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Tuesday, March 20, 2012

The problems with transparency

I am all for openness and transparency but according to the Telegraph one particular movement in this direction by the UK Government could lead to open revolt in Middle England. They say that the proposal that every taxpayer will get an annual statement from HMRC detailing exactly how much tax they pay and what services it is spent on could cause disquiet amongst a significant minority of taxpayers.

They say that most government spending, including most of the benefits bill, flows back to taxpayers. But the question is which taxpayers?

The majority of taxpayers use the schools, the police, the NHS and so on. Most taxpayers even claim benefits: nine out of ten families with children are entitled to claim tax credits, for example, while over a third of the benefits bill goes to pensioners. For the typical taxpayer, the benefits of government spending probably more than outweigh the costs.

But for a significant minority, this isn't the case. According to the most recent data, the best-paid one per cent pay around 28 per cent of income tax. The 3.7 million who pay the 40p rate of tax – the top tenth, approximately – pay 34 per cent. Overall, people in the top half of the income distribution pay around 90 per cent of income tax.

This large minority – the middle and upper-middle classes, in short – feels ever harder done by, because much of the increase in their income since 1997 has been swallowed up by higher taxes. They live in areas where crime rates are low, and where the infrastructure is well-maintained. They are healthier, and so are less likely to use the NHS. They are very unlikely to ever claim benefits, except possibly for the state pension. Their children are probably privately educated. And yet they are paying for the bulk of the welfare state.

Give these people a tax breakdown and they will realise exactly what they are paying for: the security of everyone else. Instead of a vague sense that the government wastes their money, they will realise that actually, it redistributes it. Twenty years since John Major told us that "we are all classless now", the southern middle classes are pitted once again against the northern, impoverished masses in a fight over a shrinking pie. Dare I say it: class politics may be coming back.

An interesting perspective but not one I agree with. Perhaps I just have more faith in human nature than the Telegraph.
Interesting. It recalls what local politics used to be like (Ratepayers versus council tenants) when the assumption was that 'tenants' did not pay any local taxes.

If we succeed in taking some millions of low-paid people out of income tax this will I suppose meant that they will not get a tax breakdown statement. So the people who may stand to benefit most from the redistributionist profile in direct tax spending will hear less about it... Wonder what the consequences of that will be...
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