The budget today illustrated all that is wrong with the politics of taxation.
The fairest way of reducing taxes would be simply to raise the tax free threshold, so that the benefit is the same for rich and poor alike. But tax thresholds mean nothing to many people fixated on how many “pee in the pound” they pay. Where I work we’re all above average when it comes to numeracy, so we soon worked out what tosh this was.
The Conservatives did similar things in the 80s and 90s, they cut allowances and other tax benefits that don’t appear on many peoples radars. They could do that because people were misdirected towards the fact they were paying “fewer pee in the pound.” Brown has effectively done the same. The 10% and 22% tax bands have been rationalized into one 20% band. So, yes, on the portion of income that was in the old 22% tax band, you are paying less tax. But on the portion of your income in the 10% band your income tax has doubled. Yes the band isn’t very wide, but those on less than £18605 (thanks Ryan) will be losing more on the tax increase than they gain on the decrease.
Those on low incomes will not be the only ones to lose out. Unless I missed anything, the restructuring will mean charities will be only be able to claim 25% in gift aid instead of 28%. This means if the amount giftaided remains the same in real terms, the amount charities receive from the Inland Revenue will reduce by 10%. People will have to increase their donations by more than the 2% tax reduction to make up for this.
Gordon Brown is beginning to resemble Monty Python’s Dennis Moore as played by John Cleese. To start with Moore robs the rich at gunpoint, and steels useless things like lupins in order to alleviate the suffering of the poor. In the end he gets so confused he ends up taking from the poor in order to give to the rich.
My worry here is threefold. One that those of us who see through the Chancellor’s prestidigitation and speak out will be seen as pedants, geeks and weirdos by those who don’t realise they are worse off. The second is that many of the people aware of how taxation works will be earning enough to make them better off, and be keeping quietly smug. The third being that this state of affairs was the intention of chancellor Moore.