“Tax or not to Tax that is the question”
Well in reforming the taxation system in this country let us consider the facts the Government have proclaimed the values of lifting millions of workers out of tax altogether. Not necessarily so they have reduced the Income Tax burden through the increases in the tax threshold the point at which income becomes taxable but they have not aligned National Insurance Thresholds to the same equilibrium standard.
This table shows the differential margin between National Insurance Thresholds and Income Tax Thresholds since 2007 / 2008
Date NI TAX
2007-8 £5,205 £5,225 -£20
2008-9 £5,465 £6,435 -£970
2009-10 £5,725 £6,475 -£750
2010-11 £5,725 £6,475 -£750
2011-12 £7,235 £7,475 -£240
2012-13 £7,599 £8,105 -£505
2013-14 £7,755 £9,440 -£1,685
2014-15 £7,956 £10,000 -£2,036
2015-16 £8,060 £10,600 -£2,540
2016-17 £8,060 £11,000 -£2,940
Traditionally Income Tax Payers were Tory Voters in the Middle Classes and National Insurance Payers were Labour Voters in the Working Classes. The distinction between the two is no longer in existence in terms of the tax system in respect to the above table.
In simplifying the tax system and reducing much of the bureaucratic administration the collection of National Insurance should only begin once income has passed £15,000 because there is no logic in deducting income tax payments and national insurance payments from Households then topping up those artificial low incomes through Tax Credits which is a Tax Refund. An expensive system to operate that costs £30bn plus each and every year.
In reducing tax burdens in the longer term there should be:
Zero National Insurance paid on income below £15,000.
Zero Income Tax paid on income below £15,000
Zero Council Tax paid on income below £15,000
The Triple Guarantee on Tax would ensure that tax burdens are reduced lifting 100% millions of workers and in reference to tackling millions of low income households specifically pensioners out of tax altogether.
Council Tax Benefit would be seriously reduced because the reforms proposed above would cancel out the need for council tax benefit expenditure in the first instance.
Working Tax Credits would be reduced because simply why should you be taxed and then given back the same money in the form of benefits.
When you should just keep your own income tax free to begin with.
Aligning the tax thresholds with Minimum Wage Increases would increase the post tax income that workers have in their pay packets to spend in the economy.
National Insurance Employers Contribution is a tax on job creation and a tax on pay increases this is something that has been used to control wage growth in the United Kingdom and is a contributory factor to the low pay culture that we have experienced now for successive decades.
Speech by José Manuel González-Páramo, Member of the Executive Board of the European Central Bank
Madrid, 13 May 2005.
“Similarly, a payroll tax, in the form of employer social security contributions, raises the cost of labour.” Paramo 2005:
In reforming Taxation in the UK the problems of Low Pay can be solved or partially contained.