Nick Clegg today set clear yellow water between the values of the Liberal Democrats and those of both the Conservative and Labour parties when it comes to taxation.
In a passioned call for the tax threshold before paying basic rate income tax to be increased immediately from £7,475 to £ 10,000 the Liberal Democrat leader has called up again the Liberal belief that you should tax the rich, not the poor.
Labour will of course bleat on about the increase in VAT, but the simple truth is that VAT on fuel is set at 5%, and there is no VAT on un-prepared foodstuffs, these two commodities make up the bulk of the expenditure of the poorest in our society.
Labour’s VAT cut = 2.5%
Lib Dem Tax threshold increase = £ 510
If 2.5/100*X= £ 510 then X = £ 20,400.
Assuming Income tax of 20% on earnings above £ 7,450 (they didnt increase the threshold remember)
To get £ 20,400 after tax your income has to be £ 26,218.
Bear in mind that you now have to add on the cost of your fuel, any un-cooked food and any other zero-rated items such as newspapers, books etc before you start to benefit from the VAT cut and you are looking at having earnings in the 40% Income Tax bracket before you even begin to benefit more from Labour’s proposals than from those of the Liberal Democrats.
Labour, anyway, lost the argument on taxation when they increased the basic rate of income tax from 10% to 20% and yet introduced the most generous capital gains tax regime for the rich at 18% and with tapered relief.
The Conservatives have latterly come on board with the Liberal Democrats agenda for making work pay by cutting taxes for the poorest paid in our society, and they did acceed to the Liberal Democrat demand that Capital Gains Tax be increased from Labour’s 18% to the current 28% at the same time as introducing a 50% tax on income over £ 150,000.
The increase to £ 10,000 would also benefit pensioners who are currently benefitting from the Liberal Democrat insistence that pension increases should be linked to rising prices.