Where the tax burden falls

Where does the tax burden fall, and why do loopholes help the rich?

The TPA's Matthew Sinclair has produced an interesting graph from HMRC's data on the share of income, which charts clearly what it means to have a progressive taxation system (click for big, and note that the top four categories are equal in size to one of the other four; the top 25 per cent has been split up to better show the progressive nature of the system):

Mulling over Osborne's tycoon tax, Sinclair provides an example of a tax "loophole" which he thinks is anything but – loss relief:

Suppose you make a £15 million loss one year, then enjoy a £15 million income the next year. How much have you made overall? £0. If you get full loss relief then you will be taxed on that basis and pay nothing, as you have no income to pay from. If your loss relief is capped at 25 per cent of your income, as the Government seems to be proposing, then you presumably have to pay tax on over £10 million. From an income of £0. Good luck.

It is difficult to argue with the ideal of loss relief; people shouldn't be penalised by being taxed exorbitantly on multiple years' income just because they happen to receive the actual payment in one lump sum. But the existence of loss relief is also a wonderful example of a tax system built with one set of rules for the rich, and another set for everyone else.

Suppose a different pattern of income: You are a novelist working for £10,000 a year, barely supporting yourself while you write on the evenings and weekends. (For simplicity's sake, lets set this in 2015 when the 10k tax threshold is in effect). After five years, your book takes off, and you earn a quarter of a million in a year. Not only are you paying income tax for the first time in your life, you are straight in at the top rate.

In this situation, can you claim tax relief? Of course not. You pay your tax for the year your income comes in, and if you took a hit in earlier years, that's something you have to suck up. Yet if that quarter of a million had been spread out over the five years before, you would have paid at least £50,000 less in tax.

It's easy to see why this isn't the case. It would be hell to administer, and would basically end up with everyone paying tax on their average lifetime earnings. Yet this awkwardness results in a tax system which allows relief for those who are in a position to gamble millions on a business, but not those who can only gamble thousands on a career. It's a pattern repeated throughout the tax system, but as we've seen with the charity debacle, while these loopholes are used, they will be very hard indeed to close.

The BP board, 1960. These gentlemen are probably the 1%. Credit: Getty

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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How the Lib Dems learned to love all-women shortlists

Yes, the sitting Lib Dem MPs are mostly white, middle-aged middle class men. But the party's not taking any chances. 

I can’t tell you who’ll be the Lib Dem candidate in Southport on 8 June, but I do know one thing about them. As they’re replacing a sitting Lib Dem (John Pugh is retiring) - they’ll be female.

The same is true in many of our top 20 target seats, including places like Lewes (Kelly-Marie Blundell), Yeovil (Daisy Benson), Thornbury and Yate (Clare Young), and Sutton and Cheam (Amna Ahmad). There was air punching in Lib Dem offices all over the country on Tuesday when it was announced Jo Swinson was standing again in East Dunbartonshire.

And while every current Lib Dem constituency MP will get showered with love and attention in the campaign, one will get rather more attention than most - it’s no coincidence that Tim Farron’s first stop of the campaign was in Richmond Park, standing side by side with Sarah Olney.

How so?

Because the party membership took a long look at itself after the 2015 election - and a rather longer look at the eight white, middle-aged middle class men (sorry chaps) who now formed the Parliamentary party and said - "we’ve really got to sort this out".

And so after decades of prevarication, we put a policy in place to deliberately increase the diversity of candidates.

Quietly, over the last two years, the Liberal Democrats have been putting candidates into place in key target constituencies . There were more than 300 in total before this week’s general election call, and many of them have been there for a year or more. And they’ve been selected under new procedures adopted at Lib Dem Spring Conference in 2016, designed to deliberately promote the diversity of candidates in winnable seats

This includes mandating all-women shortlists when selecting candidates who are replacing sitting MPs, similar rules in our strongest electoral regions. In our top 10 per cent of constituencies, there is a requirement that at least two candidates are shortlisted from underrepresented groups on every list. We became the first party to reserve spaces on the shortlists of winnable seats for underrepresented candidates including women, BAME, LGBT+ and disabled candidates

It’s not going to be perfect - the hugely welcome return of Lib Dem grandees like Vince Cable, Ed Davey and Julian Huppert to their old stomping grounds will strengthen the party but not our gender imbalance. But excluding those former MPs coming back to the fray, every top 20 target constituency bar one has to date selected a female candidate.

Equality (together with liberty and community) is one of the three key values framed in the preamble to the Lib Dem constitution. It’s a relief that after this election, the Liberal Democratic party in the Commons will reflect that aspiration rather better than it has done in the past.

Richard Morris blogs at A View From Ham Common, which was named Best New Blog at the 2011 Lib Dem Conference

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