Judy Beishon
However, the pain and anger over these tax decisions may turn out to be relatively minor compared to what is to come. Figures from the Institute for Fiscal Studies (IFS) show that 18 million families will become worse off as a result of the expected level of taxes and benefits over the next two years.
The IFS says that this will be due to the recent increase in the personal tax allowance being a one-off measure for this year only; this year's higher winter fuel payments could also disappear; and because the upper earnings limit for National Insurance contributions will rise.
The IFS also looked at how high public-sector debt has become, and concluded that if the government extends the extra personal tax allowance (the recent £2.7 billion u-turn) beyond this financial year, it will break through its limit of the debt rising to no more than 40% of national income. This is based on the economy growing at the rate predicted by the government, a rate that even the International Monetary Fund thinks is too optimistic, so the situation is likely to be much worse.
With the onset of the coming recession, not only could the prediction of 18 million families suffering from tax and benefit changes become a definite fact, but they could be joined by many more millions of families and single people too, as the government seeks to place the burden of the economic crisis on their backs. And the amounts of money involved could be much worse than currently feared.
This is the picture for the coming period under a government that has prioritised the greed of the super-rich and big business. Over decades, taxation rates have progressively contributed to rising inequality. For most of the 1970s, big corporations paid 52% of their profits in tax, but that percentage has been reduced step-by-step ever since, to now being just 28%.
Likewise with income tax on the highest earners; for most of the 1970s it was 83%, but it is now only 40%. The lowest tax band over the same period went from around 35% to 20%, so income tax for low to average earners has decreased much less than it has for the rich.
Add together all taxes: income tax, council tax, national insurance and the long list of indirect and hidden taxes that we are subjected to, then the lowest paid workers pay a massively greater proportion of their income in tax than the rich. And this is before taking into account the huge tax evasion engaged in by the wealthiest in society, estimated at around £25 billion a year by the TUC.
It is no surprise that a recent survey showed that 74% of people in Britain think that those on low incomes should be taxed less. The struggle of low-paid workers to get by, while food, energy and housing costs shoot up, is becoming intolerable, especially when contrasted with the unprecedented level of wealth of the small minority at the top of society.
- Increase income tax for the super-rich, not the low-paid!
- The first £15,000 of income to be exempt from all tax.
- Increase the tax paid by big corporations and stop their evasions!
- A minimum wage of £8 an hour without exemptions, as a step towards £10 an hour.
- Scrap the council tax! Replace it with a local authority tax which takes ability to pay into account.
- For public ownership of the top 150 companies and banks that dominate the British economy. Compensation to be paid only on the basis of proven need.
The study of 8,748 adults in eight countries found that more than half of respondents in all countries believed the wealthy should be taxed more. Here are the soak-the rich rankings (i.e., the percentage of respondents from each country who said "The government should tax the wealthy more"):
Japan — 77%
Spain — 65%
Germany — 64%
U.S. — 62%
China — 60%
Italy — 59%
U.K — 56%
France — 51%
Granted, there are some obvious problems with the poll — it defines neither "wealthy" nor "tax more." And it's a relatively small sample size per country.
Yet the responses become more interesting when they're compared with another poll question: Is the gap between rich and poor too wide?
In this ranking — call it the envy ranking — Japan is at the bottom, with only 64% of respondents saying the gap is too wide, while another 20% believe it's just right. France has the second-highest envy ranking, with 85% believing the gap is too wide — yet it has the lowest "soak-the-rich" ranking. Germany is ranked first in the envy ranking at 87%, while the U.S. ranks second to last, with 78% saying the gap is too wide.
You would think that the countries with the highest envy ranking would also be the most likely to want to hike taxes on the rich. So why is the relationship nearly the opposite?
One answer might be existing tax codes. France already taxes its earners heavily, so there might be less pressure to tax people even more, even though the envy ranking is high. The U.S. probably has the highest wealth gap of any of the other countries, yet taxing the rich isn't as popular here, since more voters aspire to become wealthy themselves.
Another answer may be relative wealth gaps. Germans says their wealth gap is too wide –but Germany is among the more meritocratic economies in the world when it comes to distribution of wealth. Germans' definitions of "too wide" are probably different from those of Japanese and American respondents.
On May 29 a US court filing revealed that former UBS private banker Bradley Birkenfeld agreed to plead guilty to tax fraud in federal court. US prosecutors alleged on May 13 that Bradley Birkenfeld helped a wealthy client hide assets in Switzerland and Liechtenstein to avoid paying US taxes.
