Thursday, 30 August 2012

Barnet Eye Mythbusters #2 - Who pays for tax cuts for the rich?

A phrase which hasn't been heard much lately - "I agree with Nick". Yesterday Nick Clegg had the audacity to suggest that the richest people in the country should stump up a bit more money, in these times of economic woe. Sadly, George Osborne, who is the chancellor takes a different view. He believes that the rich should pay less tax. Rather unsurprisingly, the press, which are owned by RICH people have come out firmly against Cleggs idea. From some of the coverage, you would think Clegg had suggested that babies should be barbeque'd.

The thing which is not mentioned at all in the rabid, screaming editorials is who has to pay, if the rich won't pay their fair share. One can speculate why this fact isn't raised, but to me the answer is fairly straightforward. The reason that rich newspaper barons won't tell their readers is because if they did, the readers may take a rather different view of whether the rich should pay up. The reason is because someone has to pay. If it isn't the rich, then it is ultimately everyone else. If likes of Fred the Shred Goodwin of RBS fame, on multi million pound salaries and share deals had to pay a couple of pence in the pounds worth of extra tax, would it radically change their lifestyle? Would they have to eat beans on toast for dinner rather Fois Gras? Of course not. A tax rise for the richest people, would merely mean that the amount of cash in their bank account would be slightly less.

What about the rest of us? How many people have had an increase in their pay this year? How many have found their bills easier to pay? When George Osborne calculates who he taxes, what does he think? What is the logic behind his decisions. I cannot for one second possibly believe that he actually considers the economic wellbeing of the country. If he did, he would be doing everything in his power to stimulate economic activity. If the economy had grown rather than shrunk over Osborne's tenure, he'd have more cash in the bank to actually afford tax cuts. As it is, his policies are a disaster. Someone has to pay for his ineptitude, but George is determined that it won't be the rich backers of the Conservative Party.

There is a myth that we are all in this together. We are not. The people in the middle are the people who pay. The people at the bottom don't have any money and couldn't pay, even if they want to. The people at the top are powerful and so can avoid paying. So when the tab comes in, it is you and I, the ordinary people of Great Britain, who have to stump up the dosh.

There is an argument that taxing rich people less actually brings in more tax. With regards to the cutting of the top rate of tax from 50% to 45% this is nonsense. If someone has a taxable income of a million pounds a year, then they will still have to pay £450,000 a year in tax. They will not sack all of their accountants and abandon their tax dodging strategies because George Osborne has given them a £50,000 a year bung.

What will Fred the Shred and his mates do with their extra £50,000. Luxury Holidays abroad, a new BMW or Mercedes? A few bottles of the finest French Champagne? I was trying to think of a single British product, I'd buy if I won £50,000 and couldn't. In effect what George Osborne has done is give all of the richest people in the country a great big bung, which they will export.

A tax break for ordinary families would have a completely different effect.Money will by and large be spent in local shops and help the local economy. Many familes would find £50 a month would make a massive difference to their household budget.

If I was George Osborne, I would cut taxes, but I wouldn't cut income tax at all. I would cut VAT and petrol duty. The economy is in recession and these two measures would make a huge difference to the high street and family budgets. Every product you buy, is affected by the cost of fuel. In principle, I support environmentally friendly taxes, but we have a huge crisis. Stimulating the economy is vital.

I believe that the richest people should pay more. I think the idea of a mansion tax is a very sound one. It is a tax that is unavoidable. I would impose it on any property valued at over £2.5 million. I would also increase VAT on cars with Engine capacities of over 2 litres to 25%. This would encourage people to buy smaller, more environmentally friendly cars. If people are rich enough to afford a gas guzzler, then it really won't make much difference to them.

No one likes paying tax. I don't and I'm sure you don't. The problem is if we don't contribute, the country will fail. I would like to see more tax on luxury items, no tax at all for people on low incomes and VAT as low as possible. I think taxes should be used to encourage us to be more environmentally responsible. For instance, I would impose charges on supermarket packaging. This would massively reduce the amount of rubbish we throw out. That would save us all a fortune, if we went back to re-using bags etc.

It is a free country and if someone is wealthy, I have no objection to them having a fleet of Rolls Royce's and living in a stately home. I do however think that those of us who are lucky enough to have the trappings of wealth, should do a little bit more to help our less well off brothers and sisters. Take someone like Richard Branson. I don't begrudge him his dosh, his island in the sun and his airline. He has worked hard to develop his business. What is less often considered is that he is only wealthy because he is a member of our society and he has a workforce who also work hard. His wealth has been generated by supplying his customers with what they want. Without those customers though, he'd have nothing. I don't think it's unreasonable to say "Richard, times are hard, you've done well out of the UK, now please out a little bit back".

The truth of the matter is that if Richard Branson and all of the other wealthy people in the UK use their influence and privelige to say "No" then you and I have to pay their share for them. I actually find that quite objectionable.

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