Wednesday, 31 October 2007

Getting the State Off The Back of The Poorest

Further to my post about the importance of raising literacy and numeracy amongst the most disadvantaged in our society another aspect of British society that worries me, particularly as a former academic economist is the disproportionate burden of taxation on the poorest in our society.

The last budget was a travesty in effectively redistributing the tax burden from the wealthiest in society to fall mostly on middle income Britain but also disproportionately on the poorest members of society. This shift in taxation burden was supposedly mitigated by the Working Tax Credit (WTC) but the WTC system is such a nightmare to negotiate since it has been notorious for overpayments being clawed back leaving poorer working families even further under pressure. This adverse publicity has been a deterrent for some of the neediest families to claim their WTC.

The Institute of Fiscal Studies analysed the impact of the budget and it showed that marginal tax rates facing the lowest paid are at about 70%. This is way too high. I agree with Nick Clegg that tinkering with Capital Gains Tax misses the point.

The main focus on taxation policy should be reducing the burden of income taxation on the poorest and that includes local taxation as well. The Council Tax is regressive. It should be scrapped in favour of a local income tax. Government attention should be turned to getting more of the poorest in our society out of the taxation system completely by a combination of raising the personal allowance to a sensible level and reducing the bottom rate of income tax. Shifts towards green taxation should also achieve this aim.

Let's get the state off the back of the poorest!

1 comment:

Mountjoy said...

I agree that reducing the tax burden for poorer people is essential. It is bad enough that in many places poorer people can never dream of getting onto the housing market. Tax often crushes their aspirations too, and this should help to make work pay so not as many people take what is currently an economically rational decision not to work.