Stupid ideas in tax policy

"Let's tax people more than they earn, that'll work."

On both sides of the Atlantic, there have been some truly terrible suggestions recenty as to how to "improve" the tax system.

In the US, [some Republicans are proposing what amounts to a great than 100 per cent marginal tax rate on incomes hovering just over $400,000], as the New York Times' Jonathan Weisman reports:

One possible change would tax the entire salary earned by those making more than a certain level — $400,000 or so — at the top rate of 35 percent rather than allowing them to pay lower rates before they reach the target, as is the standard formula. That plan would allow Republicans to say they did not back down in their opposition to raising marginal tax rates and Democrats to say they prevailed by increasing effective tax rates on the rich. At the same time, it would provide an initial effort to reduce the deficit, which the negotiators call a down payment, as Congressional tax-writing committees hash out a broad overhaul of the tax code.

That would mean, Slate's Matt Yglesias writes, that:

A person with an Adjusted Gross Income of $399,995 is going to have a higher after tax income than someone with an Adjusted Gross Income of $400,005. And it's not a small difference! You're talking about a tax penalty in the tens of thousands of dollar range for popping slightly above $400,000 rather than staying slightly below.

Meanwhile, in Britain, Chris Skidmore MP is arguing for massive marginal tax rates on the poor:

For individuals aged under 25 who have not yet paid National Insurance contributions for a certain period, perhaps five years, unemployment benefit should be in the form of a repayable loan. An unemployed teenager would still receive the same amount of cash as now, for example, but they would be expected to repay the value once in work. A New Beveridge calculates that this could recoup the government over £1.3 billion a year. Even if someone were unfortunate enough to be out of work for the entire seven years between 18 and 25, the total sum repayable would be £20,475 – considerably less than the tuition fees loan, repayable by many of his or her peers. This would also create an additional incentive to take on paid work.

With the numerous benefits which get phased out rapidly in the first few thousand pounds earned each year, making work pay is already tricky. That was the stated motivation behind the government's introduction of its own Universal Credit, which will replace six means-tested benefits and tax credits in an effort to ensure that the phase-out is controlled.

All of that would be for nothing if, the minute you started earning, you were expected to pay back a multi-thousand pound loan. Even taking Skidmore's "solution" at its most charitable, and assuming he literally means a tuition-fee style repayment option, people currently claiming unemployment benefits are, pretty much by definition, the last people you ever want to raise marginal tax rates on.

If your first priority is to punish the unemployed, then this is a proposal which makes sense. If it's to help them back into work, it's a ridiculous idea.

A political cartoon mocks William Gladstone. Photograph: Getty Images

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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MPs should follow Emmanuel Macron's example and stand up to the far right

Where does a liberal centrist's victory fit into your narrative of inevitable decline? 

“Après le #Brexit, le printemps des peuples est inévitable !” wrote the far-right Front National leader Marine Le Pen, days after Brexit. Well, the blossom is on the trees, and Le Pen is through to the second round of the French presidential elections, so presumably we’re bang in the middle of that inevitable “people’s spring”. 

After all, a referendum that left Britain’s metropolitan elite weeping into their EU flags was swiftly followed by the complete overturning of US political and ethical traditions. Donald Trump defied polling and won the Presidency, all the while proclaiming he was “Mr Brexit”.  

Then, in December, the Italian Prime Minister Matteo Renzi held a referendum on constitutional changes and lost. Both Europhiles and Eurosceptics read the runes. Ukip’s on and off leader Nigel Farage crowed of 2016: “First we had the Brexit deliverance, then the Trump triumph, then the Italian rebellion. Democracy and the rebirth of the nation state!”

As this illustrates, the far-right want you to believe all these results are linked, and that they represent a popular, democratic movement. In the UK at least, the liberal left has drunk the English champagne. Labour is agonising over how to reconnect with “traditional” voters Ukip is apparently so in touch with – which don’t seem to include ethnic minorities, young people and those living in cities. Being “tough on immigration” is the answer to modern woes, and globalisation is a dirty word that can only represent multinational interests and not, say, cheaper food on the table. 

There are debates to be had about globalisation, of course, and the lingering impact of the 2008 financial crash, and the fact wages haven’t risen, and public services have been cut, and that in some northern towns, people from different ethnic backgrounds live segregated lives. But if the first round of the French presidential election can do us one favour, it’s to dispense with the narrative that there is something inevitable about the end of liberalism. 

Emmanuel Macron, an unapologetically pro-EU social, economic and political liberal, led the way in the first round of the French presidential election. The polls put him on course to become President.

If he wins, perhaps it’s time to revisit the narrative of decline. To remind ourselves that Hillary Clinton, now written off, won the popular vote in the United States, and among growing demographics of voters too. That a far-right  Austrian presidential candidate was defeated in 2016. That as recently as March, the Dutch mainstream prevailed against the far-right original Trump, Geert Wilders, and that the left-green leader Jesse Klaver enjoyed a surge instead. And that, although it’s now commonplace to assume Canada is just “nicer” in electing a liberal, Justin Trudeau, his party actually overturned nearly a decade of tar sands Conservative rule. 

Should liberals start to join these dots, voters should have the right to ask why both Labour and the Conservatives have jumped on the populists' bandwagon so eagerly. Why, among previously economically liberal Conservatives, are Nicky Morgan, Ken Clarke and Anna Soubry left as lone voices on the back benches. And why, in Labour, is patchy research linking depressed wages and immigration now exhalted as long-established fact? 

Liberalism may be out of fashion, but it’s not dead yet, as any of the Tory MPs in south-west marginal seats know too well. By the time Farage’s “independence day” on 24 June arrives, the narrative may have changed again. 

 

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines. 

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