Poorest Hit Hardest By Gordon’s Tax Changes
It hasn’t taken long for the real truth to emerge about Gordon’s budget on Wednesday. 2p off the basic rate of income tax and he doubtless expected to be showered with praise and win votes up and down the country. The abolition of his own 10% tax rate to fund this measure was a mere detail of course. Well thanks to a bit more in depth analysis, it seems that is not the case.
The BBC, probably the most visited news website out there, has an article giving a run down of the winners and losers of the budget, and surprise surprise it seems the poorest will be the biggest losers. So much for Gordon Brown, “man of the people”. KPMG have worked it all out for us, in fact. Firstly the losers:
Taking into account the effect of changes to income tax and NI - although not tax credits - in 2008-09, compared to this coming financial year (2007-08), then most people will be better off because they will be paying less money to the Chancellor.
The most obvious exception will be people earning £17,000 a year or less.
By having a slice of their income taxed at 20%, rather than 10%, they will pay more - £131 a year more, KPMG estimates, if their income is less than £10,000.
And now for the winners:
The biggest winners in this calculation will be those earning about £35,000 a year.
They will keep £353 a year more, according to KPMG.
The rise in the ceiling for the standard 11% NI contribution rate means that those earning about £40,000 a year will gain very little - just £24 a year.
They will now pay NI on the top slice of their income which was not subject to it before.
Meanwhile those earnings more than £43,000 will gain £196 a year overall.
So, typical Gordon it seems. Taking from the poorest and giving to the richest. In fact, as long as you earn more than £17,000 per year, you are ahead. Money taken directly from the pockets of those earning less. A very typical New Labour way of redistributing wealth it would seem.
Helpfully, KPMG have arranged a handy graph for us all to see where we fit in:
See if you can find yourself there. Luckily for Gordon, he’s well above the zero point, as are his friends and colleagues. So that’s all right then.
