If a Martian taxman landed now, he'd never guess Labour was in power

[Morris Onions]

Polly Toynbee;


How will the tax structure Labour bequeaths compare with the one it inherited? By their taxes you shall know them, but would a tax accountant from Mars be able to detect if the government in power had been right or leftwing?

The shockwaves from the abolition of the 10p tax rate are accelerating. Labour canvassers report the blowback on local election doorsteps. Labour MPs exploded with fury when Gordon Brown told them, wrongly, that there were no losers. "Labour's not in power to make the poor poorer," one said. Now Angela Smith has resigned as parliamentary private secretary to Yvette Copper and 70 Labour MPs have signed protesting Commons motions. My inbox overflows with tales of woe and anger: the 63-year-old woman losing £2 a week, the sick man working 20 hours who has to drop down to 16 hours to qualify for housing benefit and get back what he loses ...

There are a lot of losers - 5.3 million people. For people with around £30 a week after bills, £2 or £3 matters: reading their weekly spending accounts is a salutary reminder of how frugally many live. Those at the very bottom pay a far higher marginal tax rate than those at the top, with a bungled benefit system imposing a 70% tax loss for every extra pound they earn.

The 10p rate was a fiddly complexity that needed abolishing. Brown had a right choice and a wrong choice. He could take all 10p payers out of tax altogether, a move that would cost £7bn and cut everyone's tax a bit, with the lowest-paid gaining most. Instead he used that £7bn to cut 2p off basic income tax, so the better-off gained. (Someone on £30,000 gains more from a 2p cut than someone on £15,000.) Those 10p losers were victims of a deliberate choice to give more to the better-off. People warned Brown before his last budget, but he ignored them. Yet if middle England whooped with gratitude at their tax cut, I somehow missed that moment. As ever, they banked it and forgot it.

Labour has sold a sackload of the state's family silver in tax cuts. It is easy to make an income-tax cut, but politically too expensive for any future government to restore. Basic income tax has been cut from 23% to 20%, corporation tax from 33% to 28%, and capital gains tax from 40% to 18% (a bonanza for second-home and buy-to-let owners); inheritance tax (IHT) allowances now give a tax-free £700,000 to the middle-aged children in the best-off families.

Labour's one progressive tax was the 1p rise in national insurance for the NHS. Council tax in England remains profoundly unjust with the top bands capped and still set at 1991 values, protecting those in the most expensive homes. (Wales and Northern Ireland moved to taxing the top more.) A timid non-dom tax was only a belated copy of a Tory plan. All in all, Labour's tax system has encouraged the rich to get richer, so would that Martian guess a Labour government had been in power?

...

http://www.guardian.co.uk/commentisfree/2008/apr/18/economy.inheritancetax

[non sociopath skin]

1. Perhaps we should invite in the Martian Audit Commission for their comments?

The Skin

[Mr Creosote]

2. I'm quite confident

that the Martian would very quickly work out that we have had a succession of right-wing governments since May 4th 1979.

[LeftishBrit]

3. You mean that the Martians aren't already in charge of government policy?

[Lydia Leftcoast]

4. What is the 10p tax?

Is it a way of saying 10p per pound, or what?

[T_i_B]

5. This relates to reforms of the UK tax system

When Labour came to power in 1997 they introduced the 10p income tax band for the least well off. However, at Gordon Brown's last budget as Chancellor he scrapped the 10p tax band and reduced the middle income tax rate to 20p.

This has had the effect of making the income tax system less equitable (ie the worst off get screwed the most) but suprisingly it's only now that people are starting to make any sort of noise about it.

[muriel_volestrangler]

6. Yes - back when there were 240 pence to the pound

it had become a common way of saying how big income tax was (it may have even been the official definition, originally). So after decimalisation in 1971, the habit of referring to income tax as 'pence' or 'pence in the pound' has stuck with many people.