In deciding to cooperate with US prosecutors, Bradley Birkenfeld may be thinking about his own future more than his role in history. The former UBS private banker will disclose the names of clients whose assets he helped hide from US tax authorities, according to the Wall Street Journal. But Birkenfeld's move is a sign that the easy times for the super-rich may be coming to an end.
The aggressive approach of the US government – it is reportedly going to ask UBS to identify its US clients – is not an isolated event. It follows a UK move to increase the tax burden on rich foreign residents and a German swoop on tax evaders who have made use of accounts in Liechtenstein, not to mention the French finance minister's recent complaint about the "perfectly scandalous" pay of corporate big shots.
In the US, the very rich have been gaining ground for more than a generation. The share of income of the richest 0.1 per cent of the population increased from 1.9 per cent in 1973 to 8.1 per cent in 2006, according to economists Thomas Piketty and Emmanuel Saez. The story is similar, although less extreme, in much of Europe.
It's easy to see why many of the 99.9 per cent of the relative losers might feel some resentment at the trend. Although a rebellion has been slow in coming, the end of the financial boom may have provided a catalyst. The top-slice share of US income last peaked – at 7.6 per cent – along with the stock market in 1929.
TSMC chief urges tax hike for the rich
Chang said the biggest challenge facing the country is the growing formation of an M-shaped society. To counter, the government should move to make the rich pay more taxes and the poor pay less.
For instance, the maximum personal consolidated income tax rate can be boosted further from the existing 40 percent, and the tax rates of 33 percent, 21 percent, 13 percent and 6 percent for the middle-class and low-income people should be reduced further, according to Chang.
He also insisted that capital gains, including securities transaction incomes, should also be taxed, while the negative income tax system should be applied to a larger group of people. Under the system, any family with annual income of lower than NT$360,000 will be allowed to retrieve tax payments already made.
Chang also asserted that the statute for promoting industrial upgrading should not be renewed again after it expires at the end of 2009. Chang's remarks have been seconded by lawmakers of the pan-blue camp. Independent Lawmaker Fei Hung-tai, for instance, said that the statute for promoting industrial upgrading has safeguarded the high-tech sector for over 30 years, and has sharply undermined the fair taxation spirit and should be scrapped thoroughly after expiring at the end of 2009.
House Approves Tax on Rich to Aid G.I.'s
Congressional Democrats began to put into practice their philosophy of asking the wealthy to shoulder more of the cost of government programs on Thursday as the House approved an expansive new veterans education benefit that would be paid for by a tax on affluent Americans.
Some Republicans joined Democrats in approving the aid, for veterans who enlisted after the Sept. 11 attacks, with a cost estimated at $52 billion over 10 years.
A vote to provide an additional $163 billion for operations in Iraq and Afghanistan went down in a surprise defeat, at least temporarily, because of objections from members of both parties.
In pushing the tax plan, Democrats are banking on the idea that most Americans will have no quarrel with requiring those on the highest economic rung to pay for veterans of Iraq and Afghanistan to receive the equivalent of a free four-year college education at a public university.
The proposal is the most striking example so far of a Democratic refrain being heard increasingly in Congress and on the presidential campaign trail: Americans with significant financial resources need to contribute more to efforts to help those less prosperous.
Individuals earning $500,000 or more would pay a surtax of 0.47 percent on income above $500,000 and the tax would apply to couples on incomes above $1 million.
Democratic officials said one analysis estimated that about 440,000 people would fall under the new tax and would pay an average of nearly $9,000 a year.
Targeting rich will not work, says study
Increasing the rate of tax paid by the rich would be unlikely to raise extra revenue, according to research published by an influential think-tank on Monday.
The Institute for Fiscal Studies said it had "new, albeit tentative" evidence that ratcheting up income tax rates for those earning more than £100,000 was likely to be counter-productive, based on the evidence of the past 40 years.
But the study, which called for a drastic overhaul of Britain's tax credit and benefit system, said tax cuts were needed for low earners, who face weak work incentives. Under the existing tax credits system, many low to moderate earners lose 70p or more of every pound they earn.
It said tax cuts for the low paid would have to be paid for by the bulk of the population, rather than by raising tax rates for the highest earners alone.
Robert Chote, director of the IFS, said: "These findings have important and perhaps uncomfortable implications for would-be tax and welfare reformers of all parties."
The research is likely to fuel the gathering backbench revolt over the abolition of the 10p income tax rate. Many Labour supporters have been dismayed that the low paid have been made to pay more tax to help combat child poverty.
No comments:
Post a Comment