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The Dead Budgie Sketch

I’ve just been down the road for a Coke and a packet of crisps. In the queue I glanced over the newspaper front pages. Paul has been proven 100% correct (see this and any number of other posts or comments by Paul here or Samizdata or elsewhere in which Paul regarded this budget as a test of the government’s political sanity). Gideon is being hauled over the coals in almost all the press over the epic 50% to 45% “giveaway” that isn’t. Now I have a feory. I don’t think Gideon is that smart. Anyone who has even vaguely followed British politics over roughly my lifetime (and probably before) must realise a terrible truth about how people perceive tax. And it is this simple. If you say “tax” to almost anyone their first reaction is to think income tax. It’s the headline grabber. It’s silly but that’s it. And a tax (by which I mean income tax – of course – people tend to ignore all the other forms) cut for the rich provokes ire. Gideon should have known this. Even if he isn’t the sharpest pencil in the tin you at least expect someone who rose to his exalted status to display low animal cunning. I think they politely call that “political ability”.

If I were chancellor I’d be sore tempted to scrap the fiction of NI in order to simplify the system and reduce bureaucracy. Let’s say I did that and left everything else the same but raised income tax to compensate in what would analytically be a neutral budget there would still be weeping, wailing, gnashing of teeth and rending of garments throughout the land because the “headline rate” (why do you think it gets called that) of “tax” as perceived by way too many people would of course have gone up quite a lot.

Or it’s like the VAT hike from 17.5% to 20%. That really hit everyone but there was only mild grumbling. I don’t recall even the greatest champions of progressive taxation bitchin’ and pukin’ over what was essentially an increase in a flat tax in the sense that the duke and the dustman pay the same rate. I hazard a guess that if shops and restaurants displayed prices ex-VAT (as they do with sales taxes in the USA) people would have noticed more. I only really think of it when buying computer kit because my usual supplier quotes prices ex-VAT them dealing with trade and all.

Anyway, it’s all OK because the Duchess of Cambridge borrowed a frock from her mother. Now I leave as an exercise for the reader to work out how many daughters for how many years will have to borrow dresses from their mother (rather than buy a new one from say Monsoon) to pay for such fluorescent idiocy as HS2. Of course if you work in clothing retail you’re going to have to retrain (boom, boom!) as an engine driver but I’m sure Gideon has a magic money tree (a Fiscus fantasia I am led to believe) down Threadneedle Street to pay for that.

PS I have done my back of an envelope calculation earlier on HS2 here.

8 Comments

  1. RAB says:

    You’re dead right Nick. The alleged Tory party and their Coagulation partners are committing political suicide in front of our very eyes. All Labour has to do is stand and jeer.

    Yes it’s always Income tax that the general public think of first, never VAT, they just think that’s all a natural part of the cost of goods and services.

    As all here know, the 50% tax was counter productive. It just wasn’t bringing the tax they hoped it would. But it’s no good telling Gen Pub that, cos they won’t believe you, any more than telling them that the top ten percent of earners pay 40% of the tax. Rich bastards are rich bastards and must be fleeced, irresepective of the facts. Tis the politics of envy, and will ever be thus.

    But the political insanity of that Budget leaves me, like you, thinking that this lot are even thicker than the last lot.

    The public see a cut to the top rate of tax as a gift to the rich, when it is hardly a cut at all and will be made up in picking their pockets in other ways. And they see the Granny tax as penalising poor old pensioners. So it’s the Nasty Party rewarding their mates and screwing the Old once again. Labour don’t even have to try to make an argument, do they?

    And who the fuck does iDave and Co think vote for them? One legged Gay Black Islingtonites, or middle class pensioners?? They are the people who have done the right thing as far as they were told, and saved and invested for their old age, only to see what pensions they have raided or damn near destroyed, their fixed incomes worth nothing because interest rates are practically zero, and rampant inflation and quantitative easing sucking up the rest.

    And Ozzie seriously expects the voters to believe this?…

    http://www.dailymail.co.uk/news/article-2118669/Im-wealthy-pay-50p-tax-rate-claims-George-Osborne-earns-ministers-salary-rents-Notting-Hill-home-15-stake-family-business.html

    Is he related in any way to the ex lead singer of Black Sabbath?

  2. Sam Duncan says:

    I’ve long advocated the abolition of income tax. And not simply because it’s a bad tax, but for that very reason: it’s all people can think about when you say “tax“. Get rid of it and we might see (some) (slightly) clearer thinking about taxation.

