Outside the marginals

a commentary on the politics that followed the UK 2010 & 2015 elections

Impoverish the poor or soak the rich?

Suppose you want to raise £1M per week? How might you do it? I suspect the two sides of the coalition will have different views.

You could cut welfare by £5 per week for 200,000 of the poor.  That fiver reduction will mean that the gas meter does not get replenished or a mother cuts out a meal a day so that her children can eat.  Real non-discretionary spending (on predominantly UK sourced goods and services?) will be cut. Or they go to the tally man or loan shark and end up paying considerably more than a fiver later.  The later transfers government debt to personal debt (as long as the government does not directly or indirectly bail out the really poor – so no tax relief to Lady Bountiful when she gives money to the poor).

You could increase tax on 200,000 of the “middle classes” by £5 per week (£260 per year).  They would probably consume marginally less (a cheaper holiday would give the required reduction), or they might pay less into their pension plan reducing the comfort of their old age by a small amount.

You could increase tax on 20,000 of “the rich” by £50 per week (£2,600 per year).  They might be marginally less lavish in their entertaining or other discretionary consumption (of predominantly imported goods and services), or they might save a little less – but not sufficiently to lead to an impoverished old age.

You could increase tax on the 200 of the stupefyingly rich by £5,000 per week (260,000 per year).  They would probably save less, possibly put off upgrading the yacht.  Some might leave the country but if their spending is predominantly overseas does it matter that much?  Make it £8,000 per week to cover for those who leave and want to give up living in London, Oxfordshire or Cheshire?

What counts as making an “equal contribution” to reducing the nation’s debt?  Everyone paying a fiver a week – or everyone feeling an equal reduction in their standard of living?

Related Posts

The problem with the rich

Being charitable towards the rich

Bonus Fetid Culture

Playing the percentages

Taxation and the behaviour of the rich vs. the rest of us

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