Monday 19 September 2011

Lib Dems mistake class war for policy

The Liberal Democrat Conference is generally the one which is either totally ignored of laughed at. The bizarrely split protest party often votes and discusses ridiculous measures and everyone else in the world just keeps adjusting to the end summer and the summer holidays.

However, this year again there is a change, as the Liberal Democrats are part of the Government and whilst they clearly ave no mandate to lead they do have a mandate to block.

Which of course suits them best as a protest party. Of course, some of them are not very keen on being in Government as this betrays their true ideology (which is itself a solid entity composed of random fads and policies from both right and left, topped with some populism for extra sauce).

This weekend the protest has been on attacking the Tories for the idea of lowering the top rate of tax below 62% (I am not writing 50% as that is a pure sleight of hand by the Government). In these hard times, how dare the rich get a tax cut etc etc. Now as it happens the Lib Dems would prefer to increase the 'tax free' element of income to £10,000. This is a real tax cut for the poor and middle income and has no benefit for high earners on more than £100,000 as the free element is already phased out. In fact, 2000, tax collectors have been hired to target the rich - given that most tax is evaded by super wealthy (as opposed to PAYE slaves), their expenses for trips to Geneva will add considerably to the national debt.

The real issue with the above is it is a load of tinkering. Cutting top rate of tax will cost £2 billion, out of an annual deficit of over £100 billion. It is loose change. The real changes and struggles are being ignored as per usual for political posturing - so important to political parties after all.

However, better for reality not to intrude into a bit of class war, someone please tell me what the Liberal Democrat policies are for:

The Euro Crisis (they still want to JOIN the euro?!)
The inflation dilemma and quantitative easing
Turning around UK growth prospects
Coping with a double dip recession

All of the above are the critical points by which we should judge a Government today - yet all this is lost in meaningless drivel about mansion taxes and other flam.

(Not that taxes are fair in this country, but the focus on 'high earners' is a shown as a pure bit of posture when one looks at the current non-domicile rules that only apply if you are rich enough not to work, and then enable you to live tax free - in fact winning non-dom status would make a great TV game show prize....)


Old BE said...

The LD conference does seem very much like the violin quartet on the Titanic. We won't be worrying too much about mansion taxes and whatever measure of progressiveness the tax system gives when the economy goes pop in a couple of weeks time.

Mark Wadsworth said...

Good point about the 62% rate, that's nearly as high as the rate suffered by the one-third of households at the bottom of the income scale, for whom the rate is about 80%.

But scrapping the 50p rate wouldn't reduce revenues by £2 bn, the chances are, it wouldn't reduce revenues at all. The so-called 50p rate is pure political gesturing - the Mansion Tax would be a far better way of doing things, it gets money in without reducing incentives to work etc.

CityUnslicker said...

MW - 80% across all their income is that, or the bit that attracts tax?

You are saying here you can earn say £15k and have a take home of only £3k per annum?

A high earner really does have 62% taken off the gross pay.

Old BE said...

Marginal rates, CU.

I had to laugh I saw a headline earlier that said that the LD property tax wouldn't fly because so many areas have £1m houses as commonplace. This is the stupidest argument against property tax I have heard.

The LDs are actually right that a shift from taxing low incomes to a higher, progressive, tax on property would be good in the long run. The perennial problem is that in the short term property tax is always presented as A Bad Thing. Witness the fairly huge VAT rise passing off with little grumbling while Pickles spreads a few peanuts around in order to freeze the Council Tax.

CityUnslicker said...

BE - Land tax is not one of my fave ideas - a much easier and better place to start is a review of current rates on a 2010 basis with a bunch of new bands so as to be acknowledge the wider spread of wealth distribution.

marginal rates are horrible and an issue, but this is not what tax policy should be solely focused on. They are always going to be hard to solve at the lower end as you come out of the tax free / tax credit bands.

Old BE said...

CU, I don't disagree on either point. I was using "land tax" as shorthand for property tax in general rather than a particular form of land tax. I don't want to get into one of those classic MW debates!!!

Now we have done, though, I think a revaluation with no upper limit on bands (why not a £100k band, £200k band, etc.?) would be the least corrosive way of doing it.

Anonymous said...

Where does 62% come from? Maybe if I wasn't such a worthless pauper I'd be able to look at my payslip and work it out :) - but I can't make it out as more than 52% myself.

Old BE said...

Because of the withdrawal rate of the personal allowance?

Sebastian Weetabix said...

No one who is a company director pays anything like the top rate - or even 40%. What we do is pay ourselves about 6 grand and do the rest in dividends or "pension contributions". Far better to have a flat tax on all income, I should have thought.

Chatting about this down the pub, some Marxist twat was busy telling me that it isn't fair for someone on 100K to pay - and I quote - "the same as someone on 50K". When I pointed out that if the mythical people both paid 40%, leaving aside allowances etc., the richer guy would be paying exactly double the amount, my Marxist chum refused to believe it as they - I quote directly again - "are both on the same rate". When otherwise apparently educated people don't even understand f***ing percentages, the country is truly in the shithouse.

CityUnslicker said...

Tom - NI and pay is 50% at the top rate. the witdrawal of allowances at 100k makes this more or less the rate for all money over 100k - worse if the lib dems get their way with the 10k start point.

Old BE said...

SW that is the basis for that whole argument about the bankers "paying less" than the cleaners of their offices. What the critics *mean* is that the cleaners are paying a higher percentage of their gross income than the fat cats. What they intend voters to hear is that a millionaire is paying fewer pounds in total in tax than the cleaner.

As many many people have pointed out, the reduction in the top rate from 93% or whatever it was to 40% actually increased the proportion of the total tax revenue that came from well off people.

