Politics Thread!

[gravy]

Inheritance tax give away apparently; you can nominate one home for your children and the first £1m will be tax free.

On a broader note I'm not sure I agree with inheritance tax as a concept.

That all said, we're all in it together yeah? Deciding to change this when they're forcing people out of family homes by adjusting housing benefit is just cunts.

It's almost as if they're trying to woo any middle englanders who've fucked off to Farage! There's your serious campaigning

[gravy]

In other cunts news

http://www.mirror.co.uk/news/uk-news/te ... ced-690027

[merman]

On Sunday this budget was not going to be about gimmicks and giveaways.

Now he's flinging cash at the young (minimum wage increase, but they are not going to vote Tory), those with rich parents (no inheritance tax on homes up to £1 million) and the elderly (widening the policy on letting people control their own pension without addressing the real problems in the pension industry).

[pogo]

The minimum wage costs the government nothing. It’s a pure benefit to the lowest paid, paid for by employers (yes the government is also an employer but the impact on finances should be slight). There’s an economic efficiency cost if it’s set too high but this parliament they have sensibly kept rises in line with how quickly wages have been rising.

It’s not just a cost of living increase but a real increase, with inflation running at close to zero. It’s a sign of the economic recovery at last affecting incomes, as wages are rising faster than inflation for the first time since the start of the crisis.

As for the other issues we’ll see. They usually keep a very tight lid on the contents of the budget, and there may still be surprises. Everything has to be agreed with the Lib Dems or they might not vote for it, and large hikes in inheritance tax seem unlikely to get past them, as well as having no economic benefit. The tax is already set high enough that only a tiny minority of estates pay anything.

[zip accident]

large hikes in inheritance tax seem unlikely to get past them, as well as having no economic benefit. The tax is already set high enough that only a tiny minority of estates pay anything.

However, those who do pay are all rich enough to be natural Torys, there aren't that many of those about.

[pogo]

large hikes in inheritance tax seem unlikely to get past them, as well as having no economic benefit. The tax is already set high enough that only a tiny minority of estates pay anything.

However, those who do pay are all rich enough to be natural Torys, there aren't that many of those about.

The politics of it is is a bit less straightforward. Very few pay and so would benefit from a rise but a much larger number of voters disagree with it, whether because they unrealistically expect to pay it themselves, or because they disagree with it on principal as a “death tax” (the latter attitude is far more prevalent in the US than UK).

Myself I agree with the tax and would be happy to see the tax threshold lower. Only the richest people pay; if people pay but aren’t rich, because their house is worth a lot more than they paid for it, then that is unearned wealth they’ve arrived at largely through luck.

Inheritance tax is about the only tax that acts to diminish wealth, by chipping away at the largest estates over the generations. Otherwise they tend to keep on growing, leading to a few people owning almost all the wealth of the country, as was true not long ago. Look at all the country houses that used to control vast [land] estates, and all the resources on them whether farms, quarries or mines. But over the decades and centuries these have been sold off and broken up, or handed back to the state to become parks and National Trust houses.

[merman]

The changes in tax threshold have a minimal effect.

There are up to 5 million who will see no benefit in the lower threshold going up, and the majority of working families will get less than £200.

Whereas the richest have seen a gain of more than £1000 thanks to the changes of higher and lower threshold.

[pogo]

Both are rising by about 2%, so in line with nominal GDP growth, neither too tight or lose. After a few years of the basic threshold rising much faster, and the higher threshold not rising at all, it’s good that things are getting back to something like normalcy.

Instead of raising more from personal taxes they are continuing to focus on tax evasion and avoidance. One potentially big deal is the new “diverted profit tax”, designed to tackle firms like Google who bank profits outside the country on earnings within it (one assumes). Projected to raise £3.1bn though it will be interesting to see how it works:

http://www.bbc.co.uk/news/business-31942639

The other move is even more promising, as it will tackle avoidance we know about and don’t know about, first making it much easier to go after people without having to prove “intent”, second by making facilitators such as banks now liable:

http://www.bbc.co.uk/news/business-31960196

[Dio]

Both are rising by about 2%, so in line with nominal GDP growth

But greater than inflation, so a quite significant tax cut for the rich.

