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Campaign for Change 2: Increasing the Personal Allowance - by James Evans
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In his second proposed political reform, James Evans argues in favour of raising taxpayers' personal allowances (untaxed basic income) from just over £5,000 per year to £10,400 per year.
We should improve our tax system by adopting the following proposal: • Raising the personal allowance (people’s untaxed basic income) to £10,400 p.a., £200 per week. (The personal allowance for most people in 2006-7 is £5,035 and for 2007-8 it is £5,225 .) Argument for this proposal: Since New Labour came to power in 1997, social justice, including a fairer deal for the nation’s poor, has been a government priority. Advances have been made in the form of policies such as the ‘New Deal’ and the ‘minimum wage’. But the Government’s credibility is waning in spite of these reforms. There is a perception that their complicated tax and benefits system has led to the poor getting over-taxed while the fraudsters benefit. The effectiveness of government initiatives depends, moreover, upon how they are followed through. The Government failed to follow through and showed a lack of joined-up thinking by deciding to create a minimum wage without making a significant revision to the personal allowance. The current situation forces companies to pay employees more but ensures that a large proportion of this extra money goes straight to the government in tax. The added cost makes hiring workers legally a less attractive proposition. On the other hand, the combination of a minimum wage and a low tax threshold provides strong incentives for black market employers and employees alike. Our tax system is not fair. On principle, income tax should only be levied on people’s surplus income. In the South East of England, an individual living alone would find it difficult to manage without social housing on a wage of less than £600 per month after tax. But an individual earning £600 per month would already be paying income tax! In fact, you would already be paying income tax if you worked for 20 hours per week on a £5.50/hour wage. Changing the allowance to £200 per week would make a huge difference to the lives of the UK’s poorest citizens. They would have more disposable income, allowing them a better standard of living and greater financial security. Because the system would be fairer, people would be less inclined to cheat the tax man. Changing the allowance would not necessarily even lead to a reduction in the overall tax take: the basic tax rate could be adjusted to compensate, perhaps to 25%; a surge in spending by the country’s poor would also increase government revenues from other sources such as business taxes and VAT. This article is written by James Evans and may not be reproduced in any way, shape or form without the author's prior consent. 10/01/07 To have your say on raising the untaxed basic income, visit our forum or click here |
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