10p Tax

Written by Kirsty Williams AM and published in Mid Wales Journal Friday 25th April 2008 on Fri 2nd May 2008

At a time when we are all tightening the money belt due to the hotly discussed 'credit crunch', Labour have gone and doubled the starting rate of income tax from 10p to 20p in the pound. Ten years ago, Gordon Brown introduced the 10p tax rate saying it would help the lowest paid people in Britain now they are doubling tax for the least wealthy in our communities. Indeed 5.3 million taxpayers are worse off under the changes. The effect of the change to the tax system is to double the rate of income tax paid on the first £2230 of taxable income from 10p to 20p in the pound. For those on higher incomes, this is offset by a cut in the standard rate of income tax from 22p to 20p in the pound. Though the standard rate of income tax has been cut from 22p to 20p in the pound, a single person with no children would have to be earning over £18,500 to be better off under the tax changes. As it stands a single person with no children earning less than £18,500 will be a net loser by up to £232 a year.

This worrying tax which will effectively rob Peter to pay Paul does not help ordinary people and it is those who are already financially struggling who will suffer the most; with people taking early retirement with a taxable income of less than £8,000 loosing up to £232 a year.

The list of those who will be worse off clearly highlights the injustice of this plan: A childless couple, where one person works earning under £8,000 will loose up to £232 per year; A family with children where both parents work, with a combined income of £8,000 will loose up to £446 per year; A retired women aged 60-64 with a taxable income of £8,000 will loose up to £168 per year. Those unable to claim tax credits or Pension Credit and earning less £18,500 will also see their income tax bill rise. This is a completely unacceptable increase in taxes for those who can least afford to pay. Labour has increased taxes by stealth without being honest about it. The Liberal Democrats in Westminster, including my colleague Roger Williams voted against the Government's plans and a growing number of Labour MPs are also questioning the Government's unpopular move.

The unacceptable reality is that in Britain today the poorest pay a higher proportion of their income in tax than the super-rich. Low and middle income earners in this country shoulder too heavy a tax burden. In order to ensure a fairer and greener society in Wales and England we need rather to be cutting the tax burden for those on low income by scrapping council tax and replacing it with a local tax based on ability to pay, and cutting the standard rate of national income tax by 4p in the pound, paid for by closing tax loopholes used by the supper rich and by increasing green taxes.