Monday, 24 September 2012

Nick Clegg is an Utter Arse, pt 2

Nick Clegg is demonstrating his cretinous stupidity once more. Apparently, people earning more money should pay more tax, and he's intimated that taxes on the richest 10% in society should be raised.

Sounds fair enough, except when you consider that the top 10% basically consists of anyone earning about £50,000 or more. Given that the current threshold for Higher Rate Income Tax is £42,475, this means that the 10% that Nick is talking about is already paying a top rate of 42%. That's 40% Income Tax and 2% Employee National Insurance.

I say this as someone who earns around £18,000 a year, so I'm well aware that someone on £50,000 is considerably better off than me. But I'm also aware that, as we have a progressive tax system, where the rate increases in bands as you move up the income scale, most tax in this country is already paid by people who are better off.

So, first off, we already have a tax system that is pretty fair. The lowest-paid in society pay a substantially lower share of tax than the richest. So what's the problem?

Well, of course, the problem is that we're running a deficit. So Nick proposes to close that deficit with extra taxes. Ah, but before we prescribe the medicine, hadn't we better check the symptoms?

The ONS and HMRC have confirmed that receipts from Income Tax have risen pretty steadily over the last 14 years. Graph detailed below, lifted from their figures. Receipts were £86.5billion in 1998-99, rising pretty steadily until 2007-08, where they levelled out at around the £147billion mark. Since then, they've been pretty steady.

 

This is no massive surprise, given that Labour successively rose Income Tax during this period. You'd expect the receipts to increase, especially when combined with a growing economy. However, the rate of increase slowed from 2006-07 to 2007-08, before the recession really took hold. On top of that, receipts actually held up in 2008-09, when the country was really in the throes of recession. There was a slight dip in 2009-10, but they bounced back the following year.

So, what this graph shows is that, although allowing fiscal drag to effectively increase taxes over the last 15 years has produced a rise in revenue, we're now basically maxed out. We're at the peak of the Laffer Curve - we're squeezing as much money out of Income Tax as possible.

So the problem is not that we are not taking enough in tax.

Yet we are still running a deficit.

Therefore, the only possible explanation for this state of affairs is...

(drum roll)

The Government is spending too much.

The answer, therefore, is not to tax people more, but to start spending less.

Of course, dear old Cleggie, what with being the Deputy Prime Minister and all, is in a far better position to know this than little old me. Yet I managed to figure it out all by myself, on account of it being fucking obvious. So that means that either Little Nicky is really, really stupid, or...

He's fucking lying to us.

Yes, you are.