Tim Worstall responds to an article advocating abolishing Britain’s tax-free personal allowance and replacing it with a form of universal basic income (UBI):
Sure, we need to have government, even if not quite as much as we do have. Thus we need tax revenues to pay for it. But that tax should be, where it is derived from income, paid by the better off among us. As Adam Smith pointed out, people should be paying more than in proportion to their income. I would actually argue that income tax should only kick in at median income but agree that would require a smaller state than we’ve got now. Actually, that’s why I would propose it.
Still, that does mean that this suggestion fails at that first hurdle:
The tax-free personal allowance, which rises to £12,500 in April, should be scrapped and replaced with a flat payment of £48 a week for every adult, according to radical proposals welcomed by shadow chancellor John McDonnell. The proposal, from the New Economics Foundation thinktank, is for a £48.08 “weekly national allowance,” amounting to £2,500.16 a year from the state, paid to every adult over the age of 18 earning less than £125,000 a year. The cash would not replace benefits and would not depend on employment.
It’s a universal basic income. Excellent stuff therefore. But the error is to think that this should replace that personal allowance. Assume that they’re including NI in that no allowance thing – if they’re doing it for income tax then they probably will for NI. What that means is that anyone earning more than £50 a week is facing a 40% marginal tax rate (yes, 40%, employers’ NI is incident upon the workers’ wages).
Do we think that’s a just way to pay for diversity advisers? That someone on £50 a week gives up 40% of any income over that? No, we don’t, we think that’s an entirely unjust taxation system. Actually, it’s a really stercore* taxation system.
* Someone’s been at his Latin texts again … I had to look this word up myself. It’s the ablative singular form of stercus, which means “manure, dung; to sully, soil, decay”, according to Wiktionary.
