Wednesday, October 21, 2009

How much I am off to switzerland!!!

Income tax 'must rise by 7p to pay back Britain's debts'

The Government could have to put 7p on the basic rate of income tax as part of its efforts to rein in Britain’s spiraling debts, according to a report published today.

Posted by mark @ 10:08 AM (1741 views)
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14 thoughts on “How much I am off to switzerland!!!

  • Similar sums could be raised by extending VAT to a wider range of goods, [b]or by imposing a five-year public sector pay freeze or by a 10 per cent cut in public services.[/b]

    There’s the answer right there, not taking more tax off people and then blowing that tax on more government consumption.

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  • brownsters_billions says:

    Surely if we all just keep on spending money we don’t have, everything will turn out ok?

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  • Is this really the only alternative to spending cuts?
    – What about changing the taxation of entities toward a cost of opportunity basis i.e. like land value, resource usage, emissions produced, etc.?

    Is it true that none of the cuts could have the same effect?
    – No, not at all. If we cut all spending, we could decrease taxation, although I would not suggest that right now.
    What about removing the minimum wage and using a reduced welfare payment as a new floor; might encourage some into work too. The alternative cut to welfare payments would be ~35%. I know the flip side is the possibility of an increase in criminal behaviour, but with welfare payments exceeding income tax this surely has to be at least considered.

    What about side effects of this increase in the basic rate?
    – This increase would make it rational for a large number of people currently in work to move onto benefits – those who will take home less after the increase than they could take in benefits.
    – Increasing the basic rate would, of course, reduce consumer spending. Not really what the state wants at the possible tail end of a recession.

    * sigh *

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  • tyrellcorporation says:

    My discretionery spending (already pretty meagre) stopped in it’s tracks about 3 months ago. Anything I don’t spend on tax, fixed costs, etc gets saved. Heck I’m even cutting back on boozing!

    There will be no stomach for cutbacks IMO and taxes WILL rise dramatically over the coming months and years to make up the shortfall.

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  • Most hard working people who have worked all their life, and not got themselves into debt, will end up paying for this debt problem. Lets remember why the government deficit is so big in the first place. Economic policies of the last 10 years that encourged people to get into debt, house price bubble and delusions of the contraction phase of the econonomic cycle had somehow been eliminated! It is fair we live in the society where the rest of us have to end up paying for the government’s and other people’s mistakes? What happended to the sense of individual responsibility? Maybe thoose who borrowed to much and and key members of the government should be asked to work for free in the weekend on public sector projects and we can save money on wages.

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  • stillthinking says:

    How about selling social housing? Put half the money to the debt and the other half to construction of new social housing?

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  • mark wadsworth says:

    I second what 666 says.

    @ Tyrell, cut back on alchohol? At a time like this? Madness!

    @ Stillthinking, nope, they ought to just build some new stuff and rent the old stuff out for market value.

    Getting back to the article, it is weird that the Daily Mail just reports this without any “Shock Horror” comments, but I suppose as long as the proceeds are used to “freeze council tax” and prop up banks and hence house prices, the Home-Owner-Ist readership of that newspaper ain’t too bothered.

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  • Notbuyingoneyet says:

    @4
    I used to own (pay a mortgage on) my own property until I sold in 2003 to move in with my partner. We now share the family home which is rented from a Housing Asssociation. We did consider buying the property to pass on to our daughter in the fulness of time, but the price just went up and up in the boom. If we were to try and buy it now, it is still financially out of reach. So who are you going to sell this social housing to? I / we can no longer afford to buy it despite earning the ‘average wage’ and my partner working part time too. Also I have had my wages frozen for the last year. House prices are still too high for ‘Mr Average’ to be able to buy.

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  • Notbuyingoneyet says:

    Comment @4 moved to number 6!
    My last refers to number 6 (stillthinkingsaid)

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  • tyrellcorporation says:

    @Mark, needs must matey, a pint in the centre of Exeter is now £3.50. A recent trip to london proved to be much cheaper, averaging £2.50 a pint. Weird!

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  • stillthinking says:

    7% on income tax, from existing 30% taxation, is effectively 70->63% disposable income. So really this would be a 10% drop in disposable income.
    If you were to pretend that a debtor doesn’t care about whether their money is taken in interest repayment or tax, then you could use this dodgy calculation to work out the effective new interest rate. For one pound of disposable income going towards one pound of interest payment, after the tax increase would be 90p going to service existing 1 pound of interest, which must then be topped up by an additional 10p, and 10p measured against 90p in that way is 11%.

    So to increase income tax by 7% on an indebted basic rate taxpayer is equivalent to an 11% increase on their -interest- payments (by interest payments I mean purely the money going on interest, NOT the interest rate on the loan i.e. an interest only mortgage). The government are probably aware that taxation isn’t a route out.

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  • @8. tyrellcorp

    Interesting observation. I often find the price of a pint in provincial city centre bars more expensive than London. Guess they probably have local pricing agreements while London is too big for that to happen?

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  • tyrellcorporation says:

    @need a crash. Quite possibly, there are a 3 blokes who own about 10 bar/pubs in the centre between them so plenty of scope for price fixing.

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  • Many pay for the public sector pensions when the private have no personal pension themselves and now we pay for other peoples personal

    debts. Let me have a little think now.

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