To think now is not the right time for tax cuts

[jm9138]

So Hunt wants to cut NI having already cut it last Autumn. The total costs of these cuts will be £13.5 bn. To put that in perspective, this would more than cover the £9bn real terms cut in the education budget since 2010 and with the total NHS dentistry bill being £3bn he could double that and cover the education budget fall with £1.5bn left. Maybe with that he could, I don’t know, fund some private operations to reduce some of the NHS waiting times. AIBU to think that maybe there are other things to focus on now than tax cuts?

At least it’s NI they’re suggesting cutting, a tax which disproportionately affects young people, low earners and people with inconsistent incomes. personally I’d bin NI entirely and just roll it into income tax rates, but cutting NI is at least befitting the right people

Anything to get more people working, and people working more is a good thing when we have severe staff/skills shortages in so many areas. We have too many people who could work but don't and who could work more hours/days, but don't. We need to chip away at the reasons why that is.

i work p/t, f/t would mean i’m in the 55-60k bracket. Factor in additional childcare, transport costs & impact to my time after tax it’s not worth it.

I know lots of people who overpay pension or reduce hours to keep under 100k to get free hours.

Child benefit should be universal.

It's time to look at the bigger picture rather than constantly increasing tax on the easy target of workers under PAYE!

Agree

PAYE are just the cash cow. Both parties milk it because it is an easy target.

If Labour were serious about taxing the rich and wealth inequality they will implement a wealth tax. But I can pretty much guarantee you there will be absolutely zero about doing that in their manifesto.

You have a choice. Tories high PAYE tax, crap services or Labour high PAYE tax, crap services.

If I were making changes to tax I would:

Make nil rate bands, childcare free hours and child benefit universal, and drop the VAT registration threshold to £10k to get rid of the marginal tax rate disincentives to earn more at the same time as increasing each income tax band by a percent or so to offset this.

Ditch stamp duty and increase council tax to offset this, incentivising people to live in a house that meets their needs best.

Some long term investment in health initiatives to get the long term sick off benefits, and as above the investment in more social housing would help reduce costs to this country in the long term too.

Due to inflation tax has actually increased due to a lack of increase in the tax bands. Therefore they can introduce a tax cut without it actually cutting taxes.

If they have more tax revenue because of inflation then they have a choice as to whether to use this revenue to actually get funding levels for services back to what they need to be or give some of it back. I think they should use it to better fund public services that have been cut so much there isn't, in some instances, any service still available.

The point is that if there is inflation but no increases in tax bands then there is actually a tax rise. You can then call something a cut without it actually being cut.

We should abolish NI and just roll it into general income tax.

It was, in the old days, effectively what it said on the packet. You paid in NI and this was insurance for using the NHS and a basic pension (and maybe some other stuff which I forget). That is why you don’t pay it on retirement, as you have already fully bought your pension.

It used to be, at least theoretically, ring fenced. Then, a while ago, they removed the ring fence and it just became a weird extra non-progressive tax for the government to play around with in our overly complex tax system.

And the government should also look at CGT on people’s primary residence. It is a tough one, as you want a mobile population, but maybe this could be done and stamp duty drastically reduced. Again, this would discourage people leveraging up and using their home as a tax efficient investment vehicle and maybe invest more in our stock market and, thus, increase productivity.

We don’t need less tax, we need a far simpler, fairer tax system, which encourages hard work and investment and not expensive houses and share buy backs (which help top rate tax payers vs disadvantaging ordinary pensioners).

Well yes but you have the choice of what to do with that money - you could also increase spending and say 'I am increasing spending'. I get what you are saying that overall taxes have risen with inflation but I am arguing what I think should happen with that money, not how it got there.

Excellent post. Thank you. Agree with all your points.

I live in Wandsworth, one of the lowest council tax in the country, and great council services:

• several outstanding schools
• bins collected weekly
• prompt reaction from the council when reporting fly tipping or pot holes.
• several libraries at walking distance, one refurbished last year, open at the weekend

and the list goes on!

NI is one of the crappest taxes going. It's baffling in this day and age that a tax exists which applies only to income from work but not other forms of income. Transitioning away from it with gradual cuts offset by freezing income tax bands is pretty progressive really.

True enough about NI. I'm not generally a fan of using fiscal drag to raise tax for practical purposes whilst not explaining that's what you're doing... but NI is an appalling system now. Erosion of it is progressive. Ideally it wouldn't exist as a separate thing at all and be incorporated into income tax. It's deranged as well as disgusting to have a separate tax in all but name, that only applies to people of certain ages and disproportionately on money earned through work.

