Today the 40% tax rate kicks in at £35,000 above the personal allowance. The tweaking, down from around £37,000, is expected to raise just £500 million this year. Given we are spending £120m every day on our debt interests, it’s not worth the pain. The £500m could have been found through other savings rather than whacking wallets.
The top-rate of tax hits 52p with Labour’s rise in National Insurance also kicking in today. “An exploded tax-bombshell designed to go off under the future economic recovery” as Osborne put it in 2008. But he’s hardly done much to ease the pain, there’s not even a little retail therapy due to his choking rise in VAT. This is not a growth strategy.
UPDATE: It was pointed out to Guido that the gift of £600m that Cameron pledged to Pakistan yesterday is more than the tax take from this squeeze on middle-earners. But it’s ok he’s sure they are very grateful.
Regular readers will remember that Guido and Andrew Pierce have not always seen eye to eye, but credit where credit is due. Pierce’s column today will make for uncomfortable reading for both of the Miliband brothers as he exposes David’s perfectly legal, but thumb-nosing and hypocritical, tax arrangements:
“Quietly, he has set up a company called ‘The Office of David Miliband Limited’, which will be a tax-efficient vehicle for his non-parliamentary earnings. This means that all payments the former Foreign Secretary receives from commercial speaking engagements and other lucrative private work will be paid into the firm. It will be subject to corporation tax of 20 per cent”
It makes complete sense as who would go out of their way to maximize their tax payments, but given that David was in the cabinet that introduced the aspiration-killing 50p tax rate it is rather telling that he doesn’t want to pay it himself. Will the militant-wing of HMRC, UKUncut, be occupying David’s Primrose Hill mansion in protest? They can also complain about the death tax on the property that the family conveniently got round while they are at it.
UPDATE: Strike the niceties, Guido is reminded that the Carina Trimingham/Huhne story that Pierce included in his column appeared here first. The Guinness story was Paul Waugh’s last week too. The invoice is in the post.
Guido is always bemused that the ritual destruction of private property on left-wing demonstrations is attributed to “anarchists”. It seems very unlikely that they are anarchists, far more likely Socialist Worker Party toytown trots and knuckle-dragging leftie trouble makers. Anarchists want to smash the state not increase the size and scope of it…
Because it is a sunny Sunday here is Guido’s favourite funky anarchist anthem, “No Government” by Nicolette:
Remember kids, real anarchists don’t pay taxes…
Something tells Guido that the campaign against Guardianista hypocrisy is getting to Polly:
Judge not, that ye be not judged.
For with what judgment ye judge, ye shall be judged: and with what measure ye mete, it shall be measured to you again.
And why beholdest thou the mote that is in thy brother’s eye, but considerest not the beam that is in thine own eye?
Or how wilt thou say to thy brother, Let me pull out the mote out of thine eye; and, behold, a beam is in thine own eye?
Thou hypocrite, first cast out the beam out of thine own eye; and then shalt thou see clearly to cast out the mote out of thy brother’s eye.
Motes and beams Polly, motes and beams…
Guido was at a private dinner last week held by an influential think-tank; around the table sat a senior Tory tax policy expert, right-of-centre wonks and an investment banker turned MP newly promoted to the government payroll. The talk was of consolidating national insurance and income tax into one headline figure. The Mail and the Sunday Times have been given the same steer that it is on the budget agenda.
The myth that national insurance is some kind of insurance to fund the welfare state no longer fools anyone. NI is just another income tax, even if it is called “employer’s NI” it is still a tax on the employee’s income. Consolidating the taxes will make income tax more transparent, the headline starting rate is really 32% not 20%, higher rate taxpayers pay 52% not 40% of their income in taxes. The marginal rate for those on £100,000 is 60%. Making this clearly transparent will make it easier in the long run to win the political argument that we are taxed enough already. It is politically difficult to justify taking more than half a worker’s income in taxes, Guido would further argue it is immoral for the state to take the majority of the fruit of our labour. Feudal serfs kept more of their income. Transparency on taxes will inform the argument more clearly to the public.
The bad news is Osborne is expected to bring the 40% higher rate threshold down to pay for a rise in the lower rate threshold, putting 750,000 more taxpayers on the higher 40% rate. That’ll be the squeezing of the middle…
UPDATE: From the comments:
Employer’s NI is paid on all income and Employee’s continues at 1% after they reach the upper threshold The resulting tax rates are therefore 43.8%, for basic rate taxpayers, 53.8% for middle rate taxpayers, and 63.8% for those paying top rate tax. NI is going up in April so you can add 2% to all these rates.
We think of France as far more socialist than Britain yet French middle class families are far better off than their British equivalents in after-tax terms, despite higher basic rates. French taxpayers get an allowance of up to €2,300 per child under 7 years of age called les frais de garde d’enfants towards the costs of child care outside of the home, a small tax rebate called les frais de scolarité for each child in education and up to €6,000 rebated for l’emploi d’un salarie a domicile covering a house-keeper or nanny. In addition there is the quotient familial to minimise the impact of higher rates of taxation on families with children, it actually increases your tax allowance as you have more children. All these fiscal incentives encourage the French tax-paying middle classes to have kids.
The think-tank research out this morning showing that Britain is the worst country in Europe for taxpayers to have kids is only the half of it. In Britain we incentivise those who can’t afford to have children to have kids by paying them more welfare benefits and upgrading their state housing. This has created a multi-generational underclass who vote Labour to keep their benefits. Anyone would think it was Gordon’s deliberate plan…
This email has just been sent out to subscribers to the Guidogram:
We need your help fighting left-wing hypocrisy. For months The Guardian has been attacking the City, bankers, hedge funds and companies like Barclays and Vodafone for using legal and prudent tax strategies. Over the past two days Guido’s blog has revealed that the Guardian Media Group has itself hundreds of millions of pounds of assets held offshore in the Caymans and invests tens of millions in hedge funds. They have been caught hypocritically doing exactly what they condemm others for doing.
On Monday we revealed that the Guardian is guilty of exactly the same business practises it deplored Barclays doing The Guardian: Uncut and Full of Cant
Yesterday Guido wrote an open letter to Alan Rusbridger asking him to come clean after we revealed tens of millions invested in hedge funds by the Guardian Media Group: Guardian Invested Millions in Hedge Funds During Banking Crisis – Editor Rusbridger on Board Which Approved Strategy
Today we’re asking you to call out the Guardian editor on his paper’s hypocrisy, if you have a Twitter account we’re asking you to tweet directly to the Guardian’s editor, Alan Rusbridger, a clear message to #ComeCleanAlan by just clicking on this birdie image:
Help fight hypocrisy by just clicking.
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New Foreign Secretary Philip Hammond has big ambitions in his first meeting with Benjamin Netanyahu today:
“I came to bring this conflict to an end.”