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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No, the Brexit vote wasn't just about immigration

The data shows that most voters want a fairer society. Labour must fight for this in the Brexit negotiations. 

The result of the UK referendum to leave the European Union has shaken the political establishment to its core. As I have argued since then, it should be a wakeup call to all political parties.

Some have also argued that the referendum result is having international repercussions, with the election of Donald Trump to the White House cited as "Brexit Plus Plus". With the imminent election in France, and Germany’s later this year, responsible analysts are trying to understand why people voted the way they did and what this means. Too often, there are knee jerk explanations without any evidentiary justification to back them up. 

Analysis of who voted to leave shows the majority of people who voted to leave live in the South of England, and 59 per cent were from the middle classes (A, B, C1). Only 21 per cent of people in the lowest income groups voted to leave.

Analysis of why people voted as they did is more complex. This includes an increase in Euroscepticism particularly from older, middle class voters; concerns about globalisation and the impact on jobs; inequalities and being left behind; and new voters who didn’t vote in the 2015 General Election, for whom immigration was a concern. When this analysis is overlaid on analysis of that election, some themes emerge. The attitudes and values of the majority of the British public are firmly rooted in the desire for a fairer society, based on principles of equality and social justice. Although immigration played a part in the election and referendum results, perceived competence, being "left behind" and disillusionment with the direction of change were the key drivers.

Whether people voted to remain or leave, they did so because they believed that they and their families would be better off, and the majority who voted believed they would be better off if we leave the EU. Labour accepts and respects this. We have said that we will vote for Article 50, but we intend to hold this Tory government to account to ensure we get the best possible deal for the country.

In his speech last week, Jeremy Corbyn set out the issues that Labour will hold the government to account on. We have been absolutely clear that we want tariff-free access to the single market, to ensure that Britain continues to trade openly with our European neighbours, and to protect the cost of living for families struggling to get by. Getting the best deal for the UK means that we must continue to have a strong relationship with our EU neighbours.

Under my work and pensions portfolio, for example, we know that 40 per cent of pension funds are invested outside of the UK. If we want to guarantee a dignified and secure retirement for our pensioners, we must ensure that savers can get the best returns for the investments they make.

We also know that many of the protections that have until now been offered by the European Union must continue to be guaranteed when we leave. Provisions that secure the rights of disabled people, or that protect worker’s rights are an essential part of British society, enhanced by the EU. These cannot be torn up by the Tories.

Defending these rights is also at the heart of our approach to immigration. The dire anti-migrant rhetoric from some parts of the media and certain politicians, is reprehensible. I reject this scapegoating, which has fear and blame at its heart, because it is not true. Blaming migrants for nearly seven wasted years of Tory austerity when they are net contributors of over £2bn a year to the economy is perverse.

Of course we need to respond when public services are coming under pressure from local population increases. That’s why Labour wants to reinstate the Migration Impact Fund that the Tories abolished. We also need to ensure new members of communities get to know their new neighbours and what’s expected of them.

We believe that migrants’ broader contribution to British society has too often been obscured by the actions of unscrupulous employers, who have exploited new arrivals at the expense of local labour. A vast network of recruitment and employment agencies has developed in this country. It is worth hundreds of billions of pounds. Last year over 1.3m people were employed in the UK by these agencies. In 2007, 1 in 7 of these people came from the EU. We should ask how many are recruited directly from the EU now, and offered precarious work on very low wages whilst undercutting local labour. Labour will put an end to this practice, in order to protect both those who come here to work and those that grew up here.

Importantly, however, we cannot let our exit from the EU leave us with skill shortages in our economy. Our current workforce planning is woeful, particularly for the long-term. We need to reduce our need for migrant labour by ensuring our young, and our not so young, are trained for the jobs of the future, from carers to coders. Again, the Conservatives have undermined people’s chances of getting on by cutting college funding and the adult skills budget.

Unlike the government, Labour will not shirk from our responsibilities to the nation. Our plans for Brexit will respect the referendum result, whilst holding the Government to account and delivering a better future for all our people, not just the privileged few.

Debbie Abrahams is shadow work and pensions secretary.