Over on Comment is free, Nick Thornsby is arguing for income tax cuts:
Political leaders in the eurozone must sort out their problems – and there is finally some hope on that front. When it comes to inflation, while George Osborne’s options to tackle the problem itself may be limited, he can certainly take action to negate its effects on the people on whom it impacts most severely. One of the most effective things he could do is to let those on low and middle incomes keep more of the money they earn. The coalition agreement already commits the government to raising the threshold at which people begin to pay income tax to £10,000 over the course of the parliament. Given the way in which the economic outlookhas deteriorated since last May, wouldn’t it make sense to do so more quickly?
When I put that very question to Nick Clegg last month, his response was this: “My simple answer is if we can do it tomorrow, I think we should do it tomorrow.” However, he also expressed practical concerns about the affordability of implementing the policy early: “It is an extraordinarily big shift in the tax system, and it costs billions – that’s basically the problem.”
But while Clegg is right that it is a multi-billion pound shift in the tax system, as Tim Leunig from the CentreForum thinktank has pointed out, the actual cost of implementing the policy early is relatively small because the policy is factored into the budget for this parliament anyway.
You can read Nick Thornsby’s piece here.
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2 Comments
If you draw a simple graph of how you wish the net effect of tax and benefit to affect an individual, the I would hope that the graph is an increasing function. I would argue that the graph should be a line whose slope is the tax rate and whose intercept at zero is the amount paid by the state to the destitute. There is a simple way to implement this aim – tax all income; make all benefits universal.
Tax unearned income in lieu of wages and affordability is not an issue.