I have been following the debate on the 10p rate of income tax with a huge amount of schadenfreude and Nu Labour's embarrassment at this one. I wasn't blogging lat year but I remember thinking when Brown announced it that this was just another piece of Labour grandstanding and a waste of money because of the increased bureaucracy.
I have always been a great believer in a simple tax system and that the beast way to help the poor is to raise the starting rate of tax to something like £15k (about 60% of median salary). However I started to change my mind reading through some of the comments on Tim Worstall's site and especially this one from dearieme:
dearieme // Apr 18, 2008 at 11:31 am
Why do people who don’t pay income tax get to vote?
On reflection I think this is a really good point and its one I have always felt was a problem with the NHS*. It was the one made against the old rating system where only private housing paid rates (not strictly true but because council tenants paid it in their rent as one figure they didn't link the 2). This was thought to skew local election voting and needed to be changed. Sadly the change was fucked up and we got the "poll tax", but that's not the point of this thread.
I don't want to get in to the Citizens Basic Income argument here because, much as I think there is a case for it, I don't think it will happen and even if it did MP's would soon tinker benefits back in. What I am now starting to think about is maybe an even lower tax band, say 5%, paid on all earnings. We would probably need 2 other tax levels, say 25% above the median wage and then 45% above about £100k. These numbers need working through and I am aware that there are still problems with marginal tax rates and at the boundary, but no system is perfect. It should, though, help with the real problem we have now of huge marginal tax rates, approaching 70%, for those coming off benefits.
* too many people don't value things that are free, which is why there is so much abuse of the NHS and especailly 999 services. I reckon we need to give people an invoice for the true value of any service and where possible make people pay a smal , say, 15% capped at £100, with pensioners and other on benefit having there's stamped "Paid by te Tax payer".