Budget 2007

[ewx]

[Poll #951035]

My back-of-the-envelope calculation suggests that the break-even point is around £18,600: you win by about 2p on every pound you earn above that, and lose below it.

There are benefits changes at the bottom end which presumably ameliorate the doubling of 10% rate to some extent (e.g. working tax credit) but I'm afraid I don't know how those benefits work, so if you're affected by those you'll have to work it out yourself.

Comments

[aldabra]

I haven't looked at the benefit changes, although Child Benefit is going up by a couple of pounds a week by 2010.

I still think Brown is a good thing, though. But he could usefully do something about the marginal effective tax rate of working tax credit withdrawal, which is a much bigger zog than a pound here or there. Not that I'd be remotely afloat at all without tax credits; abolishing them would be precisely the wrong thing to do.

[imc.livejournal.com]

marginal effective tax rate of working tax credit withdrawal

…and it looks like he's put that up by 2% — marvellous.

I can't see what's to be gained by abolishing the lowest tax band — it makes the system less progressive (and it seems that Menzies Campbell has already made this point).

[ewx.livejournal.com]

The consequence is a tax cut for somewhere around half the earning population. Obviously whether that's a "gain" depends on your point of view.

If you're selfish and in that half then the answer is clear; if you're trying to win the next election then the same might be true, depending on your analysis of voter behavior. Combined with the NI/40% alignment, fans of simple tax systems might think it a gain, though they should also consider that simplicity is not the only goal if they're not using "simplicity" as a socially acceptable code-word for "regressive".

I wonder how well a smoothly rising tax rate would work with no steps - for instance a linear growth from 0% to some maximum rate between two income levels - would work. Possibly only the mathematically inclined could love it.

[bopeepsheep.livejournal.com]

It takes a significant (at this level) chunk out of my income (although the self-employed tax-paying method means it won't hit me for quite a long time) and the 'they will get it back through WTC' line doesn't work for us of course, thanks to the joint-income nature of that assessment. Bah.

[aldabra]

> …and it looks like he's put that up by 2% — marvellous.

No, I don't think that's right. Under the old rules, from a marginal pound I paid 22p tax and 11p national insurance and 37% of 67p tax credit withdrawal. Under the new rules it's 20p tax and 11p NI and 37% of 69p withdrawal. I think I come out ahead by a penny and a quarter in a pound.

[imc.livejournal.com]

The withdrawal rate goes up from 37% to 39% in April 2008 (however I forgot to take the reduction in tax rate into account).

[aldabra]

Does it? *bastards*

[aldabra]

Actually the BBC calculator, which doesn't include either of the interesting income tax changes, has me about £250 better off, mostly due to tax credits. That'll make a fair dent in the less-well-offness from the lower band tax rate going.

It's a shame tax credits are such a confounded nuisance to deal with, actually. They've recently sent the final calculation for the 2004 tax year, and my inclination to look at it is negative.

[aldabra]

It's been pointed out to me that I also get 15% of M's increase, and he's at the peak 8-)