And that would work how, exactly?

If he has £13.5 bn to fund an NI cut because he has more tax revenue than expected, then he could use that £13.5 bn instead to increase funding to core services as I outlined in my original post. He has found some money on the magic money tree and he is choosing to spend it one way when others are available. Or am I missing something?

I seem to have responded to the wrong post in my post that you responded to by the way.

Yes. You are missing something unless you are a budget holder responsible for managing billions of pounds of tax payer revenue.

I am sorry I really don't get what you are trying to say

I am saying that the situation is massively complex, involving millions of stakeholders, and unless you've got experience dealing with that level is complexity you won't understand how difficult it is. It's not like a household budget where you can say "Well, if we reduce the amount of money we spend on haircuts and days out we'll have more money to spend on electricity so therefore we can have the heating on longer".

Wealth taxes do not work. Macron scrapped them in 2017

Not true, they were going to cut the social charges but kept them after Covid happened. This will continue until 2048 I think. France very much does have wealth taxes, we will pay the same income tax there, 45% same as here, but we will have to pay an extra 9 and 12% tax on our income, plus extra tax on my shares etc despite the double tax agreement with the U.K.

However this is worth it IMO for better public services, functional healthcare/dentistry, cheaper childcare, cheaper higher education costs etc.

Also France has high corporation tax but attracts the most foreign investment year on year.

Ok but we are in a cost of living crisis, people are struggling. They could also do with having that additional money themselves to pay for food, energy, childcare etc.

The 13.5 isn’t something that is magically appearing, it is being paid by the people.

Well, the situation would usually be horribly complex, of course.

But it's actually pretty simple in this scenario. There is a general election coming up and the Tory right wing are baying for tax cuts. These will be prioritised.

So collect the tax and redistribute it to those who are actually struggling.

Lots of people can afford to pay the tax that they're currently paying. They might not like it, but they can afford it.

It really is not massively complex. Whilst the government is not like a household (for many reasons, not least of which that it can instruct the BoE to print money) it still has revenue in and spending out. Is it more or less complicated when the Treasury just says to departments 'right, we are cutting (at least) 10% off your budget - go and find efficiencies' (like happened in the worst times of austerity). I suppose it could be argued it is less complex to cut taxes than increase spending but I would argue it is more complex and difficult to cut spending and Governments over the past 14 years have had no problem doing that.

It is like saying Microsoft have millions (billions?) of customers and so when faced with how to divvy up an unexpected profit it is just too difficult for them to choose to cut bills to customers, pay a bigger dividend or invest in new service provision. It might be more difficult to work out how to invest and easier to just pay a bigger dividend but lots of shareholders might think that really shows a lack of leadership at the top.

Yes I know that government is not a company either. But is your argument really that when faced with unexpectedly high tax revenues due to fiscal drag which - unless you change tax band thresholds - will continue and is not a one off windfall - the only choice the government has is to lower taxes because everything else is 'massively complex'. Seems a strange argument to me.

If your argument is they don't really have this £13.5 bn then I agree with you. The fact is though that they are at least pretending they do and they don't they will have to find it from somewhere, either borrowing or cutting services. But again, how is cutting services less 'massively complex' than increasing spending on them?

Or is your argument that they have to balance the tax cuts that benefit some of the millions of stakeholders (a strange term for society but maybe not the worse - and it would probably help if more people saw themselves as stakeholders) against public spending increases that may benefit a different set of stakeholders? Well that is self evident and the responsibility of government. I just think the balance this time should be towards beneficiaries of public services, but if you think it should be towards tax payers then fair enough. We disagree. But don't make out that public sector finances at a macro level are so ultra complex that only a select few could ever understand it or make decisions. If that was the case I think we need a better selection process for our MPs (actually, that is probably true anyway).

I think you make a valid point and I do see where you are coming from, but ultimately if we are going to long term get out of that crisis we have to start having a better educated and healthier society and that means investing in education (including early years and child care support) and in certain aspects of the NHS.

How about instead of my suggestions we use the money to insulate homes, or better subsidise child care and pay child care providers more? Or just take £2 bn of it and give £1000 to the poorest 2 million households as fuel payment vouchers?

Those most struggling are likely to see very little of this tax cut. If you earn £20k maybe you will be £2 a week better off. I am not sure that will make much of a dent into the cost of living.