The Conservatives are being allowed to set the focus of political debate, as we focus on supposed abuse at the bottom of the pile instead of that at the top.
There are wealthy individuals – maybe even cabinet millionaires – claiming more in pension tax relief than the proposed benefit cap. Higher rate tax payers for the 08/09 period cost the treasury £12 billion; and anyone contributing £39,000 to a pension will get £26,000 in relief.
Update: This telling exchange from the comments thread of Richard Murphy’s Tax Research http://www.taxresearch.org.uk/Blog/2012/01/23/martin-wolf-endorses-progressive-taxation-as-a-solution-to-capitalisms-ills/#comments
Question to Richard Murphy: May I ask a … a question, Richard? We don’t appear to have a progressive tax system in the UK. As I understand it from http://www.hmrc.gov.uk/, Income tax: Above £7k, 20%. Above £35k, 40%. Above £150k, 50%. OK. (Personal allowance is removed at £100k adding £1.4k tax max. Minor)… National Insurance: Above £7k, 12%. Above £42k, only 2%.
Combining tax & NI: Above £7k, 32%. Above £35k, 52%. Above £42k, 42%. Above £150k, 52%.
This is an almost flat tax curve. Add in capital gains tax or investment income and the effective tax rates will drop further at the high income end… Why don’t high earners pay National Insurance? Am I wrong to regard it as a tax? Have I got something wrong?
Richard Murphy replies: You’re bang on… but build in VAT and council tax and it’s actually regressive. That’s how bad it really is. And still the 1% say they’re over taxed.