George Osborne's fairness claim torn apart by graph
This distributional graph of the benefit freeze (blue) and personal allowance measures contained in the budget (red) shows how regressive both measures are.
As you can see, changes to welfare his those nearest the bottom (the blue bars on the left), while the personal tax allowance benefits those at the upper end of the income scale (see the red bars on the right).
(Source: IPPR)
As you can see, it was one of the most regressive budgets of recent times.
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21 Responses to “George Osborne’s fairness claim torn apart by graph”
Ash
Evidence, schmevidence. It’s ‘obvious’ that the best way to help low-income households is to cut income tax, and equally ‘obvious’ that cutting benefits only hits scroungers. ‘Obviously’ the benefits received by working households just consist of their own income tax being paid back to them, which is ‘obviously’ silly, so ‘obviously’ they’ll be no worse off if we use income tax cuts rather than benefit payments to boost their incomes. ‘Obviously’ it’s wasteful and inefficient to spend money on benefits, while tax cuts simply and effectively target low earners (and certainly don’t involve just chucking billions upon billions of pounds at people in the top half of the income distribution on the grounds that a much lower amount also ends up in the pockets of people in the bottom half). That’s just common sense, right? Now put your silly graph away.
ken mckelvey
I have never expected anything else the deficit was a wind fall for them to attack the old sick and poorest Torys only look after the Parasites
Anthony Masters
I would question the political implications of your definitions. You say that raising the personal allowance to £10,000 is “regressive”, that is, it benefits people on lower incomes least, and people on higher incomes the most.
I assume that “progressive” has the reverse definition, so lowering the personal allowance and bringing more low earners into income tax is “progressive”. Indeed, the most “progressive” change to the income tax system would be to tax all income. Whilst this is a heartening and warm label, ‘progressive’, the consequent policies under its banner are not so fluffy.
The idea that lower earners should not have their taxes cut because its “regressive”, because other people would benefit more, is rather callous, and makes the author seem as if they are forgetting that it is not their money.
Ash
“The idea that lower earners should not have their taxes cut because its “regressive”, because other people would benefit more, is rather callous”
The point is that there are more progressive (and cheaper) ways to achieve the same thing. The tax credits system is designed to reduce the net tax burden on low and middle earners in a progressive way (with the lowest earners seeing the greatest reductions); and significantly, it is the *overall* net tax burden on those people that gets reduced, not just the burden of income tax. Someone who earns too little to pay income tax does not benefit at all from an income tax cut, but tax credits can be used to reduce the net tax burden they face from NI, VAT etc.
“I assume that “progressive” has the reverse definition, so lowering the personal allowance and bringing more low earners into income tax is “progressive”.”
You’re right that not every policy that can be called a ‘progressive’ option is ipso facto desirable, but assuming a policy objective – e.g. raising taxes – is *itself* desirable, then of course it makes sense to look at the options for achieving that objective in terms of how progressive or regressive they are relative to one another. And yes, relative to some other options – e.g. raising VAT – I suspect lowering the personal allowance *would* be progressive.
Anthony Masters
Thank-you for your reply. I would say there is an incorrect assumption underlying your first point: the government does not elect that a certain amount of tax is to be raised, and then volitionally determines who pays those taxes. The government sets certain rates of taxation on certain activities, and then who pays taxes is determined by who participates in those activities. A person with a low income who spends every last penny they have on VAT-able goods pays more tax than someone on the same income who saves their money and only buys the essentials.
The problem is that the modern state is too large to be run solely on income taxation.For example, even a 100% tax on earned income over £150,000 would only raise roughly £69bn. Only having income taxation is desirable from a ‘progressive’-‘regressive’ point of view as it gives the government the greatest determinacy over who pays taxes with regards to their income.