The government is now coming under attack for abolishing the 10p income tax rate. It turns out that a significant number of low paid workers will end up worse off under the change. How the proposal get this far? I wonder if it is no more than an effect of mathematical illiteracy. Did nobody test the effects of the suggested changes on a spreadsheet?
Really, the 10p tax rate never did make sense - it is probably more trouble than the amount collected is worth. Tax allowances should equate to what someone on the statutory minimum wage can earn in a 40 hour week. But this would mean higher tax rates once the threshold was reached. Most low paid workers would still end up with about the same, but middle England would be annoyed and the focus groups must be heeded.
The underlying problem, however, is that, from any point of view, the taxation of wages is a thoroughly bad method of raising public revenue.
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The abolition of the 10p tax rate will succeed in locking even more people into the client state as tax credits become even more attractive. I find it astonishing that Labour MPs on Tyneside think that the answer to low pay is to shift more civil servants away from London, rather than reinstating the 10p rate.
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