral level, why pay income tax? Do you not own your own skills and energy outright? You can take them abroad with you, so quite clearly, the existence of your skills and energy is entirely independent of the state.
"Isn't this a bit worrying for elderly people who are on fixed incomes and face high tax on land"
That's the first thing that people say, as if
a) That somehow brushes aside all the other advantages of land value taxation as against taxation of wealth creation.
b) The issue were not easily surmountable. I refer you to my answer here.
"what "reliable and honest" assessor is going to be responsible for determining market values of land?"
We've done that to death as well. How about an automated system based on actual market values? See here. Like in Northern Ireland.
Footnote: "I can't imagine any government using this tax to totally replace all others"
Me neither. But we can make a tentative start by building on the system of Domestic Rates which they have in Northern Ireland. See here and follow up post here.
Mark I wonder what the true political reasons are behind the Cinderella status of LVT? I once read an article (who by? when? where? CRAFT) saying that the UK used to be ruled by the landowning class, but now was ruled by the rentier class (I think that is "ruled" as in "power behind the throne" not as in "sitting on the Government front bench"), which would be one reason, but I can't remember any of the arguments the writer made.
B, one theory says "It's a conspiracy, maan" and the banks and aristocrats need land prices as high as possible and want to pay the least taxes. You will note that the stealthiest tax of all - VAT - does not apply to land, banking, food or residential buildings.
(Don't forget that until Magna Carta, the state was funded by rents flowing up the chain from peasant to the King. The Barons told him that they were keeping their rents, thank you very much, and so the King had to invent other taxes.)
The other theory says that politicians just pander to the Home-Owner-Ist voters; that everybody thinks that high house prices are A Good Thing; and that people prefer stealth taxes (like VAT or National Insurance) to in-your-face taxes like Council Tax.
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