Sunday, 18 November 2012

Perhaps we should think about taxing the poor a little less?


What do you mean you hadn’t noticed? Perhaps you were too busy campaigning for a ‘living wage’ or ranting about fuel poverty to notice that the policies beloved by left and centre fall hardest on the poor. Indeed, rather than babbling about that ‘living wage’ maybe we should mention that it is quite repulsive – truly hideous and ghastly – that anyone on minimum wage has part of that income taxed.

But I’m not here to talk about income tax – although I don’t think anyone earning less than average income should pay any – but about all the other imposts, duties and proposals that fall most heavily on the poor. Here’s a little list:

  • Energy prices. All those jolly schemes to promote ‘green energy’ and save the planet are little more than a tax – the planet may need saving (although I think she’ll be fine and hunk dory for quite a few million years yet) but is it right that we do this with a regressive tax? Worse still a regressive tax that those with large roofs for solar panels or paddocks for windmills can avoid – and those are things that someone’s granny in a council flat doesn’t have.
  • Tobacco duty. OK this is about making people healthy (or so we’re told by assorted nannying fussbuckets) but we also know that people from the C2DE categories (i.e. the less well off) are far more likely to smoke than those in the ABC1 categories. Raising the duty year after year above rates of inflation is a huge tax on the less well off – except for those who now smuggle the stuff, of course!
  • Employers National Insurance. No this really isn’t a tax on the employer – they have a budget to employ people and the NI is in that budget. If employers didn’t pay national insurance then wages would be higher – we know that rises in employers NI reduced wages.
  • PAYE. You’ve read all those stories about how rich folk with clever accountants reduce their tax bills? Ever wondered why you can’t do this? It’s called PAYE – lower paid people don’t fill in a tax return and the employer does the payments. All those allowances, fiddles and dodges that you’ve heard of – they only apply to people who fill in a tax return. I’ve no doubt that there are thousands – perhaps millions – of people paying too much tax. And they’re mostly the lower paid.
  • Minimum pricing for alcohol. This is the most blatant – “we don’t approve of the poor drinking cheap cider” is effectively the message that it sends out. After all it would be simpler to just increase the duty on alcohol (something that us middling sorts consume more of that the poor) but the moralising ‘return of gin alley’ arguments dominate.

I’m pretty sure there’s more of these – even without me mentioning the de facto tax that is allowing inflation to run at two per cent plus. And – all with either the direct intention or the unfortunate side effect of falling more heavily on the less well off.

Perhaps we should think about taxing the poor a little less?



Peter said...

We should be spending less. That means we could tax less. We are not, though, are we?

Essentially. the government is three years late on its agenda. They cannot arrest the economic slide Brown bequeathed on us in time to win in 2015.

You have to give full credit to the programme Labour began in 1997. It's a juggernaut that cannot be stopped, it seems. By achieving a 'third way' coalition, the Tories will be fed to the lions by people such as I - who'll go to UKIP in desperation to end this mess.

I am a Tory through and through. It is a shame that the PM isn't.

Curmudgeon said...

The obvious one is fuel duty - a disproportionate tax on the working poor, especially outside London.

singapore sling said...

What about VAT? You lot raised it, perhaps it's time to admit you were wrong.

Ivan D said...

Peter makes a good point. If we started by curbing government spending then there would be less need to tax the poor to pay for more bureaucrats to come up with ever more devious ways of taxing the poor.

The DH would be a great start. Firing the lot of them and employing people who actually know how to and care about running hospitals would save a fortune.

The Thought Gang said...

You're right in general.. but the PAYE point is pretty weak.

Firstly, PAYE is about collection, not calculation. So any allowance/relief available to someone on PAYE is available to someone who does a tax return. And, of course, most people who do tax returns are also on PAYE.

Secondly (and mainly), the reason richer people do tax returns is that they have more complex affairs. They might have more sources of income, or more deductable expenses. Most people on £16k PAYE simply don't have any need to do a return. They don't have higher-rate pension/charity relief to claim, they don't have additional investment income to declare.

Having said all that, I do advise everyone, regardless of what they earn, to review and recalculate their tax every year. Errors can happen (either at an eployer, or at HMRC), things can be missed, and - even if everything is fine and PAYE got the right answer - it is *always* worth investing some time to understand and check the biggest bill you get every year. It amazes me that people will spend hours and hours trying to save £100 on car insurance, but never bother to check whether that £10k they paid in tax was accurate!

Jonathan Bagley said...

Contrary to the prevailing wisdom, I've always thought that VAT, as it was originally applied was a good tax for the poor. It was similar to a flat-rate tax but with a high tax free allowance. Food, including take away, newspapers, books, childrens clothes and domestic gas/electricity and insurance were all originally exempt.