… a Liberal party has proposed a new set of taxes aimed at certain ‘rich’ activities that will raise billions of pounds.   Dubbed the “Make ’em squeal tax”, it includes:

  • a levy on monocles, classic cars and children called Tristan
  • A polo tax
  • stamp duty to be extended to transactions involving the exchange of eligible daughters for land and titles
  • a penalty for shouting “Come on Tim!” at any sporting event whatsoever.

The money raised is going towards buying free books for sixth formers.

But the policy has been passionately condemned by those on the Left, who attack it as ‘a slap in the face of the poor’ and ‘just another example of how these neo-liberals types choose regressive policies at the drop of a hat’.  They fail the test of fairness, says a blog, and will stop at nothing in their mad quest to get the Gini coefficient up to 1.  Or even higher.

In a long policy report, some wonks have shown how more middle class kids get to sixth form.  Devastating bar charts demonstrate how this give more money to those middle class people.  And since they are middle class, that means, you know, wearing barbours, private school, obsessing about organic food, all that stuff that proper people loathe. Not the sort of b*****rds we should be helping, obviously.

The think tank calls on the Liberal party to abandon its poor-hating, rich-loving ways and instead use this money, that has just been found somehow let’s not ask how, on something really worthwhile, like the policies of another party altogether.

————————

OK I may be exaggerating a little.  But – as Alix is tweeting endlessly to Will – if you can choose which part of a policy proposal to leave out, anything can look regressive.  I think we share similar objectives here. This policy may have its flaws: efficiency bought for political clarity, issues with undermining pension investing.  But it doesn’t really deserve an attack from the point of view of unfairness.

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15 thoughts on “Press release: In some alternate universe …

  1. This was always a problem with Chris Dillow’s attacks on big government for having to raise taxes which are regressive – he tended to ignore what big government can buy (ie welfare payments).

    On the other hand it’s fair enough, if someone advocates raising the personal allowance to £10k because of its positive impact on the very poorest, to point out that it’s an expensive way of achieving that goal (my suggestion was simply to raise the basic rate of income tax by enough to offset the gain from a higher personal allowance for all those on higher rate tax).

  2. have they released the numbers behind that chart showing the 7th decile getting the highest proportionate gain? try as I might, I can’t figure out how that can be right – even if they were just looking at the starting threshold increase and ignored the lowering of the high-rate threshold, I just cannot understand it … what is the average income of the 7th decile?

    1. To be honest, once I realised they had only dealt with one leg of the tax proposal, I realised that diving into the actual per-decile calculations woudl take me way off course, and would be beside the point. Maybe 7th decile households have the highest proportion of two-earners? Who knows.

      V impressed with lib dem blogosphere rebuttal effort on this

  3. On the 7th decile presumably its because at that point almost every household has two earners getting at least 10k, or as many doing so as you get in the 8th, 9th and top deciles, and so the amount in pounds gained reaches a peak, but as a proportion of income it fades away the higher you go?

  4. Matthew,

    yes I guess that must be it … I just find it hard to square with the median household income being £23k or thereabouts. I suppose it’s the two-earner thing, getting more of a hit than 1 earner on £20k.

    careless use of household income data is a bugbear of mine – in many cases, some households (i.e. pensioners, students) are just not relevant to the question in hand.

    1. Yes, that winds me up too. That strange tail in the bottom 2 or 3 pecentiles, where it turns out they have a lot of assets. One has to be very careful with this data.

  5. Actually I’m sceptical too – the 7th gains about 16.50/week reading off the chart, while the 5th gets about 12.50, making a £208/year difference. The gain in household income for the 5th looks like about 2.9%, and for the 7th about 3.1%.

    If you do the calculations you get income of £22.4k for the median, and £27.7k for the 7th. Looking at NS data it says in 07/08 median household income of all kinds (inc benefits) was 26.6 and that of the 7th decile was 37.9 (original income was 20.5 and 34.0).

