Let no-one be in any doubt, Gordon Brown planned the increases in tax on those least able to afford it, as I described HERE and HERE.
The sensible way out of this problem is to let people keep more of what they earn, by increasing personal allowances.
It’s more equitable and fairer to let people make their own personal spending and saving decisions over their income, than have armies of bureaucrats administering a tax credit system, that gives people back some of the money they’ve already paid in tax.
Hell, it might be that people begin to save again, rather than spend every penny.
The Daily Telegraph’sexcellent Personal Finance Editor, Ian Cowie writes on Saturday last about the Mr Brown’s last stealth tax. Helpfully, he points to the exact page of the 2008 Budget [page 62], I was searching for earlier. Here’s his description of how the poverty trap works, that results from the tax credit system:
“Anyone entitled to claim tax credits – and that includes about half of all pensioners – whose annual income exceeds £6,420 has some of their state benefits withdrawn through a means test. To be precise, claimants lose 39p of tax credit for every £1 of income above that limit.”
“Then, like anyone earning more than £5,435 a year – the current personal allowance – they must pay National Insurance Contributions (NICs) at 11 per cent. Plus, to put the tin lid on it, like everybody whose income exceeds their personal allowance, they must now pay 20 per cent income tax instead of the 10 per cent they paid on the first £2,230 earned in the last fiscal year. So, total deductions from their marginal earnings are 39 per cent, plus 11 per cent, plus 20 per cent – or a total of 70 per cent.”
“What it all boils down to is that people earning about £6,420 a year are allowed to keep just 30p in every £1 they earn above that level.”
“More than 1.87m people will pay “high marginal deduction rates” of between 60 per cent and 90 per cent during the current tax year, compared with a total of 760,000 in the last tax year, which ended on April 5.”
What Ian Cowie concludes, is:
“Even the most timid Tory dimwits must now realise that this is where the Government is weakest and the electorate keenest to vote for change.”
Helpfully, David Cameron, in his weekend interview with Andrew Marr [See HERE], said this on taxes:
“People on low pay, families who struggle often to make ends meet, who have seen the cost of living rising and have seen their tax bill go up under Labour, those people who thought ‘The Labour Party is for me’. I think they feel desperately let down.
“What I want to say to people like that is we are there for you.”
“I would not sanction a Budget as a Prime Minister that singled out the poor for a tax increase at a time when everyone else was either left alone or getting a bit of help.”
Now you’re talking Dave.
