Tuesday, 15 April 2008

Fair Taxes

The absurdity of our tax structure was amply demonstrated in an analysis in
the Independent newspaper in association with PWC on 13th March. This
analysis looked at ten possible combinations of taxpayers and their families.

The results are almost impossible to sensibly summarise except that both
single pensioners & those with partners do very badly until their combined
gross pension exceeds about £35000 per year.

In the other 8 combinations those at the very bottom (gross income £ 10000
p.a. or less) gain a bit (max.£90 p.a.) but this is steadily eroded in a
random manner until gross income exceeds about £35000 p.a. after which very
modest gains typically about £30 p.a. kick in.

One has to ask what is the point of incurring the cost of administering such
trivial and inconsistent changes. The whole tax system needs root & branch
reform. It is insane that the 40% rate starts as low as £36001 of taxable
income & then remains unchanged up to whatever number of millions of pounds a
tiny minority get paid.

Politicians are terrified of income tax. Could that be because it is about the
ONLY tax that reflects a persons ability to pay & thus the better off would
wind up losing the subsidy that the poor give to the rich? If you earn
£20000 p.a. then to pay £ 175 VAT on a £1000 TV represents just under 1%
(0.875%) tax on your gross income. If you earned £100000 the VAT on the same
TV is still only £175 but now it represents just under one fifth of one
percent (0.175%) of your gross income. This is not fair taxation.

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