I agree with flat tax rates, with a nice big personal allowance for those at the bottom of the pile.

CityUnslicker said...

BE where they are right though is for Private Equity and Hedge Funds, the partners really do pay taxes comaprable with their cleaners!The get outs for investment and capital over salaries mean that peanuts do get paid - and this by the people who make the most. Also as investors they do all the Non Dom tricks like Hugh Osmond who lives in Jersey etc.

Bankers are PAYE, their bonus's receive special taxes. They do pay - the shadow finance industry which takes the biscuit and where the focus should be (which is why in an odd way I am attracted to the mansion tax idea albeit not in the current Lib Dem form. You can't run a house that big without serious income, despite all the bleats about ordinary people living in such houses etc)

Timbo614 said...

52% - 62% - My arse!

Here is the result of a little experimental calculation I did for my upcoming 3 days trip by car with 2 nights in a hotel (I was just curious):

Based on 20% tax rate:

Need to earn 528.40
Tax/NI Paid 128.10
VAT and Duties 143.58
Total Taxation 271.68
Pre-Tax Total 256.72
Total Tax 105.83%

Based on 40% tax rate:

Need to earn 608.46
Tax/NI Paid 208.16
VAT and Duties 143.58
Total Taxation 351.74
Pre-Tax Total 256.72
Total Tax 137.01%

It assumes you have passed the Tax&NI thresholds already. The trip is:
Guildford --> Torquay
Hotel (relax)
Hotel (relax)
Torquay --> Barnstaple
See Mum ("Hello Mum", what? "HELLO MUM")
Barnstaple --> Guildford.
Include 3 days smokes (essentials) but no drinks or meals.
OK I need not take the Jag but for 2 it is cheaper than the train!!

This should not be happening. We are doomed - where are consumers supposed to get money from to "spend us out of recession"??
Pisses me off too!

Bill Quango MP said...

I've read all the comments.
I'm with James Higham.

I just don't see what the point of the liberals is. You can get as many 'progressive' manifesto commitments as you want from the Labour party.
you can get as many 'make government work better to help the most needy,' from the Tories bumph.
If you want to get out of Europe,look at UKIP.
If you want a much more communist sort of eco-state have a gander at the Greens.
If you don't fancy foreigner's take a peek at the BNP.

But the Liberals?
Its almost as if they really do just want to be a permanent protest party. Leaping on every passing bandwagon and grabbing at every new fad, without any proper identity at all.
heard the activists on the telly?

"Well, if AV had been passed we'd be in a much better position."

Yes..that sums it up. A political party that is really only concerned with issues about the party.
No one gave a toss about AV. Yet they still feel aggrieved. As if the people would have voted for their agenda, if only they were better informed and everyone else wasn't so beastly about it.

They don't seem to have moved very far from their roots.
see this clip by Rowan Atkinson

Grow up or bugger off.

Laban said...

What will this mansion tax do to someone with a pre-tax income of less than 30K but a 5-bedroom house in an acre ?

I bought the house when they were cheap. It already costs 2k+ a year to heat - I can't afford your tax!

Electro-Kevin said...

I feel there should be a standard rate of tax for everyone.

You earn more - you pay more. This should satisfy the Left and common sensibilities though I don't think that even this is fair.

The rich are often less reliant on public services. Own pools, own teachers, own libraries, own doctors ...

Yet they'd happily pay for it if they weren't getting striped so much.

A good time to be a tax accountant.

CityUnslicker said...

Laban - if you house if worth £2 million but you can;t affrod it, sell the house and book the profit.

better yet (if this was me) I'd bugger to somewhere a whole lot nicer.

My point is overall there is a big issue in the UK and the US that the Super Wealthy do not pay remotely their fare share (i.e. 40%) - whereas the pretty wealthy who are on PAYE get reemed. It is of a lesser order than in Greece but the same underlying issue.

The mansion tax, which like all taxes is not at all perfect, does attempt to address the issue by look at capital and investments rather than the over focus on income and consumption.

But hey, before you all think I have undergone some sort of socialist awakening, there is plenyt of room to really cut Government expenditure and taxes at the same time.

Budgie said...

I am with you on this one, BQ - what are the LibDems for?

Anyway it's all a LibLabCon, so vote UKIP! - slap the establishment and Richard North at the same time!!!?!!

cosmic said...


In my experience the LDs are for people who can't make decisions and accept that there will be bad consequences as well as good ones. The LibDems fantasy solutions, offered in the belief that they'll never have to implement them, have great appeal.

They're really a way of avoiding a decision.

BlackRaven said...

the issue is quite simply that governments know that they can't tax the returns on productive investment at 40+%. saying that warren buffet pays a lower rate than his secretary is comparing chalk and cheese. his secretary doesn't employ anyone and there is no chance of her having a negative salary at the end of the year.

and the idea that the poorest decile pay a higher rate of tax because they spend all their benefit money on highly taxed goods is just nonsense. if you want to look at things logically, i suggest looking at the effective tax rate; ie (1-(net net income. ie income after tax+value of all services consumer and benefits received)/gross earnt income).

CityUnslicker said...

Interesting Black Raven, but a negative income for the super wealthy is next year's tax break?

I don't want 40% tax on investments either - but 10% for PE partners to invest in funds and get out of them is crazy, using other peoples money too. A great game for those involved but it means higher taxes for everyone else?

BlackRaven said...

If you lose, and then make that money back, over two years you've made nothing, it would be hard to say that somebody should pay tax on that. Can you imagine working out capital gains on that principle?

The issue is surely people booking income as return on investment, which is very hard to get around, where do you draw the line, somebody that creates the next microsoft would be treated the same as somebody in pe.

I really think a low uniform rate on all kinds of income is a simple and effective system, it gets rid of a lot of waste.