How the tax system discourages work
James Forsyth 12:45pm
One of the great scandals of this government is how many obstacles there are to people moving up the economic ladder. The Red Book (page 62) reveals that more than 1.8 million people are caught in a 60 percent marginal tax rate—as they earn more they lose access to tax credits and welfare benefits and also have to pay tax on the additional income that they are earning—which is an increase of more than a million since Labour came to power. This hardly encourages people to work their way up.
Much of the blame for this falls on Gordon Brown’s absurdly complicated tax credits system. Word is that Stephen Byers plans to raise this in the Budget debate this afternoon.
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Comments
Will
March 13th, 2008 3:53pmIt can be higher than 60%. I earn just over £20k and have four children. The way it works is as follows (approx.): Increase £1,000. Tax is 20%, lose tax credits of about £330, EMA grant to child of £400, lose to child at university due to rising income. At certain points you can lose a lot of benefits. My marginal tax rate on increased income is at least 67%, and this coming year will be higher from crossing some of the thresholds. The system is very complicated and doesn't make earning more very profitable - madness on these marginal salaries.
ATFlynn
March 14th, 2008 11:34amBut even more annoying is the fact that today, with e-technology and lots of in-built loopholes, the system of Direct Taxation is no more than an option. It is but a simple manoeuvre to register your Business or Company as a Holding Co., and employ an off-shore Agency to provide all the Staff you require, and have them paid from the off-shore Bank Account of the Agency. In this fashion, the operation of your business is all but TaxFree. Only the Local Council Tax is Legally enforceable. And talking of Local Councils, only last night I was at a Parish Council meeting. This proposition has been put before them and to the South Norfolk District Council. And as soon as I am able to, I have been asked if I would like to give a little talk to the Norfolk County Council, on the subject of Local Taxation and the Local Economy. Now don't laugh, I left school at 14, in 1949, that is County Secondary, and what I know about the Economy is only what I read in the Spectator and the Business Magazine. Plus other Daily publications. But I do know when the TaxPayer is being bloody well Robbed. What I propose is for the TaxPayer to take control of Taxation. Using the Parish, Town, District and County Council, it is time the Poor Bloody Taxpayer funded the spending policies that the Taxpayer approves of, not some vote catching gimmick dreamed up by some smartarse. Regards, ATFlynn "Norfolk's Mutineer"
Barbara Lockwood
March 14th, 2008 3:05pmGREAT TONY At the moment I don't think I can add much to the above. I do know we need a complete overhaul of Taxes, and a benefit system of means testing along with Council Tax SCRAPPED> Barbara Lockwood Norwich