Saturday, January 14, 2017

Tax Benefits and Housing

The huge increase in the UK's population, pressures on the National Health Service, the country's changing age profile and the humanitarian need to assist with the millions of refugees from other parts of the world, all place pressure on the Country's budget and raise the question of how to pay for responding to these very difficult issues.

One possibility might be to introduce  a new income tax band of say 80% on earnings over say £200,000 pa. Harold Wilson's Labour government tried that in the 1960s however on which Bloomberg reported:

The top rate for British taxpayers in the mid-1960s reached 83 percent. The wealthiest among them paid a 15 percent  super-tax on top of that, pushing taxes as high as 98 percent. The pain came out in the band’s music. George Harrison opened his 1966 song “Taxman”:

Let me tell you how it will be. 
That’s one for you, 19 for me…
Should 5 percent appear too small, 
Be thankful I don’t take it all.
The trouble is with schemes of the above kind is that such earners then move to other western countries which do not tax high incomes at those high rates, with the result that overall, the UK would risk losing the wherewithall required for helping poorer people both at home and abroad.

Having said that some incomes do appear extraordinarilyy high with for example,  many professional  footballers earning more in one week than the average person earns in one year but avoiding the fundamental issue of supply and demand is very difficult, if not impossible, in free societies.

Increasing council tax might be fairer than very high income tax rates as those like yours truly, who have large un-mortgaged homes bought cheaply years ago, might then be tempted to move to smaller homes where council tax is less. This could have the advantages of releasing more homes to more people or for re-development  into say flats, reducing the cost of homes and raising more finance for government, though not being a mathematician I have no idea how these financial numbers would stack up.

The current position of the government simply borrowing more and more, doubtless from lenders including eg wealthy Middle Eastern states, whose own humanitarian policies seem at best to be most unattractive, is very counter productive or will be in the long run.

The Labour Party's recent announcement that if in government, it would prevent old peoples' care homes which run out of finance, from closing, by nationalising them, sounds laudable but again there is nothing in the Labour Party announcement that I can see, about how the costs, firstly, of the nationalisation and secondly, of running the loss making care homes, would be paid for.

Harold Wilson mark II perhaps?

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