[pogo]

Both are rising by about 2%, so in line with nominal GDP growth

But greater than inflation, so a quite significant tax cut for the rich.

It’s normal to raise allowances in line with rising wages. If you don’t, if you e.g. peg allowances to inflation instead, then as wages normally rise faster than inflation you collect ever more in tax. Over time this can significantly boost the income tax take, and so the government share of GDP. In the case of e.g. the higher earning limit it means more and more people earn more on it and it ceases to apply only to the rich but affects more and more of the merely comfortably well off.



The above shows this in effect: the number paying the higher rate has risen substantially since 1990, from around 2 to 5 million, with the fastest rise under this government as higher rate allowances were frozen (at the same time as many people were taken out of paying tax altogether by the rises in the basic rate allowance).

But it’s normal and fiscally neutral to raise allowances in line with average wage growth, or nominal GDP growth which should be about the same. The government still collects on average the same share of incomes, so sees revenue rise as the economy grows.

[Dio]

... but it's still a tax cut, right?

[pogo]

... but it's still a tax cut, right?

No. If wages are expected to grow by that amount then raising the personal allowances in line is neutral. Wages don’t normally stand still, they normally rise, and things linked to them such as tax allowances should rise proportionately. There’s a degree of uncertainty but GDP and wage growth seem to be returning to normal.

If allowances rise more slowly then ever more people are drawn into paying them, so paying at the higher rate, while others pay more of their income at the higher rate. That‘s a very real tax rise for those people (and was what happened over the first years of this parliament).

[merman]

Both are rising by about 2%, so in line with nominal GDP growth, neither too tight or lose. After a few years of the basic threshold rising much faster, and the higher threshold not rising at all, it’s good that things are getting back to something like normalcy.

Instead of raising more from personal taxes they are continuing to focus on tax evasion and avoidance. One potentially big deal is the new “diverted profit tax”, designed to tackle firms like Google who bank profits outside the country on earnings within it (one assumes). Projected to raise £3.1bn though it will be interesting to see how it works:

http://www.bbc.co.uk/news/business-31942639

The other move is even more promising, as it will tackle avoidance we know about and don’t know about, first making it much easier to go after people without having to prove “intent”, second by making facilitators such as banks now liable:

http://www.bbc.co.uk/news/business-31960196

That second announcement is a CONSULTATION on how to enforce existing laws and fines work. It is nothing new.

Plus, under the £35 billion of cuts due in the next two years more HRMC inspectors will be axed. So there will be LESS PEOPLE trying to collect the tax that's being avoided.

Osborne has had five years to do so,etching about tax evasion and done very little.

[pogo]

Osborne has had five years to do so,etching about tax evasion and done very little.

Again, the tax gap (the amount lost to avoidance and evasion) has fallen significantly under this government. Again it’s the top % line that’s important; the lower chart of actual amounts depends also on the total tax take and so the state of the economy and varies much more randomly:

Spoiler: show

And that’s before some of the most significant changes introduced by the government have had chance to take effect. The GAAR only came into force in 2013 so will not be reflected in the above data. The data-sharing agreement with other countries happened even later and isn’t in effect. And of course there are the just announced measures. Once all those are in place we will see further falls in evasion and avoidance.

[pogo]

Populus outcome likelyhoods

How reliable this is I don’t know. It seems to assign very low chances to outright majorities by either parties; surely there’s more than a 0.5% or 1.4% chance that one or other will pick up enough of a swing to govern alone. Polls can move very quickly in the last few weeks before an election, and can be very wrong right up until the day.

But the rest seems plausible. SNP are on course to take most of the seats not taken by the two main parties, and this shows an over 50% chance of them being in coalition with Labour. Except Labour (or anyone) would be foolish to partner with them, which probably rules that out. The next largest slice is Lab/Lib Dem, but I don’t know if that will be either politically or mathematically possible; if the Lib Dems lose as badly as expected they may not have enough seats to help, and it may look pretty desperate to partner with them.

So I still think either one of the two main parties will win, perhaps benefitting from a late surge or embarrassing opposition collapse. Or we’ll have a hung parliament with the SNP the only party with enough seats to form a coalition but so politically toxic that no party will agree to one with them.