PER­SONAL AC­COUNT

The Daily Telegraph - Your Money - - MONEY - Marc Sid­well

A new re­port has rad­i­cal ideas on re­form­ing tax – min­is­ters should lis­ten

There was chat­ter this week in favour of slap­ping green taxes on steak and roast beef. It made me see red. Luck­ily, even Theresa May seems un­likely to fall for such a dis­mal, nan­ny­ing and il­lib­eral idea. But the Con­ser­va­tives’ eco­nomic pol­icy still lacks red meat of a less lit­eral kind. Af­ter an un­event­ful Bud­get, the search for vi­sion­ary pol­icy ideas to steal a march on Jeremy Cor­byn con­tin­ues.

Those new ideas will have to come from out­side the cur­rent gov­ern­ment, which seems to have all its creative in­ge­nu­ity fo­cused on find­ing more ways to grab tax. This week saw the an­nounce­ment of a new death tax via pro­bate fees (see page 5), the launch of a con­sul­ta­tion to make it harder to use trusts for in­her­i­tance plan­ning and an­other in­tended to raise costs for sec­ond homes run as hol­i­day lets.

But meat levies and ever-higher taxes are not the only op­tions on the menu. A free mar­ket think tank, the Cen­tre for Pol­icy Stud­ies (CPS), has just pub­lished a cleareyed, wide-rang­ing look at the per­ver­si­ties and com­plex­i­ties of Bri­tain’s tax sys­tem, with prac­ti­cal, as­pi­ra­tional ideas to make it bet­ter. The re­port is called “Make Work Pay: a new agenda for fairer taxes”. Its au­thor, Tom Clougherty, ar­gues that Na­tional In­sur­ance is re­ally a sec­ond in­come tax. He pro­poses two sim­ple prin­ci­ples: gov­ern­ment should not take any of your earn­ings for in­come tax or NI un­til they reach a min­i­mum thresh­old of £12,000 – and then should never take more than 50p from each ex­tra pound that you earn.

Pay­ing more in tax on ad­di­tional earn­ings than you get to keep hap­pens all too of­ten. Our com­plex tax code causes a range of shock­ingly high ef­fec­tive mar­ginal tax rates to ap­ply in cer­tain con­di­tions. For ex­am­ple, the with­drawal of the per­sonal al­lowance from high earn­ers means that peo­ple with in­comes be­tween £100,000 and £123,700 face an ef­fec­tive mar­ginal tax rate of 62pc. And it’s not just the very wealthy who are af­fected: child ben­e­fit rules cre­ate puni­tive rates for par­ents who earn £50,000 a year.

Mr Clougherty’s re­port lays out a num­ber of re­forms that are not only sen­si­ble and prin­ci­pled but also eye-catch­ing, such as his idea for a “uni­ver­sal work­ing in­come” of £1,000 a month tax-free for all. And the pro­posed plans to pay for the re­forms are sim­i­larly rad­i­cal, es­pe­cially where they fol­low pre­vi­ous work for the CPS by Michael John­son on how to re­form pen­sions tax re­lief.

The CPS has a long his­tory of its

‘ Uni­ver­sal work­ing in­come’ should be on the po­lit­i­cal menu, not meat taxes

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