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Day: April 18, 2013

This ‘mummy tax’ and lumping it in with a ‘tax cut for millionaires’ – you what Labour?

Tax. We don’t like tax. We do like public services. The two of them go hand-in-hand so to get public services we pay tax. That is just the way of the world. Most of us have reconciled with that but then of course the debate is about who pays what and what do they pay for?

Well today the following image show up in my Facebook feed…

mummy tax
‘Mummy Tax?’

‘340,000 New mums to lose £180 thanks to David Cameron’s Mummy Tax’

Mummy Tax. Are you (expletive) kidding me? Just calling anything that just screams political spin of the likes Shane Warne would deliver should he ever turn over his arm in the political arena. The message along with the photo was thus, ‘David Cameron is prioritising a massive tax cut for millionaires over new mums and hard working families.’ So it is essentially a dig at the 45p tax rate for higher earners. However what the ‘Mummy Tax’ actually is hasn’t been explained on this image or the text provided but we’ll get to that later.

One thing I do know is that under this government (which isn’t Labour) the amount a person can earn tax free will have risen to £10,000 a year. This according to the people who do the math (or maths if you are one of those who don’t like the american terminology – I just think ‘do the math’ scans better) means that people will save £705 a year on tax. Now as far as I’m aware £705 is more than £180 but I am happy to concede that we are talking about two very different things.

Now this ‘Mummy Tax’ is of course related to the benefits freeze at 1% instead of inline with inflation. This new image or the text to go with it actually doesn’t explain that at all. I just Googled ‘Mummy Tax’ and a few notes popped up including that Labour had dubbed this part of the budget as that. Nice slogan. The ‘Bedroom Tax’ worked well for Labour but the ‘Mummy Tax’ if it stuck would be an absolute winner. The issue is it hasn’t stuck as yet but they are trying.

In an article on Sky News about it single mum-to-be Helen Mockridge had a pretty clear suggestion for a better way to reduce the deficit and I think this is what Labour are trying to get people to think.

“Taxing really rich people, obviously, that’s where the money should come from.

“For me it’s a real no-brainer and it makes me really angry that certain parts of society are very, very wealthy and the gap between rich and poor is getting bigger.

“That’s where the money should be coming from, not from single mothers or the disabled or any other vulnerable group.”

It is a viewpoint that a lot of people have but let us look at the realities of the situation. I’ll use myself as an example.

If I was ‘really rich’ then if I was going to get taxed to high heaven to help reduce the deficit then I wouldn’t live in the UK – and you know what – neither would you. If I was super rich and they put up the tax rate to beyond 50% then I’d look at it and think ‘really is living in the UK really worth paying x amount of millions extra in tax?’ and I know exactly what I’d say. See this is the problem with having a higher tax band at a vast level.

Most ‘Really rich’ people are happy to pay a fair amount but the moment they believe they are being unjustly targeted then they will up sticks and leave. When that happens they pay no tax to the UK government and no tax is not going to help with the debt. I remember a local Labour councillor telling me that he preferred the government collecting less taxation as long as the rich really got screwed as it was an ideological matter and not actually about the money collected. I couldn’t disagree more.

Tax is about money and about everyone paying a fair amount towards public services. The issue about these ‘really rich’ people is most of them have a choice about whether to live in the UK or not. So the government has to decide at what level will they get more of these people to live in the country and generate the most income. It is a balance and it isn’t easy. The best level for the higher rate tax band is whatever percentage generates the most income. The more the higher band collects then the less is needed from the lower bands. It seems like pretty straightforward economic sense to me.

So to lump the ‘tax cut for millionaires’ aka the reduction in the higher rate of Income Tax to 45% from 50% in with the Labour dubbed ‘Mummy Tax’ and say essentially that the government are getting the money from New Mums that they aren’t getting from millionaires is a lie. If the math (I did it again) is right then 340,000 (New Mums) x £180 is £61.2million a year saved by the government. Are the ‘really rich’ people contributing more than £61.2million to the government’s coffers? I think they are.

In PMQs when this first came about these were the figures the PM went with, At the 50p tax rate there were 6,000 people paying tax raising £6.7bn in taxes. The previous year when the 40p tax rate was in place 16,000 people were paying on that tax rate and they brought in £13.7bn in tax revenue for the Treasury. So more people paying less actually led to £7bn more money being raised.

This has been long and rambly (like most of my posts) but really linking the cap in benefits to the tax cut for millionaires is just bollocks. Also dubbing the benefits freeze at 1% as the ‘Mummy Tax’ just makes me want to vomit. If the reduction of the 50p tax rate to 45p brings in more money than at 50p then what will Labour say? All they can say is either ‘well played government, you’ve done a good job there’ or ‘we don’t care – tax the rich bastards as much as possible even if it means less money – we only care about making it clear we hate the rich,’ they can only go one of those two ways.

We shall see as they say but I’m pretty sure I know which they will go. Labour’s front bench doesn’t scream out, ‘we want to deal with the financial issues in the best way possible’ and instead you always get the sense their attitude is, ‘what can we do to make it seem like the Tories love the rich and hate the poor and in turn make us more electable?’

Head. Desk. Bang.

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