    So the difference seems rather smaller (and hence makes the gain bigger) on the report’s figures than you would think. I suppose – maybe this is it – they are calculating it as the % of final income (after all taxes and benefits in kind…) which is 24.3 for the median and 30.3 for the 7th…those numbers are closer.

  6. Hi Giles,

    A few thoughts about Tim and Howard’s paper.

    First, I think it’s perfectly legitimate to look at the policy in isolation. The Lib Dems have a series of laudable policies for raising £17bn so it is legitimate, particularly in a recession, to look at the impact of spending in that recession.

    Second, I asked Nick Clegg this morning at his ippr lecture about the policy and he didn’t make any attempt to tell me that I was looking at the policy in isolation. Instead, he defended the policy as just as fair as tax credits (which I’d contest) and as a good policy even if it didn’t help those at the very bottom (which i also contest in these difficult economic times).

    Third, much comes down to how you define “fairness”. I tend to look at the impact on inequality, others look at procedural fairness and simplicity. That’s fine and reflects different values but it doesn’t detract from the fact that this policy would widen inequalities between bottom and middle. Taken in the round, I accept that the total tax policy would narrow inequalities between top and middle, but I don’t feel that’s good enough.

    Fourth, I too have been impressed by the energy of the Lib Dem response and the respectful manner in which it has been conducted. Our publishing the report was not intended in any way as a partisan attack as some have suggested. It was merely a social democratic critique of an expensive policy where there is an interesting debate to be had. I have offered the Lib Dem press office a right to reply and hope they’ll take me up on it.

    All the best,

    Will

    1. Hi Will

      Many thanks for the detailed and civil reply. I hope you and Alix continue to be buddies ….

      Let’s agree to disagree about seeing the policy in isolation. For example: I don’t think the pensions threshold side would be sellable without a promise to use the money in some such way; if it were purely for paying down the deficit, and did nothing to enable poorer working people to keep more money and perhaps thereby achieve the post 2012 pension savings we need them to do, then I think the whole thing would fall down.

      2. Thanks for your information on what Nick’s response was. My answer would be: next time I see Nick I would advise him to take a different approach to the question, and steer the questioner onto the matter of the whole policy, not just one half of it. Similarly, if he is forced to raise VAT in the next parliament to keep UK plc solvent, he should (a) insist to his partners in govt that benefit rises are made to mitigate the effect on the very poorest and (b) explain to the electorate that the VAT rise should not be seen in isolation from such benefit rises that VAT going up pays for.

      On four, you must understand that this is how it looks to others. I was a member of the Fabians in 2007-8, when still a floating voter (voted Blair 1997-2005) and only resigned when I realised that it hardcoded a support for Labour that I could not longer promise for sure. This is a very popular policy, and one that I think may attract across the spectrum; if they were not to attack (or emulate it), I would be surprised by Labour. All’s fair; this debate has remained civil and like I’ve said, I think we share much the same objectives.

      best, Giles

    2. Actually Will, you announced this “research” as:

      Nick Clegg’s planned policy of “tax cuts for people and families on low and middle incomes” would be deeply regressive according to a detailed analysis by Tim Horton and Howard Reed for Left Foot Forward.

      You announced this as if you were talking about the whole LD tax policy. Research examining a policy of “tax cuts for people and families on low and middle incomes” would not just examine the threshold raise, since that is a tax cut for the rich too. If you wanted to examine a policy of “tax cuts for people and families on low and middle incomes”, you would need to examine the total tax policy as it applies to the rich, and not just the cherry-picked part you have chosen to look at.

      And even just examining the threshold raise on its own, yes the rich get more money from it, but that doesn’t make it regressive.

      Also, I don’t think you have any evidence for this:

      “That’s fine and reflects different values but it doesn’t detract from the fact that this policy would widen inequalities between bottom and middle.”

      And this criticism doesn’t make any sense, since it’s been the very rich who’ve gained most from the New Labour years:

      “Taken in the round, I accept that the total tax policy would narrow inequalities between top and middle, but I don’t feel that’s good enough.”

      The increasing Gini coefficient is mainly to do with the rising gulf between the top and everyone else, not between the middle and the bottom.

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