If it be your will wrote:Hi, Paul Waine,
By the way, regarding Boris's tax cuts, why is absolutely everyone, in every paper, indeed everywhere, saying it will 'Cost approximately 9.6 billion'. I thought you said tax cuts
increased the total amount taken in tax?
Has absolutely everyone else got this wrong? Would this tax cut not
make extra money for the government instead, like you've always said it would?
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Hi If it be your will, great question.
I guess it's fairly easy to calculate the change, ceteris paribus ("all other things remaining equal/the same"), between the tax collected on incomes between £50,000 and £80,000 with a difference in rate of 20% (40% less 20%, of course) and the numbers of incomes that are above £50,000 and up to and including those above £80,000. I expect the Treasury has a model of income distributions and can make this "tax change cost" calculation.
If reports on BJ's statement yesterday are accurate (I'm not following the Tory leadership campaign...), I assume a lot of the reporters will be adjusting their figure downwards for the extra NI contributions all these taxpayers will be making, paying 12% against the existing 2%. So, maybe the tax not collected (NIC is also a tax, in case anyone isn't certain) is only half the first figure?
Then I doubt there's been an indication of the timing; is it immediate - I think we can discount this, or before the next GE - let's assume 2022, or would it be somewhere in the next parliament, after BJ wins his GE? Maybe BJ would plan to "aspire to" £80,000 in a number of steps, maybe he would target aspiring to £80,000 over 5 years, increasing each year in steps of £6,000? (We've all got to hope he doesn't put it on the side of a bus).
All BJ is doing, is taking a page out of JC's "election playbook." In JC's case it was "Money for everyone - except the, was it, top 5%? The thing is, how many people who are currently in the 95% who some day will want to be in that top 5%? i guess, there will be many who would fear that JC would stop everyone rising up the income scale?
BJ's approach, to me, appears to be the reverse - lower taxes for the "middle earners."
There's a difference between raising the level at which the higher rate of tax starts and cutting the top rate(s) of tax which has in the past resulted in an increae in the total tax collected. This was the outcome when Margaret Thatcher (and, was it Lawson) cut the top rate from 60% to 40%. I've not checked the stats, but it may well have been the outcome when the rate was cut from 50% to 45% earlier this decade (if you know differently, I'm happy to be better informed). Of course, that last "small" tax cut, was reversing an increase that had only been there for a short time, and because it was "signalled" by Gordon Brown and his Chancellor, the higher rate tax payers were able to make adjustments in timing of "discretionary" income that mitigated the increase....
But, get back to the first part, the media reported £9.6 bn because that is a big, attention grabbing figure. It's very likely not the true cost, and that, even if you and I are unsure about the tax receipts outcomes of adjusting the basic rate.
And, BJ cannot complain about the figure - I doubt he would even intend to complain - because it's the same thing as putting a figure on the side of a bus, it doesn't need to be "true and fair" (to borrow a financial disclosure term) - it just needs to grab attention. I'm sure BJ is happy to let get the attention, nothing more and nothing less. No different than JC, in this respect....
And, as you've said, neither of us are members of anyone's campaign team.