[News] Scrap Personal Allowance and Replace with a NEw Weekly Cash Payment

[MattBackHome]

"If the Government abolished the personal allowance of income tax and replaced it with a weekly cash payment of £48 a week they could lift 200,000 families out of poverty, according to a new report by the New Economics Foundation (NEF) published today. Overall, the proposed policy swap would shift £8bn currently spent on tax allowances for the 35% highest income families to the remaining 65% of families."

What do you reckon?

https://neweconomics.org/2019/03/scrap-personal-allowance-and-replace-with-a-new-weekly-cash-payment

Here's the full report: https://neweconomics.org/2019/03/nothing-personal

Apols if fixtures.

 

[beorhthelm]

aka universal income.
aka more state dependency.

 

[Gwylan]

aka universal income.

Not quite. It's not applicable to those earning more than £125k pa

 

[nwgull]

Article seems to conclude their examples at 90k pa and don't mention that this policy would benefit anyone earning over £100K pa.

 

[Bakero]

Article seems to conclude their examples at 90k pa and don't mention that this policy would benefit anyone earning over £100K pa.

Is that what is stated in the full report?

 

[nwgull]

Is that what is stated in the full report?

No, but for every £2 that someone earns over 100K, they lose £1 of their tax allowance.

 

[beorhthelm]

No, but for every £2 that someone earns over 100K, they lose £1 of their tax allowance.

yes, and im not sure that they have taken this into account, with who pays for this. its the households with two above average earners, not the over 100k, that will see that £1000-2000k loss.

 

[mac04]

No, but for every £2 that someone earns over 100K, they lose £1 of their tax allowance.

On page 10 of the report it states that "Those earning more than £100,000 already see the personal allowance tapered away at a rate of 50p for every additional
£1 of income. Their new cash payment would there also be tapered down at the same rate to mirror the existing value of their
personal allowance. This means that those earning more than £125,000 would not receive the new weekly payment at all,
since their personal allowance has already effectively been removed in the existing income tax system."

So anyone earning over £100k would not see any rise or fall in net income. That would add a bit of admin to the previously fairly simple system though.

 

[nwgull]

On page 10 of the report it states that "Those earning more than £100,000 already see the personal allowance tapered away at a rate of 50p for every additional
£1 of income. Their new cash payment would there also be tapered down at the same rate to mirror the existing value of their
personal allowance. This means that those earning more than £125,000 would not receive the new weekly payment at all,
since their personal allowance has already effectively been removed in the existing income tax system."

So anyone earning over £100k would not see any rise or fall in net income. That would add a bit of admin to the previously fairly simple system though.

Good job someone read it! That effective 100-125K rate is uneccessarily complicated, particulary when high earners go back to 40% for 125-150K. Why not just decrease the 45% threshold to around 90-100K instead?

 

[beorhthelm]

Good job someone read it! That effective 100-125K rate is uneccessarily complicated, particulary when high earners go back to 40% for 125-150K. Why not just decrease the 45% threshold to around 90-100K instead?

because more about politics rather than revenue, bugger the complications.

 

[Bold Seagull]

yes, and im not sure that they have taken this into account, with who pays for this. its the households with two above average earners, not the over 100k, that will see that £1000-2000k loss.

Is that not the benefit those in that bracket see from changes in the personal allowance thresholds?

Someone on £25k pa sees a few £100 benefit from a change in the personal allowance, someone on £90k sees more like a few £1000 benefit because the higher rate threshold changes with it. It's not exactly progressive when an incentive to work tax allowance threshold change benefits the higher earners more than it does the lower.

 

[mac04]

Good job someone read it! That effective 100-125K rate is uneccessarily complicated, particulary when high earners go back to 40% for 125-150K. Why not just decrease the 45% threshold to around 90-100K instead?

Good points. I didn't actually read the whole thing. I just wanted to know if this particular concern had been addressed, so I did a search for 125,000 in the downloaded document.

 

[mac04]

Is that not the benefit those in that bracket see from changes in the personal allowance thresholds?

Someone on £25k pa sees a few £100 benefit from a change in the personal allowance, someone on £90k sees more like a few £1000 benefit because the higher rate threshold changes with it. It's not exactly progressive when an incentive to work tax allowance threshold change benefits the higher earners more than it does the lower.

I don't think you've understood it properly. Everyone earning under £100,000 would see the amount of tax they pay increase. Those earning under £12,500 would see less of an increase, those earning over £50,000 would see more of an increase. BUT, everyone earning under £100,000 would be given £2,500 a year to compensate for this.

Roughly speaking, those earning under £12,500 would be better off, from £12,500 to £50,000 would be neutral, £50,000 to £100,000 worse off, and over £100,000 neutral.

 

[nwgull]

because more about politics rather than revenue, bugger the complications.

I'd have thought that announcing a reduction of the 45% threshold from 150K to 100K would be a vote winner all round!

 

[Bold Seagull]

I don't think you've understood it properly. Everyone earning under £100,000 would see the amount of tax they pay increase. Those earning under £12,500 would see less of an increase, those earning over £50,000 would see more of an increase. BUT, everyone earning under £100,000 would be given £2,500 a year to compensate for this.

Roughly speaking, those earning under £12,500 would be better off, from £12,500 to £50,000 would be neutral, £50,000 to £100,000 worse off, and over £100,000 neutral.

Yes I agree, I was talking about what happens now with marginal changes to the tax allowance threshold.

 

[NooBHA]

aka universal income.
aka more state dependency.

. Totally agree. Much as I would like lower income families have greater support in the form of income it encourages people capable of working to remain on benefits. Giving relief in the form of personal allowances relieved against earned income for me is the best way to encourage people who can work off benefits. Give them cash payments and they have less incentive to work

 

[symyjym]

I don't see a problem giving everyone a basic of something like £125 a week without being penalised in extra pt or ft work and all the extra paperwork it causes.

It would encourage employment, startups and cottage industries, and would stop desperate criminal theft. All the money only gets circulated back into the economy anyway.

I reckon it costs the country more money in bureaucracy and civil servants nit picking through peoples welfare status on a case by case basis than it would be distributing out a simple basic rate no questions asked or forms filled.

 

[Bold Seagull]

I don't see a problem giving everyone a basic of something like £125 a week without being penalised in extra pt or ft work and all the extra paperwork it causes.

It would encourage employment, startups and cottage industries, and would stop desperate criminal theft. All the money only gets circulated back into the economy anyway.

I reckon it costs the country more money in bureaucracy and civil servants nit picking through peoples welfare status on a case by case basis than it would be distributing out a simple basic rate no questions asked or forms filled.

That's what the report alludes to, it makes your economy more robust to recession because the additional income in most cases is straight back into the economy. I would also potentially encourage not only more employment, but better quality employment and commitment, because your basic income is secure, not just in the form of tax relief.

 

[Seasidesage]

Hasn't it been tried and abandoned in Finland already?

 

[symyjym]

That's what the report alludes to, it makes your economy more robust to recession because the additional income in most cases is straight back into the economy. I would also potentially encourage not only more employment, but better quality employment and commitment, because your basic income is secure, not just in the form of tax relief.

I think they do this in Sweden or Finland. Might be wrong on both, but it is reported to work. The trials have been done so it's not a complete fantasy.

Financial problems are linked to mental health issues and our current benefit system can dehumanises some people when they are at their lowest. So it would save the NHS some cash too.