    As for the gubmint, it’s a toss up between Gideon and Gordon in the moron stakes, isn’t it? Osborne seems to have marginally more knowledge of basic economics than The Greatest Chancellor In History™, but he has a long way to go on his politics. The only explanation that makes any sense (other than “he’s a complete fuckwit”) is that the “Conservatives” have decided they don’t want to win another election because governing is too hard.

  3. Kevin B says:

    Janet Daley over at the Telegraph has a slightly different take:

    The advantageous tax allowance which now goes to pensioners is going to be merged with the universally raise personal allowance. So in future, everybody will get the more generous tax relief and there will be no need for pensioners to fill out a complex self-assessment tax form in order to receive it. Simple policy, simple defence. But there would have been no need for this frantic apologia if George – the political genius – hadn’t misjudged the effect of the announcement.

    So having increased taxes on the rich and cut taxes on the pensioners, Gideon has managed to persuade the nation he has done the exact opposite.

    Mind you, some crazed commenter at the link thinks this is a masterstroke by Ozzie since everyone’s teeing off on him and he will turn round and say “Ha! Fooled you all!”

  4. According to HMRC, in 2005, 5% of the population owned 40% of the wealth. It isn’t as simple as that of course, because some of that wealth will be in forms that can’t be easily realised like property, but even so, just because 10% of earners pay 40% of tax that doesn’t mean it is inequitable. If we have tax, then it should at least be evenly borne. It isn’t.

    http://www.hmrc.gov.uk/stats/personal_wealth/13-5-table-2005.pdf

  5. Paul Marks says:

    This would be wealth that does not include houses, or pensions (pension funds own most shares)?

    So if we exclude most of the wealth that most people own….?

    By the way – wealth is not income. Wealth and income are different things.

    Still if we want to reduce inequality (actually there is nothing wrong with inequality – as long as it is not created by subsdies), then GET RID OF THE BANK OF ENGLAND.

    After all it is not exactly a new discovery that credit-money expansion is a form of welfare for the rich – making the rich richer than they otherwise would be, and the poor pooer than they otherwise would be.

    Richard Cantillion explained the process back in the 1700s.

    The only difference is that now the credit-money expansion (and, therefore, the economic distortion) is much, much, bigger.

  6. I’m well aware of the difference between wealth and earnings. I made much the same point.

    Taxation on earnings is inequitably imposed. Taxation on property is inequitably imposed. If we aim to reduce taxation we should not be doing in in ways that increase that inequity and assuming we are not so utopian as to want to abolish all taxation on everything overnight, then we might as well reduce it first for those to whom it does the most damage.

    I’m doing some analysis of the distribution of ‘earned income’ – that is income liable for income tax – as against the distribution of tax paid. I haven’t finished yet, but there are marked imbalances.

  7. NickM says:

    ian,
    I would argue – from experience as a student – that it’s remarkably expensive to be poor in general. Now that is a problem which if it could be solved… A start might be a personal tax allowance of, say, 20 grand. Much of what passes as “environmental” legislation is doing the opposite. The London congestion charge, the erstwhile scrappage scheme and VED in general are skewed against people who can’t afford the bright shiny new eco-cars. And it goes on…

    As to the distinction between wealth and earnings… I don’t think it is that simple. I might cite Lady Sybil’s furniture. Lady Sybil is astonishingly wealthy but doesn’t really spend very much at all because she has everything already. It’s a sort of corollary to Sam Vimes’ boots.

  8. Analysis based on this data from HMRC (http://www.hmrc.gov.uk/stats/income_tax/table2-5.pdf) (http://www.hmrc.gov.uk/stats/income_tax/table2-5.xls)

    My reworking of it is here:http://dl.dropbox.com/u/47807417/tax%20liability.xls
    In 2009-19 there were 314,000 people earning more than £150,000. They constituted a fraction over 1% of those people liable for tax. The total income of these people represented just over 13% of total earned income. Their liability for tax is about 25% of total liability. Roughly therefore these people are liable for tax at about twice the level that their income would otherwise suggest.

    Its a matter of opinion whether that is too high or not, but the picture is very different to that presented if you set the liability against numbers of people not income.

    As far as the lower end of the scale is concerned, it is generally recognised that the cost of living for the poor is higher than for the better off. They pay more and get less. The impact of tax when you only earn £15,000 a year is much greater than when you earn £150,000, even if you pay tax at 50% on the top end. Increasing the personal allowance to around £20k would as you say be a good start and in my view a fairer starting point than reducing the top rate.

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