Sunday, April 20, 2008

The ten pence punch

In Gordon Brown's last budget as Chancellor he messed around with the tax bandings - that is he adjusted marginal rates. He announced it as a tax cut. For some - mostly those of higher than median wages, it genuinely was. But for the very low paid, it was tax hike. The first level of taxation was at 10% - quite a low rate of income tax - and to me absolutely right that the first tranche of taxable income should be taxed at a low rate - to reduce the burden on the low paid. Gordon Brown's budget essentially doubled that rate of tax for the working poor. Interestingly enough, the press failed to pick up on it for a day or two and spun Gordon's spin as if they were paid hacks. But here's what I wrote about it:

Anyway, Gordo likes to make out that he's a swell and generous kind a guy. Sure, he taxes the rich, but only to give to the poor - especially the poor little tots.

Only it's a terrible lie and his current budget is a prime example. The headlines all read that he's cut the basic tax rate, but he's managed to actually increase the taxes on the very low paid while reducing taxes on those earning over $100,000.

Labour will tell you that the very low paid with children can always apply for tax credits. Sure, but you're forced to apply as a supplicant to Gordon Brown and entangle yourself into a notoriously knotty bureacracy. (The Treasury admitted only last week the system of credits was baffling.) But the point is that the young and potentially aspirational folks on low wages are hit with yet another Gordon Brown sucker punch.

This country has long had a problem of keeping people mouldering away on benefits - de-skilling and degenerating. For many it doesn't pay to work. With the abolition of the 10 pence marginal rate it pays even less.

And surely, if Labour is to stand for anything, it must be for labour - you know - the workers - and not screwing them out of the wages they earn cleaning toilets, stocking shelves and picking up trash by the side of the road.

Most Labour politicians and left-wing pundits were oddly silent on the matter. And they've kept schtum for nearly a year. If I were to be charitable, I would say that they'd perhaps been kept silent by the party whips - told to shut up until Gordon's coronation last summer, then to zip their lips until Autumn election (which didn't happen), then to twiddle their thumbs until this year's budget was announced in case this error was corrected.

But the current chancellor Alistair Darling - on orders from the true head of the exchequer no doubt - has decided to go ahead and scrap the 1o p rate.

This is bad policy. Here's something I wrote about that a while ago.

The point is, of course, that everyone has to start somewhere. And unless you're the privileged child of wealth, the place you start is at a very low wage job. You work your way up. And you should be rewarded for trading a life of penurious leisure for penurious labor by keeping as much of your wage as possible when you're at that rough, rotten bottom rung of the economic ladder.

It's not as if the low-paid don't pay taxes. They pay a lot of tax (proportionately). They pay taxes on goods and services. They are almost certainly paying other payroll taxes (FICA in the US, National Insurance in the UK). And they can't escape the taxman with sheltered income and offshore accounts.

I believe in the hand up, not the handout. But forcing the poor to hand-over disproportionately, making their precarious situation all the more tottering is just wrong.

Now the Labour back benches are in turmoil. And they should be. Gordon Brown is concerned only so much as in threatens his (weakening) grip on power - but still refuses to acknowledge the harm this policy will do.

Shame on him.


vol-in-law said...

Apparently Gordon Brown agrees with Mitt Romney that low paid workers need to be taxed heavily, for the good of their souls I guess. But in the UK they have an alternative - they can not work and live off the dole instead. Stupid.

Anonymous said...

Start talking tax policy or tax reform and eyes glaze over faster than the speed of light. You are of course right. The problem with citizens these days is they don't want to think. VolMom