Wednesday, 21 March 2007
In figures: the effect of Brown's tax rebanding
In his last budget, Gordon Brown has announced changes to the tax system. He's cut the basic rate of income tax by 2p. However, he's increasing (note: not scrapping) the 10p rate up to the level of the basic rate.
After a thoroughly anoracky afternoon messing around on Microsoft Excel, I've made a chart showing the effect of Gordon's changes, as applied to the 2007-2008 financial year. It's only a rough guide; I'm neither a tax lawyer nor an Excel expert - but it does give a good general idea of the effect they'll have.
And the answer is: well, not a great deal. The tax cut and the tax increase cancel each other out pretty effectively. Most people won't notice much difference. Apart, that is, from those on the margins.
Let's start at the top. People with incomes over about £40k will benefit from a raised threshold on top rate tax. For example, under the current system, a pre-tax income of £48,000 translates into £37,384 in your pocket. After Brown's changes, that'll increase to £39,440. I'm not complaining too much about this. Indeed, Lib Dem policy is to raise the top rate threshold even further, to £50k, which we'd balance out with green taxation.
But what worries me is the fact that Gordon is dipping into the pockets of those on very low incomes, especially those hovering round about the minimum wage. If you're earning £14,000 pre-tax, the new banding will see you handing over £100 more to the Treasury than under the current system. I'm all for the redistribution of wealth, but surely it has to be redistributed in the right direction?
The truth is, the Chancellor hasn't changed much at all. He's giving and taking away at exactly the same time, and it all cracks out about the same - with the disadvantage that it hurts those most in need of our help. It's both gimmicky and entirely counter-productive.
That'll be New Labour, then!